The Innovator's Dilemma - one of the best 6 business books of all time

This week, The Economist launched a quarterly review of business books.

For their inaugural review, they chose the best six business books of all time.  They included The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, by Clayton Christensen.  I fervently agree with this choice, as this book was the seminal work that sparked my deep interest in innovation, and Christensen's ideas form the nucleus of my MBA courses on innovation.  My opportunities to work with Clay have been among my most stimulating intellectual experiences; amazingly he's a really nice guy besides.

There are several reasons The Innovator's Dilemma is worthy of this honour.  The first is that it presented a sound theoretical basis for the concept of disruptive innovation and why successful companies can go into a sudden tailspin when their industry is disrupted.  Many business books present anecdotal evidence of how a particular company (or a selection of companies) achieve success; then they extrapolate that behaviour as if it's a general formula for success applicable to all companies.  In contrast, Christensen identifies the industry dynamics that call for different behaviours at different times.  The Innovator's Dilemma sheds light on how a company can be disrupted; The Innovator's Solution and later works provide guidance on how to defend against disruption, or go on the offensive to disrupt an industry yourself.

The second reason the book earned a place on this very short list is because of the impact it's had on the business world.  Christensen coined the term disruption to describe a particular kind of innovation that 'disrupts' a whole industry.  Such innovations are not the ones with the most bells and whistles or the most sophisticated technology.  Rather counter-intuitively, they are just good enough on traditional attributes, but deliver a new kind of value with a revolutionary business model.  

This idea links to one of the other books on this list The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits by C. K. Pahalad. The people at the bottom of the pyramid have been considered unattractive because of their limited disposable income; but when you add up billions of these individuals, the market suddenly becomes interesting.   This market needs products that are good enough for their needs, not necessarily to the standard of the top of the pyramid - good enough is almost always better than nothing.  Yet these products that start at the bottom of the pyramid are relentlessly improved over time, and we're starting to see some very interesting products appearing in the developed world that were originally designed for those bottom-of-the-pyramid markets.  GE's portable ultrasound device is a typical example of this.  Developed in India, it will make ultrasound more convenient and cheaper for the whole world.  This is true disruption.

Christensen regrets attributing disruption to technology in his original book; he came to realize that it's the business model that does the disruption.  In fact, in his modest way, he credits Andy Groves, legendary CEO of Intel, with this insight.  In the paperback release of The Innovator's Dilemma, the new subtitle The Revolutionary Book That Will Change The Way You Do Business eliminates the word technology.

Because of The Innovator's Dilemma, the business community has an understanding of the fundamental cause of cycles in the life and death of companies, and how to deal with those cycles.  The powerhouse incumbents in an industry will no longer be taken completely by surprise by such disruptive innovations, the way Kodak was devastated by digital photography, or Western Union by the telephone, or newspapers by Internet content and advertising.

Just today, Jackie Hutter posted on Blogging Innovation how to choose a partner for a company with a radically different battery technology.  Discouraged with their first foray with a big company that didn't seem to get the potential of disruptive innovation, she hypothesized that understanding Christensen could be a filter for choosing partners.  "At a minimum, if the person on the other side of the phone has not read any of Christensen's books, we probably don't want to have a second call".

Christensen has written other books, exploring disruption in specific industries, and what DNA it takes to be a good innovator.

Emerging Markets

"What's different today about emerging markets compared to ten years ago?" 

"Today they're emerging."

Chuckle for a minute.  Then think about it.  It's a very telling statement*. 

The term 'emerging markets' was coined thirty years ago by Antoine van Agtmael, to replace the perjorative terms previously used for the less developed world.  These economies represented one third of global GDP thirty years ago, but now they make up more than half.  More importantly, they accounted for more than four fifths of global GDP growth over the last five years.  Finally those countries are, well, emerging.

The Economist has just published an interesting article about emerging markets, assessing the common concern that their economies are overheating.

They chose six different indicators that might indicate overheating of an economy - inflation rate, average GDP growth rate since 2007, labour markets, credit expansion, real interest rates, and external current account balance - and concluded that the likeliest worst danger lies not in oft-discussed China, but in Argentina.

There is a depressingly long list of countries where something could go wrong.  And with the world so intertwined, and with emerging economies accounting for most of global growth these days, it's not a pretty picture.

Interesting analysis.  This post is a departure from my normal topics, but perhaps others will find this interesting too.


* I read this exchange recently but can't remember where, so pardon the lack of attribution.

The Makioka Sisters

The Makioka Sisters from the movie

Do you love Jane Austen and her detailed description of families and the social conventions that frame their lives?  Then you'll love The Makioka Sisters, by Jun'ichiroTanizaki.  Much like Jane Austen's writings, it's an intimate portrait of a family, especially the women and their marriage prospects, embedded in a description of Japanese societal conventions just before World War II.

The Makioka Sisters,Tsuruko, Sachiko, Yukiko and Taeko, are navigating a changing Japanese society through the years 1936-1941.  They can be insulted by a note written on the wrong kind of paper, they dress in traditional kimonos, they observe significant anniversaries of the parents' deaths and make an annual pilgrimage to Kyoto for viewing cherry blossoms; yet the youngest daughter Taeko symbolizes modernity by dressing in western clothes and trying to support herself and her independence.

The two oldest sisters, Tsuruko and Sachiko are married, and the book chronicles the efforts to marry off the third sister, Yukiko.  With the parents dead, the final verdict on suitability rests with the 'main house' and Tatsuo, the oldest sister Tsuruko's husband.  Yukiko and Taeko 'should' be living in the main house. However, since they don't get along very well with Tatsuo, they manage to spend most of their time with Sachiko and her kind and supportive husband Teinosuke.  Thus Sachiko feels responsible for finding her sister a husband.

The Japanese custom is for the family to arrange marriages for the daughters, and detailed research is carried out by private investigators to assess worthiness. The Makioka family was once a merchant family of high standing; however it's been slipping lately.  In the past, the family has haughtily rejected many suitors for Yukiko's hand, based on very stiff requirements.  Now the tables are turning, and with the family fortunes in decline, they are relaxing those requirements.  But the potential suitors are dwindling and getting choosier themselves: the family is reduced to producing chest X-rays to reassure suitors Yukiko is healthy and starting a regimen of injections purported to clear up a blemish above her eyebrow.

Yukiko's unwillingness to speak in the presence of a suitor or on the telephone dooms some prospects and drives Sachiko to distraction, but still the Makiokas do not force the meek and passive Yukiko's hand.  Indeed, Yukiko seems passive-aggressive - apparently disinterested in marriage she virtually sabotages some approaches, without ever saying outright that she is unwilling.  As the desperation intensifies,  the Makioka family does nothing proactive to seek a husband; they must wait for proposals from matchmakers, most notably their aggressive no-nonsense hairdresser.

Meanwhile Taeko, the youngest sister, is at the mercy of these negotiations, because she can't marry before her older sister.  Taekio has been foiled in her desire to marry the man he loves.  Admittedly, Okubata is a lazy, cheating dandy but prohibiting Taeko to marry or see him hasn't been a very effective countermeasure.  Taeko's aborted elopement with Okubata was unfortunately reported in the newspaper and has clouded Yukiko's chances.  As she strains for independence, she ricochets from one undesirable liaison to another.  For such an introverted novel, there's a lot going on!

There is little mention of the political situation going on outside the family.  The Sino-Japanese war is refered to as 'the China incident', and in these difficult times, social events have to be more muted, but there's little sense of the impending war (Pearl Harbor is just a few months away).  This is definitely a novel whose stage is inside the house, with the outside world merely a blurry backdrop to the main action. 

I highly recommend this book.

An Apple Experience

Recently I wrote about great customer experiences at ING Direct, especially at their new cafe in Toronto.  Amazingly, I've just had another customer experience worth writing about - at the Apple store in downtown Toronto.

Apple store - Toronto Eaton Centre

Past experiences at the Apple store revolved around the Genius Bar  - getting expert help with my iPod at the promised appointment time.  This time, I was in a hurry to buy a blue wireless Jambox speaker.  There was one left on the shelf, in black, and the store was thronged with customers and buzzing with activity.  As far as I could see, the many Apple staff in blue t-shirts were all occupied with customers.  I was never going to get out of there in time for my next appointment!

Then, one of the staff instructed me to go to one of the iPads lined up on the long tables, and click in the bottom right to call for a salesperson.  The screen instructed me to stand there and someone would come to me.  After a minute or so, I clicked again and was told there were 2 people ahead of me and did I still want to wait?  I clicked on yes, and a salesperson promptly showed up.  I told her what I wanted and she walked me to the back of the store, where she sent someone off to the back room to fetch the blue Jambox, the last one in stock as it happened, and put it in a bag for me.  She had a mobile device in her hand (an iTouch?), with a card reader.  So she captured my credit card info and asked me to sign on the touch screen, then walked me to the door, and grabbing my receipt off a printer mounted under a table near the door.  Presto, I was finished in time for my next (ugh dentist) appointment.

What a fabulous experience.  Quick, efficient, and showing off Apple technology all the way.