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The Innovator’s Solution - Clayton M. Christensen

McGraw-Hill New Zealand Pty Ltd

The Innovator’s Solution

Creating and Sustaining Successful Growth

Clayton M. Christensen
Author of the international bestseller The Innovator’s Dilemma
Michael E. Raynor

They pour resources into their core business. They listen to their best customers. And in doing so, industry leaders get blindsided by disruptive innovations – new products, services, or business models that initially target small, seemingly unprofitable customer segments, but eventually evolve to take over the marketplace. This is the innovator’s dilemma – and no company or industry is immune.

Now, new research reveals the innovator’s solution – a powerful and counterintuitive set of theories that may finally resolve the vesing challenge of creating new growth in business.

At best one compnay in ten is able to sustain profitable growth. Yet capital markets demand that all companies seek it relectlessly, punishing mercilessly those who fail. In his worldwide bestseller The Innovator’s Dilemma, Clayton Christensen explained why disruptive innovation is so hard, and the powerful forces that drive established leaders to set the stage for their own destruction. The book sent shock waves through strategy “war rooms” in every industry, and put executives on notice: disruption is inevitable, and you’d better do something about it.

Over the last five years, Christensen, a professor at Harvard Business School, and Michael E. Raynor, a director at Deloitte Research, probed deeper into the nature of disruptive technologies. They knew how established companies made themselves vulnerable to attack. Now, they wanted to discover how successful innovators could shape nascent ideas into killer disruptions. In The Innovator’s Solution: Creating and Sustaining Successful Growth (Harvard Business School Press: $64.95), they reveal some surprising truths about innovation, and offer a set of proven theories managers can use to revive their sputtering growth engines by shaping and launching disruptive innovations.

Innovation is Much More Predictable Than We Thought

In this groundbreaking book, Christensen and Raynor show that innovation is not nearly as random and unpredicable as managers have come to believe. While the outcomes of the innovation process have seemed random – such as superior innovations that tank and unlikely products that take off – the process itself, that is, the forces that shape and package innovations within companis, is very predictable. Christensen and Raynor demystify this process and explain how managers can greatly increase the odds of successful growth.

Surprising New Theories on What It Takes to Innovate Successfully

Whether they realise it or not, executives and managers regularly make decisions based on a set of theories drawn from their past experiences. The problem is, the same theories that work well in running an established business don’t apply when launching a new growth venture.

Drawing on years of in-depth research, the authors present new theories – tested in hundreds of companies across many industries – that make it possible for managers to better predict the outcomes of important growth-related decisions under different circumstances.

Each of these decisions represent key actions that drive success inside what the authors call the “black box” of innovation: that critical place where new ideas are either stripped of their market-making potential – or shaped into powerful disruptions.

Many of these theories upend conventional thinking about what it akes to manage and lead, develop and market products, and innovate successfully:

- Competitive Battles: Many executives pick their battles according to things like a competitor’s size. In fact, this is almost irrelevant. The hard and fast rule: incumbents almost always win sustaining battles (which center around imporved versions of already existing products), and entrants nearly always win disruptive ones.

- Market Segmentation: Most companies segment customer markets along the lines for which data are available. The authors argue that segmenting markets by price point, product type and customer demographics does not reflect the way customers actually experience life. This is why companies often product products or services that customers don’t want. When managers segment markets according to important jobs customers are trying to get done, they have a much higher chance of connecting with enthusiastic customers.

- Outsourcing Decisions: Most companies determine what activities to keep in-house and which to outsource according to their “core competencies”. Christensen and Raynor propose a different theory. When products are not yet good enough, companies should set up a proprietary, in-house architecture to capture the most profits. When products become more than good enough, commoditization sets in and activities should be outsourced.

- Management and Leadership: Often the managers picked to lead new ventures are those with proven track records in the core business. But these individuals are often the least-equipped to steer a fledging business, because they don’t have the experiece to see the job through successfully.

- The Growth Rationale: Most executives fell pressure to grow very quickly, and reason that profits will come later. Wrong. The authors say companies must be impatient for profits, but patient for growth. Demanding early profits actually helps a truly viable strategy to emerge quickly, and buys the new venture the ramp-up time it needs to grow successfully.

- Strategy: Many executives focus on the core business when times are robust, and worry about growth when numbers start to stall. Christensen and Raynor argue that it is imperative to initiate disruption-based growth efforts while business is booming, so that executives won’t give in to the pressure to grow so quickly that they make fatal strategic mistakes.

A Template fo Shaping and Launching Successful Disruptions

Thorugh vivid examples of disruptive innovations in many eras and industries – from healthcare to retail and from electronics to energy – The Innovator’s Solution shows that disruption actually follows a remarkably consistent pattern. Christensen and Raynor guide to managers in each step of identifying, shaping, and launching a new disruption, including:
- How to determine whether a new idea has disruptive potential
- Segmenting markets to target jobs customers are trying to get done – and creating products that help them accomplish those things cheaply and simply.
- How to connect disruptive innovations with the right initial customers.
- Which sales and distribution channels would be most capanle and motivated to grow the market as fast as possible.
- Which activities required to design, produce, sell, and distribute the product should be done internally and which should be outsourced.
- When and where commoditization and decommoditization are beginning to happen, and how to keep earning attractive returns in the face of new trends.
- What organisational structure would best support a new venture and where it should “live”.
- Which managers would be best equipped to lead the new venture.
- What process for strategy formation to use at different stages of business development.
- Whose investment capital would best help the new business succeed.
- What role the CEO should play in shaping and running the business

While no company has yet succeeded in creating and what the authors call a “disruptive growth engine”, the capability is within reach, and the potential is huge. By helping managers guide their companies on a predictable path to growth, The Innovator’s Solution will enable companies to consistently identify, move to, and capture the money-making opportunties of the future.

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