Christensen, Clayton – Page 2 – artdiamondblog.com

French Billionaire Entrepreneur Starts Small and Cuts Costs

On Mon., October 13, 2014, Iliad dropped its bid for T-Mobile, after lack of interest from some of the T-Mobile board and from the majority owner, Deutsche Telekom AG.

(p. B1) Iliad wants to improve T-Mobile US’s cost structure by applying its own ultraslim cost base, under which it has kept costs to a minimum in everything from IT services to back office to equipment purchases. Iliad estimates it will be able to save about $2 billion annually by cutting out costs such as sending paper bills, and savings on equipment and IT systems, Mr. Niel said.
. . .
(p. B4) . . . before Mr. Niel can execute his American dream, Iliad has to win over T-Mobile US’s board, which could prove a formidable challenge.
. . .
He says he is sticking to the same principle that has guided his ascent from a teenage computer programmer in a working class Paris suburb to one of France’s richest men.
“I always follow the same idea: Start small and disrupt to create something big,” he said.

For the full story, see:
RUTH BENDER. “Will This Billionaire Bring $3-a-Month Phone Plans to U.S.?” The Wall Street Journal (Sat., Aug. 2, 2014): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the story says it was updated on Aug. 4, 2014.)

Netflix Proved TV Programs Can Be Delivered on Web

(p. B1) Netflix pointed a way forward by not only establishing that programming could be reliably delivered over the web, but showing that consumers were more than ready to make the leap. The reaction of the incumbents has been fascinating to behold.
As a reporter, I watched as newspapers, books and music all got hammered after refusing to acknowledge new competition and new consumption habits. They fortified their defenses, doubled down on legacy approaches and covered their eyes, hoping the barbarians would recede. That didn’t end up being a good idea.
Television, partly because its files are so much larger and tougher to download, was insulated for a time, and had the benefit of having seen what happens when you sit still — you get run over.
. . .
For any legacy business under threat of disruption, the challenge is to get from one room — the one with the tried and true profitable approach — to another, (p. B5) where consumers are headed and innovators are setting up shop. To get there, you have to enter a long, dark hallway, a scary place.

For the full commentary, see:
David Carr. “The Stream Finally Cracks the Dam of Cable TV.” The New York Times (Mon., OCT. 20, 2014): B1 & B5.
(Note: bolded words, and last ellipsis, in original; other ellipses, and bracketed date, added.)
(Note: the online version of the commentary has the date OCT. 19, 2014.)

Harvard Rejects Christensen’s Advice to Try Disruptive MOOCs

“Harvard Business School faced a choice between different models of online instruction. Prof. Michael Porter favored the development of online courses that would reflect the school’s existing strategy.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Universities across the country are wrestling with the same question — call it the educator’s quandary — of whether to plunge into the rapidly growing realm of online teaching, at the risk of devaluing the on-campus education for which students pay tens of thousands of dollars, or to stand pat at the risk of being left behind.

At Harvard Business School, the pros and cons of the argument were personified by two of its most famous faculty members. For Michael Porter, widely considered the father of modern business strategy, the answer is yes — create online courses, but not in a way that undermines the school’s existing strategy. “A company must stay the course,” Professor Porter has written, “even in times of upheaval, while constantly improving and extending its distinctive positioning.”
For Clayton Christensen, whose 1997 book, “The Innovator’s Dilemma,” propelled him to academic stardom, the only way that market leaders like Harvard (p. 4) Business School survive “disruptive innovation” is by disrupting their existing businesses themselves. This is arguably what rival business schools like Stanford and the Wharton School have been doing by having professors stand in front of cameras and teach MOOCs, or massive open online courses, free of charge to anyone, anywhere in the world. For a modest investment by the school — about $20,000 to $30,000 a course — a professor can reach a million students, says Karl Ulrich, vice dean for innovation at Wharton, part of the University of Pennsylvania.
“Do it cheap and simple,” Professor Christensen says. “Get it out there.”
But Harvard Business School’s online education program is not cheap, simple, or open. It could be said that the school opted for the Porter theory.
. . .
“Harvard is going to make a lot of money,” Mr. Ulrich predicted. “They will sell a lot of seats at those courses. But those seats are very carefully designed to be off to the side. It’s designed to be not at all threatening to what they’re doing at the core of the business school.”
Exactly, warned Professor Christensen, who said he was not consulted about the project. “What they’re doing is, in my language, a sustaining innovation,” akin to Kodak introducing better film, circa 2005. “It’s not truly disruptive.”
. . .
One morning, [Harvard Business School Dean Nitin Nohria] sat down for one of his regular breakfasts with students. “Three of them had just been in Clay’s course,” which had included a case study on the future of Harvard Business School, Mr. Nohria said. “So I asked them, ‘What was the debate like, and how would you think about this?’ They, too, split very deeply.”
Some took Professor Christensen’s view that the school was a potential Blockbuster Video: a high-cost incumbent — students put the total cost of the two-year M.B.A. at around $100,0000 — that would be upended by cheaper technology if it didn’t act quickly to make its own model obsolete. At least one suggested putting the entire first-year curriculum online.
Others weren’t so sure. ” ‘This disruption is going to happen,’ ” is how Mr. Nohria described their thinking, ” ‘but it’s going to happen to a very different segment of business education, not to us.’ ” The power of Harvard’s brand, networking opportunities and classroom experience would protect it from the fate of second- and third-tier schools, a view that even Professor Christensen endorses — up to a point.
“We’re at the very high end of the market, and disruption always hits the high end last,” said Professor Christensen, who recently predicted that half of the United States’ universities could face bankruptcy within 15 years.

For the full story, see:
JERRY USEEM. “B-School, Disrupted.” The New York Times, SundayBusiness Section (Sun., June 1, 2014): 1 & 4.
(Note: ellipses, and bracketed name, added.)
(Note: the online version of the story has the date MAY 31, 2014, and has the title “Business School, Disrupted.”)

Some of Christensen’s thoughts on higher education can be found in:
Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.

“On the topic of online instruction, Prof. Clayton Christensen said: ‘Do it cheap and simple. Get it out there.”” Source of caption and photo: online version of the NYT article quoted and cited above.

Government Regulations Favor Health Care Incumbents

Source of book image: online version of the WSJ review quoted and cited below.

(p. A11) The rise in U.S. health-care costs, to nearly 18% of GDP today from around 6% of GDP in 1965, has alarmed journalists, inspired policy wonks and left patients struggling to find empathy in a system that tends to view them as “a vessel for billing codes,” as the technologist Dave Chase has put it.

Enter Jonathan Bush, dyslexic entrepreneur, . . .
. . .
. . . , Mr. Bush touts technology as a driver of change. It has revolutionized the way we shop for books and select hotels, but health-care delivery has been stubbornly resistant. Mr. Bush notes that the number of people supporting each doctor has climbed to 16 today from 10 in 1990–half of whom, currently, are administrators handling the mounting paperwork. Astonishingly, as Mr. Bush observes, the government had to pay doctors billions of dollars, via the 2009 HITECH Act, to incentivize them to upgrade from paper to computers. Meanwhile, fast-food chains discovered computers on their own, because the market demanded it.
. . .
Let entrepreneurs loose on these challenges, Mr. Bush believes, and they will come up with solutions.
Mr. Bush identifies three major obstacles to the kinds of change he has in mind. First, large hospital systems leverage their market position to charge hefty premiums for basic services, then use the proceeds to buy more regional hospitals and local practices. “As big ones take over the small,” Mr. Bush laments, “prices shoot up. Choices vanish.” Second, government regulations, especially state laws, favor powerful incumbents, shielding “imaging centers and hospitals from competition.” Third, heath care suffers from a risk-avoidant culture. The maxim “do no harm,” Mr. Bush says, should not be an excuse for clinging to a flawed status quo.

For the full review, see:
David A. Shaywitz. “BOOKSHELF; A System Still in Need of Repair; Routine medical services can be done for less cost–one of many obvious realities that current health-care practices studiously ignore.” The Wall Street Journal (Mon., May 19, 2014): A11.
(Note: ellipses added.)
(Note: the online version of the review has the date May 18, 2014, and has the title “BOOKSHELF; Book Review: ‘Where Does It Hurt?’ by Jonathan Bush; Routine medical services can be done for less cost–one of many obvious realities that current health-care practices studiously ignore.”)

The book under review is:
Bush, Jonathan, and Stephen Baker. Where Does It Hurt?: An Entrepreneur’s Guide to Fixing Health Care. New York: Portfolio, 2014.

“The Experts Keep Getting It Wrong and the Oddballs Keep Getting It Right”

“A worker at a hydraulic fracturing and extraction operation in western Colorado on March 29[, 2014].” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. C3) The experts keep getting it wrong. And the oddballs keep getting it right.

Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world’s leading producer.
What’s most surprising about both events is how few experts saw them coming–and that a group of unlikely outsiders somehow did.
. . .
Less well known, but no less dramatic, is the story of America’s energy transformation, which took the industry’s giants almost completely by surprise. In the early 1990s, an ambitious Chevron executive named Ray Galvin started a group to drill compressed, challenging formations of shale in the U.S. His team was mocked and undermined by dubious colleagues. Eventually, Chevron pulled the plug on the effort and shifted its resources abroad.
Exxon Mobil also failed to focus on this rock–even though its corporate headquarters in Irving, Texas, were directly above a huge shale formation that eventually would flow with gas. Later, it would pay $31 billion to buy a smaller shale pioneer.
“I would be less than honest if I were to say to you [that] we saw it all coming, because we did not, quite frankly,” Rex Tillerson, Exxon Mobil’s chairman and CEO said last year in an interview at the Council on Foreign Relations.
. . .
The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture–or frack–and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering.

For the full commentary, see:
GREGORY ZUCKERMAN. “ESSAY; The Little Guys Who Saw Our Economic Future; Corporate Caution and Complacency Come at a Cost.” The Wall Street Journal (Sat., Nov. 2, 2013): C3.
(Note: ellipsis, and bracketed year in caption, added.)
(Note: the online version of the commentary was updated Nov. 3, 2013, and has the title “ESSAY; The Outsiders Who Saw Our Economic Future; In both America’s energy transformation and the financial crisis, it took a group of amateurs to see what was coming.” )

Zuckerman’s commentary, quoted above, is partly based on his book:
Zuckerman, Gregory. The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters. New York: Portfolio/Penguin, 2013.

William Vanderbilt Helped Disrupt His Gas Holdings by Investing in Edison’s Electricity

(p. 84) But even the minimal ongoing work on the phonograph would be pushed aside by the launch of frenzied efforts to find a way to fulfill Edison’s premature public claim that his electric light was working. A couple of months later, when asked in an interview about the state of his phonograph, Edison replied tartly, “Comatose for the time being.” He changed metaphors and continued, catching hold of an image that would be quoted many times by later biographers: “It is a child and will grow to be a man yet; but I have a bigger thing in hand and must finish it to the temporary neglect of all phones and graphs.”
Financial considerations played a part in allocation of time and resources, too. Commissions from the phonograph that brought in hundreds of dollars were hardly worth accounting for, not when William Vanderbilt and his friends were about to advance Edison $50,000 for the electric light. Edison wrote a correspondent that he regarded the financier’s interest especially satisfying as Vanderbilt was “the largest gas stock owner in America.”

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.
(Note: ellipses, and capitals, in original.)

Amazon’s Story of the Evolution and Revolution of Disruptive Innovation

Source of book image:
http://i1.wp.com/allthingsd.com/files/2013/10/Stone_EverythingStore1.jpg

(p. C5) Mr. Stone, a senior writer for Bloomberg Businessweek and a former reporter for The New York Times, tells this story of disruptive innovation with authority and verve, and lots of well-informed reporting. Although “The Everything Store” retraces early ground covered by Robert Spector’s 2000 book, “Amazon.com: Get Big Fast,” Mr. Stone has conducted more than 300 interviews with current and former Amazon executives and employees, including conversations, over the years, with Mr. Bezos, who “in the end was supportive of this project even though he judged that it was ‘too early’ for a reflective look” at the company.

“The Everything Store” does not examine in detail the fallout that Amazon’s rise has had on book publishing and on independent bookstores, but Mr. Stone does a nimble job of situating the company’s evolution within the wider retail landscape and within the technological revolution that was remaking the world at the turn of the millennium.

For the full review, see:
MICHIKO KAKUTANI. “BOOKS OF THE TIMES; Selling as Hard as He Can.” The New York Times (Tues., October 29, 2013.): C1 & C5.
(Note: the online version of the review has the date October 28, 2013.)

The book under review is:
Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013.

“Brad Stone” Source of caption and photo: online version of the NYT review quoted and cited above.

Pretentious Studios Were Pushed Aside by Grounded Googlers

(p. 261) Kamangar didn’t put a value judgment on the way the labels and studios worked but tried to crack their code, talking to executives, producers, agents, and managers. One day he happened to be in New York and was invited to meet with the CEO of Universal Music Group, Doug Morris. Kamangar was escorted by bodyguards to a private elevator and ushered to a fancy office high above the city. He couldn’t help thinking of the contrast with Google, where you stumbled in and went to the microkitchen for coffee. Kamangar didn’t dwell on the (p. 262) irony that it was the scruffy kids in shorts, munching energy bars and writing analytics programs, who were pushing aside the old power structure. While he put the pieces of YouTube together, though, he always kept in mind that he was documenting a traditional media system on the verge of collapse. He had to deal with the music world as it was but also plan for the way it would be after disruptions, which Google and YouTube were accelerating.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Yahoo Execs Complained that Google Did Yahoo Searches too Well

(p. 45) Even though Google never announced when it refreshed its index, there would invariably be a slight rise in queries around the world soon after the change was implemented. It was as if the global subconscious realized that there were fresher results available.
The response of Yahoo’s users to the Google technology, though, was probably more conscious. They noticed that search was better and used it more. “It increased traffic by, like, 50 percent in two months,” Manber recalls of the switch to Google. But the only comment he got from Yahoo executives was complaints that people were searching too much and they would have to pay higher fees to Google.
But the money Google received for providing search was not the biggest benefit. Even more valuable was that it now had access to many more users and much more data. It would be data that took Google search to the next level. The search behavior of users, captured and encapsulated in the logs that could be analyzed and mined, would make Google the ultimate learning machine.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Silicon Valley May Be Insulated from the Jobs Ordinary People Need to Get Done

A long while ago I read somewhere that in his prime Bill Gates deliberately tested Microsoft software on the limited hardware that mainstream customers could afford, rather than on the cutting edge hardware he himself could easily afford. I thought that this gave an important clue to Gates’ and Microsoft’s success.
Christensen and Raynor (2003) suggest that the successful entrepreneur will think hard about what jobs ordinary people want to get done, but are having difficulty doing.
The passages quoted below suggest that Silicon Valley entrepreneurs are insulated from ordinary life, and so may need to work harder at learning what the real problems are.

(p. B5) Engineers tend to move to the Bay Area because of the opportunity to get together with other engineers and, just maybe, create a great company, Mr. Smith said. But in a region that has the highest concentration of tech workers in the United States, according to the Bureau of Labor Statistics, the bars, restaurants and other haunts of entrepreneurs can be an echo chamber. The result can be a focus on solutions for mundane problems.
. . .
. . . too often, says Jason Pontin, the editor in chief and publisher of MIT Technology Review, . . . start-ups are solving “fake problems that don’t actually create any value.” Mr. Pontin knows a thing or two about companies that aren’t exactly reaching for the stars. From 1996 to 2002, he was the editor of Red Herring, a magazine in San Francisco that chronicled the region’s dot-com boom and eventual collapse.

For the full commentary, see:
NICK BILTON. “Disruptions: The Echo Chamber of Silicon Valley.” The New York Times (Mon., June 3, 2013): B5.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 2, 2013.)

The Christensen and Raynor book that I mention above, is:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.