Dealing with the Dangers of

Success
Clayton M. Christensen
Harvard Business School

7/31/2003 Copyright Clayton M. Christensen 1

 Disruptive Technologies:
A driver of leadership failure and the source of new growth opportunities

e of cal
Incumbents nearly always win Pa nologi
c
h
Tec ress
Performance

g
Pro
ations
innov
ining
a
Sust
o rm a n c e th a t customers
Perf
sorb
can utilize or ab

Disruptive Entrants nearly always win

technologies

Time

7/31/2003 Copyright Clayton M. Christensen 2

 The Innovator’s Dilemma

ations 60% on
nov s
Performance

in $500,000
a ining pu ter
Sust minicom
to 45% on
$250,000

40% 20%
Disruptive on $2,000
technology:
personal
computers

Time

7/31/2003 Copyright Clayton M. Christensen 3

 Most micro- and macroeconomic growth
comes from disruption
Yesterday Today Tomorrow:
• Japan • Toyota • Embraer
• Kodak • Wal-Mart • Veritas
• ZCMI • Intel • U. of Phoenix
• Ford • Southwest Air • RIM Blackberry
• Merrill Lynch • Microsoft • Salesforce.com
• AT&T • Oracle • Linux
• Sears catalog • Cisco • E-Bay
• Swift; Armour • Sony • Sonosite
• Black & Decker • Bloomberg • Amazon.com
• Xerox • Best Buy • Tensilica

7/31/2003 Copyright Clayton M. Christensen 4

Non-consumers are the ideal initial target

Major Established
Electronics Markets:
Tabletop radios, floor-standing
televisions, computers,
Performance

telecomm.equipment, etc.

Portable TVs

Pocket radios
Path taken by
Hearing Aids established
vacuum tube
manufacturers

Time

Disruptive technology:
7/31/2003 transistors
Copyright Clayton M. Christensen vs. vacuum tubes 5
Non-consumers are the ideal initial target

Word Processing
Performance

Wireline e-mail

Wireless e-mail
Chat rooms

Standard phrases
Path taken
Toy robots by IBM

Time

7/31/2003Disruptive Technology: Voice

Copyright Clayton Recognition Technology
M. Christensen 6
 Disruption enables less-skilled people
to do more sophisticated things
Disruptive innovations enable a larger population of less-skilled,
less-wealthy people to do things in a more convenient, lower-cost
setting, which historically could only be done by specialists in less
convenient settings. Disruption has been one of the fundamental
causal mechanisms through which our lives have improved.

• Computers

• Xerography

• Angioplasty

Almost always, disruptive innovations such as these have been

ignored or opposed by the leading institutions in their industries for
perfectly rational reasons.
7/31/2003 Copyright Clayton M. Christensen 7
 Disruption is facilitated by sophisticated
technology that makes things foolproof

Complex New Problems:

Experimentation
& problem-solving Experimentation
& problem-solving

Pattern Recognition

Rules-Based
Simple

7/31/2003 Copyright Clayton M. Christensen 8

 Disruption amongst healthcare institutions
is well underway

Complex

p itals
Hos
e ral
Complexity Ge
n ilities
of diagnosis t F ac
at ien
and
ut -p are
treatment O c
ffice
o
In -
e
e car
- hom
In
Simple

7/31/2003 Copyright Clayton M. Christensen 9

 Disruptions amongst healthcare professionals

icians
Complex s
phy
list
cia
b - spe
t & su
ecialis sicians Performance
Sp
re phy that the
n al ca marketplace
Complexity
/ p erso needs or
of diagnosis am ily
F utilizes
and ers
io n
treatment
p ractit
e
Nurs
lf - care
Se

Simple
Time

7/31/2003 Copyright Clayton M. Christensen 10

How can I know what my organization is
capable and incapable of accomplishing?
Resources Processes Values

• People • Hiring & Training The criteria by which

prioritization decisions
• Technology • Product are made
development
• Products
• Manufacturing • Ethics
• Equipment
• Planning & • Cost structure/
• Information income statement
Budgeting
• Cash • Size of opportunity
• Market Research
• Brand
• Resource
• Distribution allocation

7/31/2003 Copyright Clayton M. Christensen 11

 Relationship between
Relationship unit size
between andand
unit size the extent
extent of member
of member missionary
missionary activity activity
(78 wards & branches in southern New England, 2002)
(78 units in southern New England, 2002)
0.34

0.32
Referrals given to missionaries divided by average sacrament

0.3
Referrals given to missionaries divided by

0.28
meeting attendance

0.26

0.24

0.22
meeting attendance

0.2

0.18
average sacrament

0.16

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
<100 100-150 151-200 >201
Average Sacrament meeting attendance
Average Sacrament Meeting Attendance
7/31/2003 Copyright Clayton M. Christensen 12
 The strategy-making processes that are good at planning
sustaining innovations, are bad at guiding disruptive ones.

Intended Imp
strategy wha roved
t wo und
rks e
and rstandi
wha ng o
t do f
esn
’t

Strategic Actions:
The Resource Actual
allocation New products,
Organization’s services, processes, Strategy
values process
acquisitions

unities
o pport sses
cipated d succe
nti an
Emergent Una oblems
pr
strategy
7/31/2003 Copyright Clayton M. Christensen 13
Many valuable LDS institutions emerged historically through local
leaders’ initiatives, in response to problems they encountered.

• Sunday school
• Primary
• Concordance to scriptures
• Family home evening
• Institutes of religion
oblems
• Welfare program a ted pr es
an ticip rtuniti
Un oppo
• Early morning seminary an d
Emergent
• Monday evenings for FHE strategy

• Six missionary discussions

7/31/2003 Copyright Clayton M. Christensen 14

The value of these solutions
was subsequently recognized
and deployed worldwide as Intended
strategy Imp
r
intended strategy: wha oved u
t wo n
rks derstan
and d
• Sunday school wha ing of
t do
esn
’t
• Primary
Strategic Actions:
• Concordance to scriptures Resource
New products, Actual
allocation services, processes,
process Strategy
• Family home evening acquisitions

• Institutes of religion nities

,
ortu
ed opp lems
• Welfare program t b
n ticipa nd pro
Una cesses a
suc
• Early morning seminary Emergent
strategy
• Monday evenings for FHE
• Six missionary discussions

7/31/2003 Copyright Clayton M. Christensen 15

A belief that “if its not in the handbook it must be snuffed out”
will impede the emergence of better solutions to new challenges.

Intended
strategy Imp
rove
wha d
t wo unders
rks a ta
nd w nding o
hat f
does
n’t

Resource Strategic Actions:

allocation New products, Actual Strategy
process services, processes,
acquisitions

s
r ob lem
p
ipated i ties
ntic rtu n
Una d oppo
an
Emergent
strategy

7/31/2003 Copyright Clayton M. Christensen 16

 Developing new leaders
As their fundamental sources of disruptive
growth wane, many performance-driven
companies and managers stop investing in
development of the next generation of
managers. They begin relying instead on
people who, by virtue of prior education and
experience, are fully qualified to succeed. Many
of these are hired in from outside the firm.

7/31/2003 Copyright Clayton M. Christensen 17

 Proportion of new members who have received a calling of any sort
11 stakes in the North America Northeast area, 2000-2002
100%
95%
90%
85%
80%
75%
70%
65%
60%
55%
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
A B C D E F G H I J K Average for
this sample
7/31/2003 Copyright Clayton M. Christensen 18
 Ten questions in building new growth businesses
1. How can we beat the competition?
2. Which customers should we target?
3. What products will our customers want to buy?
4. Which things should our company do, and which should our
can partners and suppliers do?
5. How should we distribute to and communicate with our
customers?
6. Who should be on our management team?
7. What is the best organizational structure for this business?
8. How can we know when to change course?
9. Whose investment capital will help, and whose might hurt?
10. The role of the CEO in sustaining the growth of the business
19
Integrated firms have the advantage when products aren’t good
enough. Focused firms overtake over-served markets.

Beat competitors
with functionality
Performance

ures
itect
h
t Arc
den
n
epe res
terd ctu
In
hite
Arc
r Beat competitors
dula
Mo with speed, responsiveness
and customization

Time
7/31/2003 Copyright Clayton M. Christensen 20
Changes in integrality/modularity have profoundly
changed the structure of the computer industry
1960 - 1980 1980 - 1990 1990 - Present

Equipment Teradyne, Nikon, Canon, Applied Materials, Millipore, etc.

Materials Monsanto, Sumitomo Metals, Shipley, etc.

Components Intel, Micron, Quantum, Komag, etc.

Product design Compaq, Dell, Gateway, Packard Bell

Digital Equipment
Control Data

Assembly Compaq Contract assemblers

IBM

Operating system Microsoft

Microsoft
Applications software Word Perfect, Lotus, Borland, etc.

Sales & distribution CompUSA Dell

Field service Independent contractors

7/31/2003 Copyright Clayton M. Christensen 21

 Two strategies for asymmetric competition
Bring a better product into

Performance
an established market

rup tion
d dis -served t
Of Performance
Different measure

- en
Low ress over ower -cos
Add w
l
ith a del
mers o
custo business m

Time

rup tion:
arket dis t non -
m s
New - pete again mption
Com consu
r
re s o
n sum ming Time
n -co onsu
c
No on - ons
N casi 7/31/2003 Copyright Clayton M. Christensen 22
oc