Have you ever had a day that was done before it even got started? Suddenly, it’s 8PM, and not one item on your To-Do List is checked off. Maybe a lot of things got done, just nothing that was in the line of fire. One looks back at those days, in the evening, and pulls one’s hair out.
Which brings me to my blog. I’ve been composing it all day, but only got to the computer late, late in the evening. My topic for today’s blog is The Innovator’s Dilemma.
So much has been written and rewritten about Clayton Christensen’s thesis. If you haven’t had a chance, look at a video of one of Christensen’s lectures. It’s truly mesmerizing. He talks about how all companies go upmarket to higher margin products, ceding the low margin products to new players, sowing the seed of their own destruction. His illustrative points are: GM vs. Toyota, US Steel vs. the mini-mills, and so on.
If I was to guess, the classic strategy consultant advice is to go upmarket where all the margins are, and cede the low market. He should know, having worked at the Boston Consulting Group after attending the Harvard Business School. Christensen knows a Cash Cow when he sees one: “Beware of the Cash Cow.”
Rather than call it the Innovator’s Dilemma, why not: “Eating your young,” “Why David always wins against Goliath,” or “Why you should short the winners and buy momentum stocks.”
Christensen was a co-founder of Ceramic Process Systems (“CPS”), a company that, while technically impressive, and profitable, from a venture capital perspective, never quite made it to the big time. That is to say it’s not a billion dollar company. It is an impressive company, which uses metal matrix composites to create parts that have specific thermal capabilities, are light weight, and can be molded into complex shapes. It’s nice to see a professor and evangelist who’s lived in the real world, and has been knocked about a bit, which means he’s probably worth listening to. Trust me, Christensen accumulated quite a few scars at CPS. Creates some amount of humility, which is a good thing for all of us.
The BCG website, has papers on Retail Transformation, Omnichannel Alchemy [online grocery stores], and Rethinking the Fashion Supply Chain. All about disruption. Seems that disruption is now their Cash Cow.
Christensen’s most recent target has been Strategy Consultants, and how that industry is being disrupted. The title of the report is “Consulting on the Cusp of Disruption.” Yes, indeed, even the service industries are being dis-intermediated. We’ve seen it with law firms, all sectors of the financial industry, and now consulting.
Which got me to thinking that maybe we should all be following Professor Christensen around, shorting the stocks that he’s poking at, and buying the stocks of companies that he labels as disruptors. Shall we create a sector fund called “the Disruptor Fund,” and to play out the Christensen Companie?. He was quoted in an Op-Ed article in the New York Times or Wall Street Journal, (couldn’t find it in a 10 minute search) claiming Jet Blue is prime for disintermediation. He sighted Jet Blue’s going upmarket, with the beds in business class, as a classic indication that a company has lost its way and is about to head South.
I’ve always thought Christensen made a lot of sense. Isn’t it time to act on it?