Wednesday, May 28, 2008
One of my clients recently adopted Clayton Christensen’s model of organizational innovation and so I thought it best to get myself up to speed on his ideas. The Innovator’s Dilemma, published in 1997, is his original work and so I started there. It was there that I came across his principles of disruptive technologies and thought about their relevance to an organization’s culture. First, here is some background on Christensen’s work.
His original research focused on trying to understand the apparently paradoxical phenomenon of “well-managed companies that have their competitive antennae up, listen astutely to their customers, invest aggressively in new technologies, and yet still lose market dominance.” What he learned was:
Good management was the most powerful reason they failed to stay atop their industries. Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership.
Christensen observed that when good companies failed, it was often because their managers either ignored particular principles or chose to fight them. He calls these rules the principles of disruptive innovation. He distinguishes between sustaining technologies (new technologies that foster improved product performance) and disruptive technologies (new technologies that under-perform established products in mainstream markets but have other features that a few fringe (and generally new) customers value, such as cheaper, simpler, smaller, and more convenient to use.) He builds on an age-old notion that “we exercise power most effectively when we understand the physical and psychological laws that define the way the world works and then position or align ourselves in harmony with those laws.” So here are his five principles of disruptive technologies:
Principle #1: Companies Depend on Customers and Investors for Resources
Principle #2: Small Markets Don’t Solve the Growth Needs of Large Companies
Principle #3: Markets that Don’t Exist Can’t Be Analyzed
Principle #4: An Organization’s Capabilities Define Its Disabilities
Principle #5: Technology Supply May Not Equal Market Demand
It was when these principles were combined with his observation that “every company in every industry works under certain forces – laws of organizational nature – that act powerfully to define what that company can and cannot do,” that the idea organizational cultures could be thought of as “natural” or “unnatural” popped into my head. So how can a culture be “unnatural” when it comes to these principles? Let’s take one at a time.
Principle #1: An unnatural culture would be one where the spoken or unspoken attitude is “we know what’s best for our customers” or in a similar vein “our customers need to be satisfied with what we make available to them.” Variations on this theme all point to a skewed view of dependency; it is not customers who depend on the organization but the exact opposite. But too many organizations have held this belief right up to the grave.
Principle #2: Mental models of the value of growth, time, sizes of markets, and organizational structures have the potential to distort an organization’s perception and assessment of where and how to invest in new, smaller markets for future growth. An unnatural culture would be one that puts on its own blinders as to what is possible as well as desirable.
Principle #3: A culture characterized as analytical, rational, methodical and focused on the tangible, concrete and predictable will struggle with giving itself the freedom and permission to explore rather than plan, to experiment rather than execute. An unnatural culture is one that fights these impulses as an organism fights an infection.
Principle #4: Christensen points out that an organization’s capabilities reside in two places – in its processes (“the methods by which people have learned to transform inputs of labor, energy, materials, information, cash, and technology into outputs of higher value”) and in its values (the criteria that managers and employees in the organization use when making prioritization decisions.”) An unnatural culture is one where its processes and values can’t change in response to the dynamics of the external world. In these cases, the organization declines through rigidity as any organism would with clogged arteries.
Principle #5: Hubris can dominate an organizational culture that holds up the tenet “build it and they will come” as the guiding truth. It is the chance to offer “the possible” rather than “the desired” that energizes such organizations. They load on features that usually add more complexity and fewer benefits to the end user. Driven by the “cool factor,” such unnatural cultures end up being detached from the very people they depend on -- their customers -- and end up worshipping at the feet of technology and progress.
