With every business wanting to position itself on the cutting edge of technology, strategy and culture today, “disruption” and ”innovation” have become some of the most-used words in business strategy. But “disruptive innovation” is something far more specific, says Clayton Christensen, keynote speaker at the B2B Next conference, who originated the theory of disruptive innovation and introduced it as a business model more than 20 years ago as a professor at Harvard University.
The model is critical to understand for B2B e-commerce companies, whether they’re seeking new opportunity or out to protect their flanks from encroaching competition, as Christensen, Kim B. Clark Professor of Business Administration, Harvard Business School, will explain in his keynote address at B2B Next, to be held Sept. 24-26 in Chicago.
Christensen’s ground-breaking book, “The Innovator’s Dilemma,” published in 1997 and since updated, changed the way business leaders around the world view innovation. It makes the case that disruption starts when a company successfully targets and serves customers whose needs are overlooked by category leaders focused on larger and often more profitable customers. The innovating company builds on its success in serving the first customer segment, with additional new offerings targeting a broader range of customers. Eventually, this attracts customers away from established competitors.
In a recent interview with B2BecNews, Christensen discussed how disruption presents opportunity in B2B e-commerce—or a threat to established companies that don’t innovate to keep up.
Q: Why do so many companies react too slowly to disruption in their space?
Christensen: At its core, disruption is a theory of competitive response. It predicts that incumbent companies are in fact not motivated to go after disruptors from below—instead, they are motivated to pursue better margins from better-paying customers. Meanwhile, disruptors are delighted to take root making simple products for less sophisticated customers. This asymmetry of motivation is what causes such slow reaction time—and can ultimately lead to problems.
Q: Can market incumbents and established industry players successfully transform themselves? If not, why? If so, how?
Christensen: The firms who transformed themselves generally did so by setting up a completely separate business unit—with different resources, different processes and a different profit formula—and giving it a charter to disrupt the parent. The challenge is that you have to do that while the core business is healthy, because the new game begins before the old one is over.
Q: What are the critical cues that the market gives companies that indicate whether a disruption is real and lasting vs. a mirage and temporary?
Christensen: The critical tool in evaluating whether or not disruption is afoot is understanding what performance demands customers actually have, and whether or not the market is overshooting them. For example, in higher education, colleges overshoot a large population of potential students who don’t need a campus experience, athletic facilities, faculty supervision, etc. As a result, online learning has taken root and is beyond question a disruptive force.
Q: What advice would you have for B2B companies that must self-cannibalize in order to survive? (e.g., B2C company Netflix purposefully killed its own DVD business with its online streaming service.)
Christensen: Understanding the job-to-be-done of your customer is critical. Technology changes all the time, but jobs are relatively constant over time. If you understand the job your customer is trying to get done, you can ward off disruption. Netflix pulled out of DVD and into online streaming not because it was the latest technology, but because the job to be done for a media consumer was so well understood that the transformation made all the sense in the world.
Q: How do you recommend that B2B companies motivate themselves to “fight through the pain” in order to reach a better, post-disruption space?
Christensen: Disruption is a process, not an event. For firms to survive, they need to recognize that strategy is at work 24/7, and be up for the challenge.
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