The Rules of Innovation

From Brett Peterson - -

In Clayton M. Christensen’s article The Rules of Innovation, he sets forth four rules a company must abide by when developing innovative technology into markets. Christensen shows that implementing innovation is not as hard as is may seem, and by following these rules, companies big and small can see immediate profits.

The first rule, named “taking root in disruption”, is about implementing disruptive products, not just sustaining current ones. These disruptive products often appeal to different markets than the current ones, for example lower cost and simpler designs appeal to the everyday consumer as opposed to big businesses.

The second rule, “picking the scope needed to succeed”, relates to the degree which the company produces its product (any outsourcing). There are markets in which the product needs drastic improvements in terms of functionality, yet other markets need a product to be more simple and convenient; factors such as these are key in determining the scope of production in a company.

The third rule, “leveraging the right capabilities”, simply refers to a company’s ability to produce a certain product. Christensen asks three questions of managers: 1) Do I have the resources (managers, money, and technology) to succeed? 2) Will my organization’s processes facilitate success in this new effort? Processes are normally habitual in a company and difficult to change. And 3) Will the values of my organization allow for employees to prioritize innovation?

The fourth rule of innovation is to disrupt competitors, not the customer. Implementing a new product to a market or creating a new market completely generally requires a seamless transition for customers from the old technology to a new one.

Christensen’s four rules seem pretty straightforward and well enough, but the hardest part of the process is accurately and unbiasedly dissecting the company and the product to determine if it is profitable. It would be helpful to add a fifth rule, about getting an unbiased team to examine the product, company, and market; a team that doesn’t have any specific interest in the success of the new product. Other than that, the four rules are exceptionally well explained (although at times the technical jargon is a bit much) and seem like a sure path to success.
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From Chantelle Venezuela - -

“Taking root in disruption,” “the necessary scope to succeed,” “leveraging the right capabilities,” and “disrupting competitors, not customers” are the four variable sets that Clayton M. Christensen established for companies that were developing technological innovations to abide by to see immediate profits.

The first variable, “taking root in disruption,” goes over how not just to nurture and strengthen current products, but how to carry out disruptive products effectively. Two tests must be taken first in order to determine whether or not a market can be disrupted. In order for this to be successful, one out of the two tests must be fulfilled in order to move forward. The first test is, “does the innovation enable less-skilled or les-wealthy customers to do for themselves things that only the wealthy or skilled intermediaries could previously do?” And the second test is, “does the innovation target customers at the low end of a market who don’t need all the functionality of current products? And does the business model enable the disruptive innovator to earn attractive returns at discount prices unattractive to the incumbents?”

The second variable, “picking the scope needed to succeed,” goes over how the profitability of a new business and level of integration relate to one another. A situation is brought to the table as to whether a highly integrated company or nonintegrated company is likely to succeed when “determining by the conditions under which companies must compete as disruption occurs.”

The third variable, “leveraging the right capabilities,” goes over asking three questions: (1) “Do I have the resources to succeed? (2) “Will my organization’s processes facilitate success in this new effort?” (3) “Will my organization’s values allow employees to prioritize this innovation, given their other responsibilities?” There are two misconceptions that should be taken into consideration. The first being, that innovators must avoid money and leave the money to be dealt with by the corporations. And the second being, patience is a virtue and that “innovators should be patient about the new venture’s size but impatient for profits.”

The fourth variable, “disrupting competitors, not customers,” goes over how innovation can help customers do things they are already doing in a more simple way, which in turn would create more profitability for a company. On the other hand, if innovation is helping customers do things they are not trying to do, the company will fail. Watching and observing is the best way for a company to come to an understanding as to what their customers want and need in the company’s products.

Out of Christensen’s four variables I found that that fourth variable was one that I feel is the most straightforward from a consumer’s point of view, but how it may be difficult for companies to fulfill. For example, in the article, Christensen used textbook industry and how students say they would like “to probe more deeply into topics,” but really just trying to avoid reading a textbook at all. This is just one way where companies would invest their money and “new” innovation to appeal more to their consumers, but get little results because of the real interest that students have in reading textbooks.