Christensen, Clayton – Page 5 – artdiamondblog.com

Christensen Book Re-Thinks Basic Assumptions About Health Care Innovation

Source of book image: http://images.barnesandnoble.com/images/34000000/34009038.jpg

Christensen’s new book hit the shelves in December 2008. His ideas on health care are promising, if the special interests don’t get in the way. (I have not yet read the new book, but have read earlier versions of his proposals on how disruptive innovations can improve health care.)

(p. R2) BUSINESS INSIGHT: Your coming book, “The Innovator’s Prescription,” takes a look at health care. How likely do you think it is we’ll see substantial innovation in the structure of the U.S. health-care system?
DR. CHRISTENSEN: Well, one great benefit of the current economic crisis is that it will create pressure to find a real solution to the health-care problem. Right now, emergencies exist at companies like General Motors, which has got to drive the cost of its health care down. Every city and town in America would be bankrupt if they kept their books the way private-sector companies keep their books — because of the obligation cities and towns have taken upon themselves to provide health care for their retirees.
And so we really are in an emergency where it’s likely that employers and health-care providers are open to completely rethinking some of the basic assumptions that made innovation seem impossible. What we’re hoping with this book is that we can just bring a way to frame the problem that can help people reach consensus around a course of action that otherwise, at another time, would have seemed quite counterintuitive.

For the full interview, see:
Martha E. Mangelsdorf, interviewer. “Executive Briefing; How Hard Times Can Drive Innovation.” Wall Street Journal (Mon., DECEMBER 15, 2008): R2.
(Note: ellipses added.)

New Business Model for Promoting Disruptive Innovation

“Clayton M. Christensen” Source of caption and photo: online version of the WSJ interview quoted and cited below.

(p. R2) BUSINESS INSIGHT: . . . There must be, . . . , cases where concerns about the market cause companies to abandon their plans for new products or really retrench. Or do you see that happening less these days as companies realize the importance of keeping up with changing markets?
DR. CHRISTENSEN: In the next two years, I think the answer will hinge quite a bit on the role that hedge funds play in driving stock prices. By now, 95% of all trades on the stock exchange are executed by hedge funds, mutual funds or pension funds that you could not call shareholders. They’re share owners, but they don’t even hold the shares long enough, on average, to vote the proxy. And long-term shareholders are always better for innovation than the short-term people are.
BUSINESS INSIGHT: So we might see innovation more from private companies?
DR. CHRISTENSEN: Absolutely right. And there’s another business model toward which more and more companies need to move. It’s a business model you see with Li & Fung in Hong Kong, Tata Sons in India, and Cox Enterprises in Atlanta. In this model, the holding company is privately held, and then certain of the subsidiary companies that have the right characteristics take their shares public on the market.
What that allows those companies to do is, when they have a disruptive innovation that they need to launch, they can just do it under the private umbrella of the holding company, and not have it reduce the near-term performance of the publicly held subsidiaries.

Microsoft Still Risks Becoming “Road Kill on the Information Highway”

“Steve Ballmer is the second Microsoft chief executive to butt his head against the view that a new era in technology brings a new market leader.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) The Yahoo affair obscures the larger story: Microsoft’s long, long struggle — since 1993 — to maintain its leadership position while the Internet grew ubiquitous. Mr. Ballmer, who joined Microsoft in 1980 as its 15th employee, and Bill Gates, his mentor who will retire next month as a full-time Microsoft employee, have certainly tried their best to avert the inevitable decline of the company’s influence.

In 2000, Mr. Ballmer credited Mr. Gates for noting that no company in the computer business had ever stayed on top through what Mr. Gates called “a major paradigm shift.” The two men wanted Microsoft to be the first company to achieve that goal. An interesting challenge, but some problems are of a size that dwarf the abilities of multibillionaire mortals.
In a 1995 internal memo, “The Internet Tidal Wave,” Mr. Gates alerted company employees to the Internet’s potential to be a disruptive force. This was two years before Clayton M. Christensen, the Harvard Business School professor, published “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail” (1997). The professor presented what would become a widely noted framework to explain how seemingly well-managed companies could do most everything to prepare for the arrival of disruptive new technology but still lose market leadership.
It’s Google, of course, that has developed the musculature to step forward and lay claim to being Microsoft’s successor as industry leader in the Internet era. If there had been any way Microsoft could have prepared for this day, it had ample time to do so. In 1993, fully five years before Google’s founding and two years before Mr. Gates’s memo, Nathan P. Myhrvold, then Microsoft’s chief technology officer, wrote his own memo, “Road Kill on the Information Highway.” It spelled out in prescient detail how each of many industries would be flattened by the build-out of digital networks, and it said that the PC software business would be no exception.

For the full commentary, see:
RANDALL STROSS. “Digital Domain; The Computer Industry Comes With Built-In Term Limits.” The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.

A Schumpeterian Policy Program Promotes Innovation and Creative Destruction

McCraw on the nature of “a Schumpeterian program” :

(p. 169) Yet it is not difficult to identify a Schumpeterian program—at whatever level of analysis one chooses: the individual entrepreneur, the business firm, the industry, or even the country. At all levels, Schumpeter’s litmus test is whether the players are pursuing innovation and bringing about creative destruction. If they are, then the program is Schumpeterian.

Source:
McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.

Kodak Ignored Digital to Its Peril

“Steven J. Sasson, an electrical engineer, created the first digital camera.” Source of caption and photo: online version of the NYT article quoted and cited below.

Kodak’s problems in detailed in the article below, fit very well Christensen’s account about how difficult it is for incumbent firms to embrace major disruptive technologies.

(p. C1) ROCHESTER — Steven J. Sasson, an electrical engineer who invented the first digital camera at Eastman Kodak in the 1970s, remembers well management’s dismay at his feat.
“My prototype was big as a toaster, but the technical people loved it,” Mr. Sasson said. “But it was filmless photography, so management’s reaction was, ‘that’s cute — but don’t tell anyone about it.’ ”
. . .
(p. C2) The company now has digital techniques that can remove scratches and otherwise enhance old movies. It has found more efficient ways to make O.L.E.D.’s — organic light-emitting diodes — for displays in cameras, cellphones and televisions.
This month, Kodak will introduce Stream, a continuous inkjet printer that can churn out customized items like bill inserts at extremely high speeds. It is working on ways to capture and project three-dimensional movies.
. . .
Paradoxically, many of the new products are based on work Kodak began, but abandoned, years ago. The precursor technology to Stream, for example, pushed ink through a single nozzle. Stream has thousands of holes and uses a method called air deflection to separate drops of ink and control the speed and order in which they are deposited on a page.
“I remember wandering through the labs in 2003, and seeing the theoretical model that could become Stream,” said Philip J. Faraci, Kodak’s president. “The technology was half-baked, but it was a real breakthrough.”
Other digital technologies languished as well, said Bill Lloyd, the chief technology officer. “I’ve been here five years, and I’m still learning about all the things they already have,” he said. “It seems Kodak had developed antibodies against anything that might compete with film.”
It took what many analysts say was a near-death experience to change that. Kodak, a film titan in the 20th century, entered the next one in danger of being mowed down by the digital juggernaut. Electronics companies like Sony were siphoning away the photography market, while giants like Hewlett-Packard and Xerox had a lock on printers.
“This was a supertanker that came close to capsizing,” said Timothy M. Ghriskey, chief investment officer at Solaris Asset Management, which long ago sold its Kodak shares.

For the full story, see:
CLAUDIA H. DEUTSCH. “At Kodak, Some Old Things Are New Again.” The New York Times (Fri., May 2, 2008): C1-C2.
(Note: ellipses added.)

“Allan Camp, a technician at Kodak’s inkjet development center in Rochester, works on the development of print heads for printers.” Source of caption and photo: online version of the NYT article quoted and cited above.

European Bureaucrat Forces Businesses to Make “a Smart Business Decision”

If open standards are always “a smart business decision” why do business managers need government bureaucrats to force that decision on them (through fining firms, like Microsoft, that sometimes favor proprietary standards)?
In fact, there are circumstances in which open standards are better for customers, and there are also circumstances in which proprietary standards are better.
To better understand these issues consult Shapiro and Varian’s Information Rules and Christensen and Raynor’s The Innovator’s Solution.

(p. C8) BRUSSELS — The European Union’s competition commissioner, Neelie Kroes, delivered an unusually blunt rebuke to Microsoft on Tuesday by recommending that businesses and governments use software based on open standards.

Ms. Kroes has fought bitterly with Microsoft over the last four years, accusing the company of defying her orders and fining it nearly 1.7 billion euros, or $2.7 billion, on the grounds of violating European competition rules. But her comments were the strongest recommendation yet by Ms. Kroes to jettison Microsoft products, which are based on proprietary standards, and to use rival operating systems to run computers.
“I know a smart business decision when I see one — choosing open standards is a very smart business decision indeed,” Ms. Kroes told a conference in Brussels. “No citizen or company should be forced or encouraged to choose a closed technology over an open one.”

For the full story, see:
JAMES KANTER. “Harsh Words for Microsoft Technology.” The New York Times (Weds., June 11, 2008): C8.

References mentioned:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.
Shapiro, Carl, and Hal R. Varian. Information Rules: A Strategic Guide to the Network Economy. Boston, MA: Harvard Business School Press, 1999.

A.D.A. Tries to Stop Dental Therapists from Competing with Dentists

“Aurora Johnson, left, a dental therapist, filled cavities for Paul Towarak, 10, in the village of Unalakleet, Alaska. For more involved procedures, Ms. Johnson refers patients to a dentist.” Source of caption and photo: online version of the NYT article quoted and cited below.

Clayton Christensen (and co-authors) have suggested that disruptive technologies could reduce the cost and improve the quality of health care. One pathway for this to occur is new technologies that permit effective treatment to be carried out by para-professionals with less education than MD’s.
The article below illustrates Christensen’s idea, and also highlights the main obstacle to its implementation: professional organizations asking the government to regulate and restrict competition from the lower-cost para-professionals.

(p. A1) UNALAKLEET, Alaska — The dental clinic in this village on the edge of the Bering Sea looks like any other, with four chairs, a well-scrubbed floor and a waiting area filled with magazines.
But to the Alaska Dental Society and the American Dental Association, the clinic is a place where the rules of dentistry are flouted daily. The dental groups object not because of any evidence that the clinic provides substandard care, but because it is run by Aurora Johnson, who is not a dentist. After two years of training in a program unique to Alaska, Ms. Johnson performs basic dental work like drilling and filling cavities.
Some dentists who specialize in public health, noting that 100 million Americans cannot afford adequate dental care, say such training programs should be offered nationwide. But professional dental groups disagree, saying that only dentists, with four years of postcollegiate education, should do work like Ms. John-(p. A15)son’s. And while such arrangements are common outside the United States, only one American dental school, in Anchorage, offers such a program.
. . .
(p. A15) In Alaska, the A.D.A. and the state’s dental society had filed a lawsuit to block the program that trained people like Ms. Johnson, who are called dental therapists. The groups dropped the suit last summer after a state court judge issued a ruling critical of the dentists. But the A.D.A. continues to oppose allowing therapists to operate anywhere in the lower 49 states. Currently, therapists are allowed to practice only in Alaska, and only on Alaska Natives.
. . .
Therapists are a low-cost way to provide care to people who might not otherwise have access to it, according to Dr. Ron Nagel, a dentist and consultant for the Alaska Native Tribal Health Consortium, a nonprofit group financed mostly by federal money that provides medical and dental care to tribal communities. “There’s a huge need for these basic services,” Dr. Nagel said.
. . .
Since 1990, the number of private dentists has remained roughly flat, at 150,000, even as the United States population has increased 22 percent. As a result, dentists can easily fill their appointment books without seeing people who cannot meet their fees, and patients who have decayed teeth are suffering needlessly, said Tammy Guido, 50, who is one of seven students now training in Anchorage to become a therapist.
“We’re meeting a need that is not being met,” Ms. Guido said.
Alaskan tribal organizations sponsor Ms. Guido and the other students in Anchorage for the program. To be accepted, students must have a high school diploma or equivalency degree; for the newest class, 7 of 18 candidates were accepted.
In interviews, the students in this year’s class all said they were enthusiastic about the chance to serve communities that have little access to care. All seven had quit full-time jobs and must now get by on a $750 monthly stipend during the two years of training.
“Anybody who’s ever had a toothache can tell you it hurts,” said Ben Steward, 24, the only man in this year’s class. “But talk to someone who’s had a toothache for a year.”

For the full story, see:
ALEX BERENSON. “Dental Clinics, Meeting a Need With No Dentist.” The New York Times (Mon., April 28, 2008): A1 & A15.
(Note: ellipses added.)

One source of Christensen’s views on health care can be found in a chapter in:
Christensen, Clayton M., Scott D. Anthony, and Erik A. Roth. Seeing What’s Next: Using Theories of Innovation to Predict Industry Change. Boston, MA: Harvard Business School Press, 2004.

Talking a Good Game is Little Correlated with Getting it Done

Bossidy and Charan’s advice below on hiring managers fits with Christensen and Raynor’s advice to hire managers who have had the right experiences, in preference to those who have the ‘right stuff’ (aka ‘charisma’).

(p. 119) In our experience, there’s very little correlation between those who talk a good game and those who get things done come hell or high water. Too often the second kind are given short shrift. But if you want to build a company that has excellent discipline of execution, you have to select the doer.

Source:
Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

Schumpeterians Lead Ranking of Business Gurus

Source of graphic: online version of the WSJ article quoted and cited below.

The top two business gurus in the WSJ‘s latest ranking, have each written major books that make substantial use of Schumpeter’s concept of creative destruction. (The Hamel book is Leading the Revolution, and the Thomas Friedman book is The Lexus and the Olive Tree.)
Others among the top 20 gurus who have written favorably of the process of creative destruction, include Clayton Christensen, Jack Welch, and Tom Peters.

(p. B1) The guru game is changing.
Psychologists, journalists and celebrity chief executives crowd the top of a ranking of influential business thinkers compiled for The Wall Street Journal. The results, based on Google hits, media mentions and academic citations, ranked author and consultant Gary Hamel No. 1.
But Dr. Hamel is the only traditional business guru in the top five, which includes two journalists, Thomas Friedman and Malcolm Gladwell, and a former CEO, Bill Gates. Mr. Gladwell is among three thinkers in the top eight who focus on psychology. His 2005 book “Blink: The Power of Thinking Without Thinking” examined the role of snap judgments in decision-making. Howard Gardner, a professor of education at Harvard best known for the theory of “multiple intelligences,” is No. 5, while Daniel Goleman, a psychologist who has written about “emotional intelligence,” ranks eighth.
Thomas H. Davenport, a management professor at Babson College, compiled the ranking, employing the same methodology he used in a 2003 book, “What’s the Big Idea?” Several well-known business gurus fell lower in the updated list, including Michael Porter and Tom Peters, who topped the 2003 ranking and dropped to Nos. 14 and 18, respectively. Harvard’s Prof. Porter noted that his last book was on health care rather than general management, and that “I feel like my recent work continues to have an impact in my various fields.”
Dr. Davenport says the changes show that time-strapped managers are hungry for easily digestible advice wherever they can find it. Today, the most pressing themes include globalization, motivation and innovation. Traditional business gurus writing “weighty tomes” are in decline, he says.

For the full story, see:
ERIN WHITE. “New Breed of Business Gurus Rises; Psychologists, CEOs Climb in Influence, Draw Hits, Big Fees.” Wall Street Journal (Mon., May 5, 2008): B1.

Source of table:
ERIN WHITE. “What Influential Business Thinkers Focus On; Top Gurus Ponder Manager’s Worries, New Approaches.” Wall Street Journal (Mon., May 5, 2008): B6.
(Note: the online version of the article has the title: “Quest for Innovation, Motivation Inspires the Gurus; Leading Thinkers Apply Varied Skills For Global Solutions.”)

Why Entrepreneurs Are Needed to Bring Important Innovations to Market

Source of book image: http://www.bigbadbookblog.com/wp-content/uploads/Blink.jpg

In my classes I sometimes comment on the failure of much marketing research, sometimes quoting the founder of Sony on using his own judgment on what is useful to customers.

There’s some useful insight into this issue in Malcolm Gladwell’s stimulating Blink book. He argues, and presents examples, that marketing research can provide useful information when the product being evaluated is familiar to the customers being surveyed. But when the product is new and unfamiliar, it may take awhile for the customer to figure out what they think of it. There initial reaction will usually be negative, simply as a reaction to the unfamiliarity. But with time, the product may grow on them as they figure out what “jobs” the product might be able to do for them in the full context of their lives. (The “jobs” formulation is Christensen’s, not Gladwell’s.)

What is worse, it is precisely those innovations that are most innovative, and ultimately prove most useful, that are most unfamiliar, and hence are most likely to be panned by customers in initial evaluations.

This has implications for why an entrepreneur-friendly economy is so important for innovations. Incumbent firms are apt to rely on some formal (a.k.a. marketing research) methods to evaluate new innovations. So if innovations are to be introduced, it is crucial that there be entrepreneurs with the courage, passion, knowledge, and financial means to pursue the innovation through the period of skepticism.

The reference for the Blink book, is:

Gladwell, Malcolm. Blink: The Power of Thinking without Thinking. Back Bay Books, 2005.