October 24, 2011 12:28 am

Books: disruptive influence

Innovation is the hottest topic in business these days, and a doctrinal gulf is now opening up between the key thinkers on the subject. On one side are those who embrace the ideas of collaborative consumption and fast failure, who argue that innovators need to experiment with their potential consumers until they find a product or service that succeeds. These are the doers, the tinkerers who see innovation as a kind of performance art, to be done in full public view and modified according to the cheers and jeers of the crowd.

On the other side are the strategists, those who still believe in thinking through an innovation before leaping in. Michael Raynor, a management consultant and protégé of Clay Christensen, the Harvard Business School professor, is one of the most articulate and interesting of the strategists.

In The Innovator’s Manifesto, he takes us on a highly analytical path, weighing and testing Prof Christensen’s most famous idea of “disruptive innovation”, and seeing if it is a useful tool for analysing a business opportunity and creating an appropriate solution.

Raynor’s purpose is to unpack the ideas around disruption to such an extent that one should feel comfortable using the theory to predict, explain and implement innovation. He is not an easy read, which is a shame because he has many interesting things to say.

Disruption’s central claim, he writes, is that “an innovation has the best chance of success when it has a very different performance profile and appeals to customers of relatively little interest to dominant incumbents, and the organisation commercialising it enjoys substantial strategic and operational autonomy”.

In the music industry, for example, digital downloads crept up on the big record labels. At first, they were just for people on the technological fringes. But slowly they became more popular, as such companies as Apple and Amazon made it easier to download and play digital music. What began as a low-cost entrant into the music industry ended up overturning the high-cost, high-profit CD business. Companies from outside the music business led the revolution. They created not just a new product in an existing market, but a new business model to upend the dominant companies.

Raynor draws on a diverse set of examples, from Southwest Airlines to Holiday Inn, and Apple to the Dollar General retail store. He writes that disruption is only possible when an “enabling technology” or process comes along to allow a company to break the trade-offs made by everyone else in a sector.

Raynor writes convincingly that the current enthusiasm for “fast failure” and corporate “cultures of learning” is unrealistic. Corporate pathologies, such as “long memories, the jockeying for position, decision making by consensus”, he writes, lead to “risk aversion and incrementalism”, which make such innovation processes unworkable.

It is much more realistic for companies to strategise their way to innovation by focusing on areas where they might have a disruptive effect and designing processes and teams to exploit them. This requires a high degree of self-awareness and self-criticism.

Raynor cites a set of experiments done on MBA students, in which they were asked to rate the likelihood of success of a group of businesses before and after studying the theory of disruptive innovation. Their success rate went up by 50 per cent after learning about disruption.

If companies could think their way to similar levels of improvement, then innovation might not seem such a frightening prospect.

‘The Innovator’s Manifesto’ is published by Crown Business ($23)

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