Book Review: The Innovator’s Dilemma, When New Technologies Cause Great Firms to Fail

Book review
The Innovator’s Dilemma, When New Technologies Cause Great Firms to Fail
by Clayton M. Christensen (1997)

There is far more than schadenfreude at play when reflecting on our cultural fascination with why the mighty fall. Instead, it is perhaps rooted in our desire to avoid a similar fate. If that big and successful company over there can fail, then what does that mean for the business that I’m in?

The theory and concepts introduced in the Innovator’s Dilemma is an absolute must understand for anyone facing the task of continuing business growth. If you noticed that I have written “must understand” rather than “must read” you’ve already picked up on one of my key reflections on this book. It’s not an easy read. If you’re not an attuned technical reader that flies through academic texts, or don’t have a keen fascination with disc drives and the history thereof, you’re going to struggle with this one. That being said, if you can persist, the reward is worth it. The way you think about growth, success and innovation will be forever changed.

This book is actually pretty old these days, first published in 1997, it was perhaps ahead of it’s time as the explosion of tech startups in the recent years has brought the word ‘disruption’ into the common business vernacular. There are plenty of historical examples of disruption, the examples of disc drives and mini mills being described at length in this book, however, never has there been a time where the pace of change was so rapid, and so present in everyday consumer life. It’s all around us. How we consume media, how we buy books, where we stay when we travel, how we get from place to place, how we connect with friends and family, the list could go on and on! The up shot is that The Innovator’s Dilemma is as timely and relevant now as it ever was, both for established companies looking avoid the mistakes of the former greats, and for the up and coming startups hoping to be the next great disruptor.

The first half of the book reads like an extended history of the disk drive. The same story many times over, 14 inch, 8 inch, 5.25 inch, 3.5 inch, 2.5 inch and 1.8 inch. On and on. Technical, detailed and pretty tough going. To be honest, I got bored a few times, put it away, read something else and then came back to it. I did keep coming back though!

By the end of this section the lesson is clear, new technology is usually simpler, cheaper and lower performing. It often has a lower margin, doesn’t meet the needs of existing customers and those whose needs it does meet are so niche, they’re not worth pursuing. If you are only focused on current markets, current customers and improving profitability, it’s never going to be a priority. More than that, you’re not just going to leave this new technology that you may even have developed in house on the shelf, you’re going to bury it and ignore others playing in this space, writing them off as a non-threat due to your own lens on the competitive landscape.

The problem with this is that by carving out a strong spot in a niche market, a disruptor then has the ability to invest in incremental improvement on this new technology, which quickly sees them surpassing the original in both performance and cost. They move up market, often with disastrous consequences for the incumbent.

This is the dilemma: “the logical, competent decisions of management that are critical to the success of their companies are also the reasons why they lose their positions of leadership.”

With the pattern and framework established, the second half of the book is where it gets really interesting. With the point made, the examples become more varied, and the writing style switches from historical recount to thesis, case studies and advice. The distinction between sustaining innovations that help progress existing technologies, and disruptive innovations that chart new waters becomes clearer, and there are some positively fascinating snippets addressing questions like “When does a product become a commodity?” (Answer: When the features and functionality exceed what the market demands.)

Christensen also uses these case studies and examples to discuss good and bad strategies and posits the beginnings of some solutions to the dilemma – each presented with their potential challenges. In complete contrast to the first half of the book, I barely put my kindle down at this point!

For those that want the cliff notes, the video below gives a nice little 4 minute summary of the basic principal of disruptive vs. sustaining innovation and the dilemma itself. But if you can keep yourself motivated by the promise of the second half, do take the time to read the full book.

 

In short, the Innovator’s Dilemma is definitely on my list of books to revisit and read again in the future as it has a wealth of highly relevant principles and considerations for modern management, but first I’m going to give The Innovator’s Solution a go.

Striving for High Performance?

High performance, what does it actually mean?

Having significant experiences within the world of High Performance Sport as an athlete, a coach and selector, a researcher, and also as my area of academic qualification, my brain immediately jumps to this space when I think of high performance.  At the simplest level, high performance is the quest for greatness.  The drive to do better, be better and be judged against the best.  In the sporting arena, those that are part of high performance programmes are those that have the unique combination of ability, mental toughness and desire or ambition.

When selecting young gymnasts for competitive training groups on the path to high performance, it was my responsibility to select those that showed this combination then help them develop in the areas where they were weak.  They didn’t have to be the most talented, or have the highest resilience, or the greatest ambition, but all of these traits had to exist at a base level for them to be successful.  In fact, often those who started at 70-80% on each of these factors would outperform a peer who was stronger on a single attribute; more talented, more resilient, or more ambitious.  It the combination that counts.

If you get it right, they pour themselves into their training, giving it everything they’ve got and amassing significant hours so that movements become second nature.  In learning theory this is the transition from a learned skill to an automatic skill.  They don’t have to think about what to do, they just do it.  But more than that, they practice at a standard that results in that automatic skill being at a significantly higher level than others around them.

The translation of this into business is obvious.  If you are seeking high performance, you need high performing teams.  These teams need to be made up of high performing people.  People who have a winning mix of capability, experience and commitment.  They don’t all need to be 100% on everything, but there needs to be a combination that lifts them into that high performance arena.

Most critically, the team must be matched to the needs of the competition or playing field.  I wouldn’t send high performance 8 year olds to the Olympics.  They don’t have the right capability or experience despite their great ambition.

Having played in the startup arena for a number of years and as a peripheral Angel Investor, I’ve seen a lot of startups grow through purely capability and commitment.  I’ve also seen those that bring experience in concert and watched as they almost pick the money straight from the trees.

The challenge for startup businesses as they become more mature is that the capabilities and experience required become more niche.  Sometimes you just need someone for whom that missing skill is automatic.  The ‘been there done that’ factor.  Someone who knows what high performance in that niche actually looks like.  I could have an Olympic gold medalist track athlete, but if I ask them to perform a Tsukahara in a gymnastics competition, they’re going to look at me with a blank stare, as might an accountant asked to implement an affiliate advertising campaign, or a digital marketer asked to develop a hedging strategy.

Over the years I’ve seen many companies at many different stages of growth an all sizes and structures that state a desire for high performance, but for a variety of reasons, they haven’t the been able to make the team selections (and deselections) that will lead to true high performance. They haven’t gotten the right players on the right field at the right time.

Very simply put, if you don’t have the a team behind you with the right experience and capability for the particular competition and activity in which you’re engaged, then you are never going to do better, be better and be judged against the best.  You will never achieve high performance.

 

(Note that picture is of the amazing Samadiana who I coached as a young gymnast and who is now a NZ representative.)

Stretch goals and motivation; watching from the side

My husband is going to run a marathon this year.  To take that statement at face value, you would assume that he is a runner, that he is the fit and healthy type and that he has probably done a half marathon before.

None of these assumptions would be accurate.  To be fair, when we met ten years ago he would go for the occasional run.  He even entered a few fun run type events, although the furthest distance he’d ever achieved was circa 10-12km.  Fast forward to present day and he is essentially going from zero to hero.  From couch to marathon.  From directionless and unmotivated, to single minded and driven.  Whilst this may be a sign of a midlife crisis, it is most definitely an achievement worth celebrating.

Upon winning an entry to the ASB Auckland Marathon event, he umm-ed and ahh-ed about the distance to enter.  A half would have been impressive, ‘Go for the full,’ I flippantly said.  Go for the full he has, and not just in distance, but in fundraising too.

By setting a big hairy audacious goal, a significant stretch for distance and funds raised, he has had to be significantly more disciplined in his approach.  With 42.2km to run and $4,220 to raise, he has had to understand the gap that existed between current and ideal states, then create a clear path to get there.  He has had to develop a comprehensive plan that has had to flex and bend obstacles arose.  He has had to create tactics that align with both his fundraising and training strategy for maximum efficiencies.  He has built awareness, created interest and converted his followers to capture donations.  I have never seen him more focused and so clear about the steps that he needs to take to achieve a goal.

His last training run was 28km, his donations are surging ahead at $3.5k.  Come the end of October he will have not only run a marathon and made a huge difference to Starship Children’s Hospital, but he will have knocked his BHAG out of the park.  Something that at first glance he thought was unachievable.

This to me is a story of the power of a goal.  Not just any goal, but a stretch goal, a BHAG.

The discipline and focus required to achieve something that borders the unachievable is one of the most powerful tools in the strategist’s toolkit.  What can seem scary at first forces you to think in a way that you would not have otherwise.  In business, or in life, what is driving you?  What is your stretch goal?  What sits at the outer edge of what you think is achievable?

To see more about Howard’s journey and donate: https://aucklandmarathon2016.everydayhero.com/nz/howard

Quick read of the week: BCG Global Challengers

BCG’s 2016 Global Challengers report is out and the short excerpt in the link below identifies the ‘five under-the-hood success factors’ that were common to previous Challengers that have graduated to become Global Leaders.

Some of the key pull out quotes…

  • “Many former global challengers [that are no longer on the list] also articulated a compelling vision. But they failed to create a culture that unified the company and amplified individual effort and achievement.”
  • “The operating models of global leaders are built to go global and to be adaptive. They are not modified versions of the model designed for the company’s home market.”
  • “They make smart local acquisitions and develop local partnerships to fill in the gaps in their coverage, product portfolio, or distribution networks.”
  • “One invested heavily in innovation, especially localized R&D. … The other company remained true to its command-and-control bureaucratic structure, which led to sluggish decision making and a lack of local adaptation. Its innovation strategy was reactive, responding to requests from customers, rather than forward looking. [Two similar companies, one that has become a leader, one with falling revenues.]”

Interesting how important the intersection of vision and culture is to success.  Further reinforces for me how important it is to have a winning view of the future backed up by an adaptable plan that creates clarity for multi-level decision making.

https://www.bcgperspectives.com/content/articles/globalization-growth-how-challengers-have-achieved-global-leadership/

Winning – a source of strength

What motivates you?  What makes you stick with something through the tough times?  What keeps you in the game?  Is knowing that you’re participating enough?  Would you celebrate fourth place in the same way you would celebrate first?  Do you pat yourself on the back and say, I came, I saw, I had a go?  Probably not.

Chances are, if you are in something, you are in it to win it and there is a biological reason for this.  When we win, our brains release a burst of testosterone and dopamine, chemicals that makes us feel stronger, smarter, more confident and just generally really good.  We feel a ‘high’ and we crave more.  At the most basic biological level, winning allows you to leverage your strengths for continued success.

So what is winning?

Winning is the achievement of a predefined goal.  To win is to succeed, and to succeed is to win.

This is a powerful concept, because it means that if you have the power to define the goal and the success criteria, you can increase your odds of winning, enabling that strength and confidence that in turn drive further success.

In business, this means defining not just the competitive landscape or the playing field, but also the game you will be playing.  Winning is about creating an advantage that is valued by a defined group of customers against a certain group of competitors.

Businesses that are able identify and satisfy unmet customer needs in a way that has never been done before are creating a new playing field.  Businesses that are able to differentiate their product or service by delivering customer value over and above their competitors are changing the rules of the game.  Businesses that protect their advantage are tying their competitors’ hands behind their back, and businesses that create and leverage barriers to entry are preventing new game players.

Winning makes you stronger, but to fight your way through someone else’s game to get to that winning position is hard.  So in a business sense, why wouldn’t you change the game or the playing field as much as possible to tip it in your favour?  As Roger Martin encourages, to increase your chances of success you must make a unique set of choices about where you are going to play – in what customer segments, geographies, channels, products or services; but also how you are going to win – what end user needs are you satisfying and what value are you delivering to the customer.

By defining a unique playing field and creating unique set of rules, you are able to differentiate from your competition and set a winning aspiration with a higher likelihood of success.  When you succeed you win, and when you win, you succeed.

So be it business or life, don’t just play to play; take control of your game and play to win.

Book Review: Playing to Win, How Strategy Really Works

Book review
Playing to Win, How Strategy Really Works
by A.G. Lafley and Roger L. Martin (2013)

 

Roger Martin is a world leading global business thinker whose name keeps company with the likes of Clay Christensen and Michael Porter in the world of business and innovation strategy.  He is an advisor to CEOs globally, a strategist, design thinker, innovator, author and Dean of Rotman School of Management.  Martin is best known for the Playing to Win framework described in the book Playing to Win:  How Strategy Really Works, which he co-authored with A.G. Lafley.

Alan George (A.G.) Lafley was the CEO of mega giant consumer goods company Procter & Gamble from 2000-2009.  He is credited, along with Martin acting as his advisor, with revitalising P&G growing earnings per share by 12% and more than doubling the market capitalization to become one of the five most valuable companies in the US.  Along with these outstanding financial results, he is credited with bringing the consumer to the centre of the organisation and embedding strategic thinking to significantly lift collaboration and connectivity across the organisation for a more innovative culture.

Playing to Win, How Strategy Really Works is essentially a full length case study of P&G’s decision making process across both the corporate organisation and a variety of their major brands / business units.  It explains in detail, the Playing to Win framework for strategy, and is therefore not only interesting, but makes the leap that many business books fail to perform adequately, to being a practical guide on the subject matter.

Having been lucky enough to have attended a one-day conference where half the day was devoted to Martin describing his approach to strategy, I had high expectations for what the book could deliver over and above hearing it from the horse’s mouth.  I wasn’t disappointed.

Playing to Win, How Strategy Really Works, explains the concept of strategy simply and succinctly.  Rather than getting caught up in the wide variety of uses of the term (see Mintzberg’s ‘5 Ps for Strategy’, a topic for another day), or complicated, boring and ineffective processes (see anyone who has ever been part of traditional ‘strategic planning’ exercises,) Martin & Lafley define strategy simply, it is a choice.  More specifically, “a set of interrelated and powerful choices that positions the organisation to win.”  In Martin’s view the Playing to Win book is supposed to clarify and simplify strategy to be a powerful tool for managers.  Done and done.

Beginning with a discussion of what strategy is and a summary of the five interrelated choices, the book then devotes a chapter to each of these choices with examples from P&G that don’t just illustrate the points, but create a narrative around brands and businesses that are household names.  You can picture the packaging, the placement, the price and the promotion.  They are stories you can relate to and they are brands that you may not love, but definitely know.  This ensures that Playing to Win is not just another dry business book.

In addition to being academically interesting, the scenarios and content presented are practical.  There is enough detail that you will feel confident in applying the thinking yourself, but not so detailed as to create a snooze fest.  The final two chapters take things one step further to provide methodologies for making sense of the strategic options with a clear framework and process, a ‘how to’ for implementing the five choices.

Rather than repeat the specific content of Playing to Win, which should be top of your reading list if you have any interest in making choices for yourself, your role, your function or your business, I have instead summarised below the five key messages from all of the various materials that I have collected from Martin, including the Playing to Win book, but also his toolkit, detailed case studies, various articles and his key note speech from the event I attended last year.  These are some of the key elements of strategic thinking.

1. Strategy is simply about making choices.  Choosing to do some things and not others.

Strategy is a set of choices that “positions an organisation to win with customers and against competitors”.  The critical message here, is that strategies need to be about winning, and winning needs a playing field.  Without a clear understanding of who the judges are (the customer / consumer) or who you’re playing against (the competition), you are likely to be making choices that are a long way from best serving the consumer base to create maximum shareholder value.

2. Strategy is about increasing the odds of success.  There is no such thing as the perfect strategy.

Many companies, and indeed strategists, believe that the more analysis they put into planning, the greater the chance of success.  Instead Martin proposes that by first understanding the various strategic possibilities available, and only then adding thoughtful analysis, we can increase the odds of success with targeted analysis rather than casting a wide net and hoping that something relevant becomes apparent.

3. Successful strategy making combines analysis and creativity.

Martin proposes that taking a purely analytical approach limits decisions based on a past that is unlikely to be repeated.  This is particularly true in these times of rapid disruption and innovation.  Rather he posits, strategy should be the intersection of the creative and scientific.  It is about generating new hypotheses, potential futures, just as much as it is about testing and critically analysing them.  This is the root of the design thinking movement.

4. Strategy should always start with a problem and a choice.

As strategy is about making winning choices, you cannot have a strategy if there is no choice to be made, and that choice will relate to a problem.  “Framing the problem is as important as, and often more difficult than, solving the problem.”  Attempting to ‘do strategy’ is a waste of time if it doesn’t exploit an opportunity to create value.

5. Strategy is the answer to five interconnected questions – the strategic cascade.

The answers to these five choices should create a unique position “so as to create sustainable advantage and superior value relative to the competition.”  In other words, your choices should be purposefully different to your competitors’ choices.

The five choices are:

  • What is our winning aspiration?
    What is the guiding purpose of this entity.
  • Where will we play?
    The geographies, customer segments, channels, products, and stages of production in which we choose to compete.
  • How will we win?
    The competitive advantage we need to win in our chosen market.
  • What capabilities must we have?
    What we will need to do at the highest level, in order to win in that way.
  • What management systems do we need?
    How we will build, support, and measure those capabilities.

Furthermore, these choices do not just happen at the top of an organisation, they should cascade down through all levels in an inter-connected way.

“At P&G, for instance, there is a brand strategy that articulates the five choices for a brand such as Olay or Pampers. There is a category strategy that covers multiple related brands, like skin care or diapers. There is a sector strategy that covers multiple categories, for example, beauty or baby care. And finally, there is a strategy at the company level, too. Each strategy influences and is influenced by the choices above and below it.  The result is a set of nested cascades that cover the full organization.”

Strategic Cascade

In summary, strategy is not complex wizardry held close by the upper echelon, and it is definitely not separate from execution.  It is merely the art and science of making choices that increase the odds of success to create value, and it should be present at every level of an organisation.

The link to purchase the book: https://www.amazon.com/Playing-Win-Strategy-Really-Works-ebook/dp/B00AJVJ1HI/ref=sr_1_1?s=books&ie=UTF8&qid=1468960408&sr=1-1&keywords=playing+to+win

A summary article with a great example of why a winning aspiration is important: http://www.playingtowin.us/sites/leadingauthorities.drupalgardens.com/files/aPlaybookForStrategy.pdf

Purposeful Choices – The value of a clear vision in a personal context.

Strategy 101 tells you that choices must be made in the context of a strategic intent.  A knowledge of the desired future state as expressed by some combination of vision, mission, values, goals (order and importance vary based on whatever source / author you’re referring to at the time).  As a strategy professional, my musing for today was reflecting upon the strategic intent behind the career choices that I’ve made to date.

As a five year old I would have expressed my future goals as “being a ‘boss’ and going to the Olympics.”  As a ten year old I wanted to “be the head coach of the All Blacks”.  By 11 I’d realised that the chance of that happening for a non-rugby playing female was relatively slim and so it became a desire to be “the All Blacks’ head doctor.”  15-year-old-me would have said I was going to be a leading Orthopaedic Surgeon and a few years later I’d completely pivoted to wanting to be a School Principal at a prominent school.

Now it’s completely normal for your ideas about your future to change as you age, but what I’ve realised is that there is very strong thread of commonality running through my intentions and dreams.  Although the specific goals have changed and flexed to suit the circumstances and context of the time, my vision has been pretty consistent.  In every field I chose to fixate on for that moment, I wanted to be the leader, to perform in the highest arena, to have influence and power so as to effect change, to use that change to enable success and to feel personal success through high performance.

Fast forward a good decade or so and here I am sitting in my car on the way home with hubby and he’s describing my career trajectory in terms that would be closer to luck than planning.  I was immediately uncomfortable with this suggestion.  Yes, from the outside it appears as if I’ve randomly hopped around through roles across multiple industries moving diagonally as well us vertically, and yes some of the opportunities I’ve been exposed to have come without me seeking them, but every choice I’ve made has been in keeping with the original vision.  For the record, these days I would express that vision as “leading and enabling shared success through high performance”, and yes, there is a current version of a specific and measurable goal that sits alongside that.

I wouldn’t go as far as saying that I don’t believe in luck, but luck is definitely influenced by considered planning led by good decision making and then proving your capability at every step of the way.  Confidence speaks volumes, but confidence backed by capability and good decisions wins.

Having worked in a variety of strategic roles and being immersed in strategic business conversations at the dinner table since childhood, I’ve been constantly exposed to the principles of good decision making.  Strategy is at its core, the art of making winning decisions.  The principles of good decision making apply not only to business, but to life, and upon reflection, it’s these that have guided my career thus far.

  1. Know what it is that you want to achieve but be open to alternate interpretations along the way.
  2. Share the vision widely, especially with trusted people who have power or influence, but most importantly share it with your support network and your team.
  3. Fully commit to the current course and know what defines success within the current interpretation. Know the goal and then systematically work towards those success metrics (yes numbers) until something indicates the need for change.
  4. Stay alert and open to opportunities and information that may change the status quo.
  5. Consider opportunities in the context of the overall vision and gather information to inform that view. Don’t make decisions in a vacuum.
  6. Share the thinking, create buy in and take people with you on the journey, especially when making significant changes.
  7. Fully commit to any new course of action ensuring you’ve got the capability required and execute with confidence.
  8. Celebrate milestones and success along the way. Look back to see how far you’ve come, and look forward to remind yourself of the end game, the vision and the current goal.

So back to the conversation of last night and I can’t help but wonder what my husband’s career vision is.  I don’t even know his longer term goal.  My clarity of vision (and personality) are such that I shout my opinions from the rooftops.  He is a more conservative soul motivated primarily by a thirst for knowledge and a feeling of making a difference for the local community rather than corporate ladder climbing.  There is however, no reason why he can’t gain clarity on his own vision and goals and pursue them in the same manner of purposeful choice that I have always instinctively followed.  A conversation for tonight perhaps!