Friday, July 11, 2014

Is the Christensen Halo Slipping?

Christensen Criticism
Harvard Professor Clayton Christensen is considered by many to be one of the modern great minds of business theory. His 1997 book, The Innovator’s Dilemma, was called by the Economist magazine in 2011 one of the six most important business books ever written. That’s high praise.

However, in the June 23, 2014 edition of the New Yorker magazine, fellow Harvard professor Jill Lepore writes a scathing criticism of Christensen’s seminal work (read it here). Perhaps in an attempt to overcome the damning nature of that New Yorker article, the July-August edition of Harvard magazine has a glowing defense of Christensen’s work (read it here).

The Criticism
So what does Lepore say about Christensen’s work that is so damning? Basically she says two things:

  1. The facts don’t back up Christensen’s theory.

  1. Even if the theory is true, it is relatively useless because it does not predict what type of behavior to take. In other words, there is no advantage to knowing the theory, because it only can explain the past, not predict the future. It is like someone who can tell you in great detail why the stock market did what it did yesterday, but has no clue about what it will do tomorrow. Lepore backs up this claim by pointing out that Christensen’s venture capital fund designed to exploit his theories from the Innovator’s Dilemma was a failure.
Although Lepore’s argument may not be as rock solid as she wants you to believe it to be, it is still very damning to Christensen’s legacy.

Another Chink in the Armor
I first started having my doubts over the “genius” of Christensen back in 2011, when I read an article of his latest “discovery” on the Harvard Working Knowledge website (read it here). I was flabbergasted that Christensen thought he had come up with another brilliant new insight, which looked to me like something that could have come out of an introductory marketing textbook.

He was acting as if he invented marketing. It reminded me of something a radio DJ recently said: “Miley Cyrus acts as if she invented sex.” It makes a person look silly when they act as if they invented something that everyone else knows has been around a long time.

I started thinking, how could Christensen be such a genius in understanding how businesses rise and fall if he hasn’t a basic understanding of marketing? I wrote a blog on the topic here.

Stay Away From Extremes
The reality is that Christensen is not as bad a bum as Lepore says nor as much a genius as Harvard magazine says. And even if much of what Christensen said is not new (a lot of the Innovator’s Dilemma ideas harken back to earlier work by others, such as Schumpeter’s “creative destruction” a half century earlier) it is still valuable work, because it got people to focus on an important topic.

My Core Learnings
My interpretation of the key takeaways from the innovator’s dilemma thinking is this:

  1. Business leaders have a vested interest (and bias) towards protecting and growing their key sources of profitability. 
  1. This causes them to:
    1. Go on the offensive by continually making incremental improvements to their key sources of profitability.
    2. Go on the defense by aggressively counteracting any direct competitive threat to their key sources of profitability.
  1. Unfortunately, the biggest threats are usually indirect, coming from radically different solutions which are unlike the status quo.
  1. Incremental improvements to the status quo won’t save them from the radical new innovation (for example, you can never make carbon paper incrementally better enough to overcome the threat of photocopy machines). And because the attack is indirect, the innovation is relatively immune from the traditional defense.
  1. The best response is to move away from the status quo and embrace its radical replacement. However, to do so requires destroying much of the current profitability within the status quo. That is a difficult undertaking to get approval for. As a result, the future usually goes to the one with no vested interest in the status quo.
  1. The key takeaway: The new is going to destroy the old. If you let someone else destroy your old, you are left with nothing (think Kodak and film). If you destroy your old, at least you have a chance of being left with the new. So overcome your fear of creating your own obsolescence, because obsolescence is inevitable and it’s better if you do it to yourself than to have it done by others.
These six takeaways are highly valuable, even if not new. The problem is that people have read far too much more into this concept. And that is when you get into trouble. Knowing that the new will eventually replace the old does not mean that you can always correctly know which new thing is going to do the replacing. Most new things fail. Therefore, one has to be very careful when making choices about what new things to bet on. And that is where the true genius lies.

Final Thoughts
We get into a lot of trouble when we label people as business messiahs. Eventually, they will not live up to all the hype and will disappoint us. But that doesn’t mean that we should throw away everything associated with them. Useful ideas are still useful, no matter the source. Just don’t read too much into them and think that a single idea solves everything.

1 comment:

  1. Gerald, Our experience with our alma mater suggest that Christensen was right. In spite of being a required reading, the company went back to its traditional view of competition while it handed away business after business to new competitors. It viewed Walmart, Sears, and Circuit City as its competitors far more than Apple, Amazon, Dell or Netflix.