Innovation

Author: Chris Anderson
Publisher: Hyperion
Year Published: 2006
Rating:
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In October 2004, Chris Anderson published an article on The Long Tail (named for what it looks like graphed - see picture) in Wired Magazine on how niches are becoming extremely profitable for online businesses. Almost 2 years later, Anderson’s book, of the same title, fleshes out the concepts he proposed: continue

I attended the Philadelphia Innovation Conference at the Convention Center last week where Harvard professor, Clayton M. Christensen, and ex-Harvard professor turned consultant, Ram Charan, were speaking, so I thought I’d blog about some of the highlights.

Why innovation? As Peter Drucker said “Because its purpose is to create a customer, the business has two basic functions: marketing and innovation. Marketing and innovation produce results, all the rest are costs.”

Prof. Christensen was up first to discuss his research since the Innovator’s Dilemma. The question he posed was what kills successful companies? People are quick to answer “management” but he wondered how the same executives who led the company to success suddenly become “dumb” and contribute to its downfall.

So he started looking at industries - the steel industry, being a good example - and found that the problem exists when a new entrant comes into the market that disrupts how things are done. Usually, that entrant comes in on the low end, so firms concentrate on protecting their higher end products and services and let the low end entrants take the less profitable work. Walmart and Kmart did this to the retail industry, while the mini-mills entered the steel industry making low grade steel and catering to the bottom, less profitable clients until they revolutionized their technologies and started making higher grades of steel and competing for more profitable clients.

The other way to disrupt a market is to come up with a totally new use for a product - such as how the personal computer revolutionized the industry when it was introduced.

Or how online courses - like, say foreign language or AP courses - can substitute for in-class learning when such courses aren’t offered in elementary or high schools. Online courses aren’t good enough to take the place of an actual teacher instructing the students, but if the school doesn’t have the budget to provide such in-class experiences, giving students the option of taking the course online is better than nothing.

So what kills successful companies? When they remain focused on the short term - particularly if they are catering to a small group of profitable clients - and completely miss technologies and innovations that are reshaping the industry. When they are focused on slight improvements and miss (to put it in Seth Godin’s terms) the Edgecraft.

Those who attended the conference got a free copy of Prof. Christensen’s new book, Seeing What’s Next, so I’m looking forward to reading it soon.