Disruptive Innovation

Missed Clayton Christensen? Here's the recap

Disruptive Innovation and common misconceptions about drivers of growth

On 29 August 2014, we gathered in Copenhagen for Implement Thought Leaders 2014. Nearly 1,300 clients and friends of Implement were present at the lecture and subsequent Q&A held by one of the world’s most influential management thinkers, Harvard Professor Clayton Christensen.

Missed Clayton Christensen? Here's the recap

In an expansion on his highly acclaimed theory on Disruptive Innovation, Christensen discerns between three different types of innovation based on their potential effect on the growth of a company.

Efficiency innovations

Are innovations which allow companies to increase efficiency – to produce their products at a lower cost, enabling them to offer those products to customers at a lower price. Efficiency innovation can take the shape of a process improvement, or it can take the shape of a more efficient business model. Either way, it often leads to a reduction in jobs, unless the capital freed up by improved efficiency is invested in other activities requiring manpower.

Performance-improving innovations

Enable companies to replace existing products with new and better products. Typically, this does not create more jobs, because the new products are produced by the same people who produced the old products, as the market demand for the old products subsides.

These types of innovations are “easy” for established companies to achieve, because they allow the companies to improve on what they are already finetuned to do, while serving their existing customers.

Investments in the improvement of a manufacturing process or a step up the ladder within a market with a higher quality product make sense on paper and are justifiable to the board of a company.

Market-creating innovation

What is hard for industry incumbents to achieve, however, is market-creating innovation. A market-creating innovation transforms a product or a business model to such an extent that it becomes something new; a new product for a new market that was not previously served. Rather than cannibalising on an existing market share, the market-creating innovation finds new customers among previous non-consumers, typically those who cannot afford the products currently available.

According to Christensen, this is the innovation that leads to true growth and large-scale job creation. It is, however, difficult for an established company to take on new activities that are based on different processes, customers and business models, than those which the entire organisation is optimised to support. Investing in new concepts that leverage little or none of a company’s current assets, and may not even be measurable along the same metrics as current activities, is difficult and hard to defend in a short-term financial perspective.

Ida Eikvåg Groth
Ida Eikvåg Groth
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In his lecture, Christensen demonstrated how time and time again, industry incumbents fail to conduct market-creating innovation and are overrun by agile new entrants offering new products to a much larger market at a significantly lower price. This is the reason why CEOs and owners of established companies need to recognise this phenomenon and admit that there is a chance that by solely focusing on being great at what they do, they might just run the company to the ground. In order to survive in the long term, companies must strive to innovate in all three categories simultaneously, leveraging their current assets and position, while also guarding the low end of their market and aiming towards the consumers of tomorrow. This is difficult, but as Clayton Christensen shows us, it is not impossible.

This is Clayton Christensen

  • Widely regarded as one of the world’s top thinkers within innovation and growth
  • Bestselling management author and speaker
  • Professor of Business Administration at the Harvard Business School
  • Co-founder of Innosight, a management consulting and investment firm specialising in innovation
  • Educated at Harvard University (MBA, DBA), Oxford University (M.Phil.), and Brigham Young University (B.A.)
  • Born on 6 April 1952 in Salt Lake City, Utah
  • Author and co-author of several bestselling management books, including “The Innovator’s dilemma” (1997). Here, Christensen demonstrates how successful, established companies can make all the right decisions and still lose their market leadership when unexpected competition arises from the low end of their market. He introduces the theory of “Disruptive Innovation”, which has changed the way the business world talks about innovation.

Go to Clayton Christensen's page on our management heroes to learn more about his work on Disruptive Innovation.