A NEWSLETTER FROM HARVARD BUSINESS SCHOOL PUBLISHING AND INNOSIGHT
STRATEGY INNOVATION
Breakthrough Insight and Ideas for Driving Growth
A Road Map to Disruption
by Scott D. Anthony and Clayton M. Christensen
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ST RAT EGY
A Road Map to Disruption
Companies wishing to innovate successfully must debunk the myths that
impede creativity, then adopt new mindsets and apply four basic principles
BY SCOTT D. ANTHONY AND CLAYTON M. CHRISTENSEN
E veryone knows that innovation is vital to an orga-
nization’s ongoing health. Indeed, the creation of new
products, services, processes, and profit models fuels the
aimlessly down fruitless paths instead of shutting down or
reformulating doomed efforts. The problems often reside
in the way in which the resources are allocated and man-
growth not just of companies but of our national and aged, not the resources themselves.
global economies.
It is amazing that such an important discipline is so mis- Myth 3: Only a big bang counts as a success.
understood. Statements such as “innovation is a random Most industry-altering innovations actually start out as
event,”“innovation is intrinsic and can’t be taught,” and “if small whispers. It takes time, and plenty of momentum,
we could just spend more money, we could be more inno- before they become big bangs. Companies that push too
vative” are often heard echoing down corporate hallways. hard for big bangs—to the exclusion of initially smaller
Not only are these and other such statements false; prospects—can actually miss extremely attractive oppor-
worse, they stand in the way of companies grappling with tunities that at first appear to be too trivial to matter.
some of the legitimate—but surmountable—challenges
related to innovation. Since the first step to recovery is Myth 4: Innovation—and the growth that results from
acknowledgement, we begin by highlighting, and debunk- it—is simply random and unpredictable.
ing, some of the most common myths that impede compa- Undeniably, serendipitous occurrences can be key com-
nies’ quest to master innovation. ponents of success, but innovation is significantly more
predictable than most people believe. There are patterns of
Myth 1: Innovation is all about technology success that, if properly understood and followed, can
What makes Dell and Wal-Mart great companies? Sure, greatly increase a company’s chances of getting it right over
they use technology, but their core competitive advantage and over again. Just because those patterns are hard to see
resides in their business models, the way they organize to or not well understood does not mean they do not exist.
create and capture value. Why has Procter & Gamble had Remember, 30 years ago many people believed that achiev-
so much success lately? The company employs great tech- ing total quality within the manufacturing process was
nologists for sure, but its deep understanding of consumer inherently random. The quality movement showed that
needs and its ability to implement the findings it garners was not the case.
from that understanding help Procter & Gamble point
those technologists in the right direction. Myth 5: You can’t teach people how to be more
There’s no question that technology is important, but innovative.
many times it is the icing on the cake. Innovation also is This myth builds off another misconception, that inno-
about new ways of doing business, new ways of making vation requires a creative genius to spearhead it, someone
money, and new ways of understanding what customers who just has the right stuff. In truth, because innovations
want. follow distinct patterns, anyone (and everyone) can learn
specific ways to identify those patterns and proceed appro-
Myth 2: More resources equal more innovation. priately. It is a challenge, no doubt, but one very much
Managers often think that allocating more resources worth undertaking.
toward developing and introducing products will solve all
their innovation problems. However, directing too much Key principles of disruptive innovation
money toward innovation can actually stand in the way of Debunking the myths of innovation requires identifying
success. Teams often fritter away extra money, wandering the patterns that separate high-potential innovation
Copyright © 2005 by Harvard Business School Publishing Corporation. All rights reserved. | 3
A Road Map to Disruption (continued)
strategies from low-potential approaches. The Innovator’s Adam Aircraft, corporate jet manufacturers such
Solution by Clayton M. Christensen and Michael E. as Cessna, and automobile manufactures such as
Raynor (Harvard Business School Publishing, 2003) sug- Honda are all targeting the space.
gests that the highest-potential route to building a new- • education, on-the-job training and online adult
In
growth business is creating a disruptive innovation that education providers are delivering extremely rele-
brings simple, cheap, convenient solutions to overshot vant, low-cost academic opportunities in more
customers at the low end of an established market or, convenient settings. Obvious examples of this
alternatively, brings the same types of solutions to non- trend include General Electric’s Crotonville training
consumers who lack the skills, wealth, or ability to get an center and the University of Phoenix, which offers
important job done themselves. classes to working adults in person and over
Disruptive innovations have affected, and will continue the Internet.
to affect, a number of different marketplaces. Consider the • In the software arena, countless companies are
automotive industry. Toyota created disruptive growth by designing flexible, nonproprietary, and low-cost
entering the low end of the market with the inexpensive software offerings based on the Linux operating
Corona model in the 1960s. Over the succeeding three system. For example, MySQL has developed the
decades, the company progressively moved up-market to popular open-source database software offering
the point where it now has a reputation for producing that has more than 10 million active installations.
some of the best-performing cars in the world. Korean • In consumer electronics, cellular phones and home
auto manufacturers such as Hyundai and Kia have lately gaming systems are continuing their assault on
stepped into the void, competing at the low end of existing other devices. Cameras on cellular phones have
markets. gotten so good so quickly that they are already
Looming on the horizon are emerging minivehicle affecting the sales of standalone digital cameras.
makers in developing economies. For example, India’s Tata Home gaming systems such as Sony’s PlayStation 2
Motors, the automotive arm of the Mumbai-based Tata and Microsoft’s Xbox are adding additional fea-
Group conglomerate best known for its business process tures that move computing from the office to the
outsourcing offering, plans to introduce a $2,200 compact family room.
car in 2008. Tata hopes it can tap into the vast pool of Disruptive approaches such as the ones detailed above
Indian nonconsumers. If the strategy succeeds, it will build have two core benefits. They strike a chord with an over-
a platform that could ease Tata’s disruptive expansion into looked or overshot customer. And, they do so in a way that
other, higher-end markets. doesn’t fit the processes and profit models of market
Disruptive developments are in the process of trans- incumbents. Because disruptive concepts face far less
forming a number of industries. For example: competition from incumbents than concepts viewed as
• In health care, companies are introducing quick “sustaining,” they have a higher probability of market-
and convenient diagnostic and prescription place success.
services delivered by nurse practitioners in kiosks
located in retail stores. The leading example of this New mindsets that need to occur to unleash
emerging model is Minnesota-based MinuteClinic, disruptive innovations
whose nurse practitioner–staffed kiosks efficiently Despite the best of intentions within many companies,
and effectively treat more than a dozen of the existing beliefs—embodied by the innovation myths men-
most common ailments, such as strep throat and tioned above—are a major barrier to creating disruptive
ear infections. growth. There are four new mindsets that companies need
• In telecommunications, a technology known as voice to adopt to increase their odds of catching disruptive
over Internet protocol (VoIP) now allows companies growth.
to offer cheap, customizable telephony service over
the Internet. Vonage is the leading standalone Mindset 1: The right metrics at the right time.
provider, but market incumbents such as Verizon Teams need to focus on metrics that recognize the
are also trying to introduce similar models. inherent uncertainty of the early days of a new venture.
• In aviation, a number of players are racing to create Project teams often focus too much on meaningless
very-low-cost airplanes that will enable the birth of metrics such as net present value or return on investment
a vibrant air taxi industry. Startups such as New figures during a project’s early stages. These numbers
Mexico–based Eclipse Aviation and Colorado-based can be critical tools to help evaluate projects—but only
4 | STRATEGY INNOVATION
A Road Map to Disruption (continued)
after there is more certainty about the approach and the Summary: New mindsets need new processes
market. Adopting a new way of thinking is never easy. At most com-
When a team is still operating largely based on panies, misbegotten mindsets influence the processes used
assumptions, intuition, and guesswork, it should be eval- to allocate and manage resources, thwarting managers with
uating how closely an opportunity fits a defined pattern even the very best of intentions. This is why we often sug-
rather than relying on numbers in which it can have little gest that companies create separate processes dedicated to
confidence. shaping and nurturing disruptive innovations.
With more of a blank slate, companies can put in place
Mindset 2: Uncertainty should be embraced. processes that embody the right principles and mindsets.
Almost all true new-growth initiatives will have high As the new process demonstrates success, it can catalyze
degrees of uncertainty. Project teams often implicitly wider organizational change.
penalize any uncertain opportunity. As a result, they feel an
almost gravitational pull towards low-risk, low-return Guidelines for disruption
options. Managers should encourage teams to embrace Companies hoping to successfully create disruptive-
uncertainty while simultaneously running the experi- growth businesses need to keep the following four princi-
ments that will stamp it out. ples in mind.
People tend to think that successful entrepreneurs are
particularly risk tolerant. In reality, many of the best entre- Principle 1: Understand the jobs customers are
preneurs find partners and creative ways to systematically attempting to get done.
take the risk factors out of an opportunity. The quest for disruption starts by recognizing the jobs
consumers are seeking to complete. Companies should
Mindset 3: Failure can be a good thing. always try to make it easier and simpler for them to do so.
Fear of failure makes it very difficult for companies to
venture down uncertain paths. Most mangers think, “If I Principle 2: Start simple.
fail, I will be branded with a scarlet ‘F,’ which will limit my Companies should always target consumers who will be
ability to continue to advance through the organization.” delighted to accept a product that would seem limited to
Not all failures are created equal, though. If a manager more demanding customers, instead of trying to force a
does something obviously foolish and fails, then repeats simple product into a demanding application. Starting
that mistake again and again, companies should certainly simple and following an incremental improvement trajec-
react appropriately. But organizations should encourage tory is a better bet than trying to make a great leap forward
the right type of failure, that which results in a vital piece of all at once.
learning. For example, a team that quickly discovers its
strategy is not viable and recommends canning the project Principle 3: Take a market perspective.
has done its company a great service. The team has helped Disruption is a relative term. Companies will often say,
to make sure that the company’s scarce resources are allo- “We have never done this, so it must be disruptive.” On
cated more appropriately. occasion that’s true, but frequently it’s not. In fact, there are
times when an approach can appear to be disruptive to one
Mindset 4: Scarcity can be an advantage. company but look highly sustaining to existing competi-
Many companies attempt to drown their most promis- tors, giving the project a low probability of success.
ing opportunities with generous capital allocations. Yet, as In ongoing project efforts, it is important that a team
discussed above, giving a team too many resources can states its goal to be “creating growth through disruption”
actually cause it to fail. not “disrupting our company.”While concepts that are dis-
Managers should remember that scarcity is the entre- ruptive to the core business might have the added long-
preneur’s advantage. Entrepreneurs are forced think of term benefit of protecting legacy positions, they are by no
creative ways around obstacles because they have no other means the only opportunities worth exploring.
option. The curse of too much capital leads many teams to
spend too much time and effort running in a fatally flawed Principle 4: Test and adapt.
direction. In general, the best new-growth opportunities Companies need to recognize that when they are setting
should be starved of resources. Companies should give off down an uncharted path, they are likely to be heading
project teams enough money to test initial assumptions in the wrong direction. Put simply, the only thing you can
but nothing more. be certain of on Day One of a new venture is that you don’t
STRATEGY INNOVATION | 5
A Road Map to Disruption (continued)
yet know the right strategy. Designing an approach that
tests key assumptions and adapts the strategy based on the
results of these tests greatly increases the ultimate chances
of success. ✧
Adapted from The Harvard Business School Publishing Innovation
Handbook: A Road Map to Disruptive Growth (Harvard Business
School Press, 2005), Product Number 9580, $19.95.
Clayton M. Christensen is the Robert and Jane Cizik Professor of
Business Administration at Harvard Business School and the author,
with Scott D. Anthony and Erik A. Roth, of Seeing What’s Next: Using the
Theories of Innovation to Predict Industry Change (Harvard Business
School Press, 2004). Scott D. Anthony is a partner at Innosight.
6 | STRATEGY INNOVATION
