Christensen’s Tests for Disruptive Innovation: When a Success Formula Locks a Company In

Time for Professor Christensen again. His fundamental point is that even very well-managed companies can fail. The reason is simple. Successful companies each have a formula behind their achievements, whether excellent customer service or strong performance in an existing market. But those formulas harden and lock companies in. Faced with disruptive technologies, business models, and the innovations they bring, a company can become helpless. Christensen’s theory seeks to advise such businesses. For example, he proposes creating a new, small organization outside the existing one to embrace disruptive innovation and confront competitors. Why set aside a successful, resource-rich organization and send a small unit forward alone? Christensen argues that large companies succeed because they have established principles and logic for customer orientation, profit assessment, and resource allocation. Deeply rooted in the value network, these become the organization’s dominant management principles. The company may be locked into its own success formula. Its existing organization and value network cannot accommodate a new-business team. Specifically, once a team forms that might suit the disruptive trend, its methods inevitably conflict with and challenge traditional practices. Management experience across many companies shows that maintaining two cost structures and two operating models within one business is almost impossible. In short, two operating logics struggle to coexist. Christensen therefore recommends independent teams outside the established system to counter disruptive attacks. ---- Christensen offers three tests for effective “disruptive innovation.” They also indicate whether you can challenge an industry. First, judge whether your supposed innovation can disrupt the original market. He suggests that challengers ask two questions: Did customers previously have to use the product or service at an inconvenient, centralized location? Did many people previously want to do what your product enables but lack the money, equipment, or technology and therefore give up? The latter means that if technology lets many people use a product more conveniently, that technology or product has disruptive potential. Christensen says at least one answer must be yes before you can say the innovation might upend the industry. Second, does the innovation work for the low-end market? Again, ask two questions: Would low-end customers pay less for products with imperfect performance but acceptable quality? Can we create a business model that remains profitable while “overserving” customers at very low prices? Christensen says both answers must be yes for the strategy to hold promise. Third, if implemented, could your strategy disrupt all major incumbents? If it can undermine the existing market’s main competitors, your chances are strong. These are known as “Professor Christensen’s tests.” An innovator pursuing disruptive innovation must answer all three effectively and affirmatively. --- #得到 (Dedao) #寧向東的管理學課 (Ning Xiangdong’s management course)