Clayton M. Christensen - The Clayton M. Christensen Reader

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First eBook Edition: February 2016

ISBN: 9781633690998
eISBN: 9781633691001

CLAYTON M. CHRISTENSEN is the Kim B. Clark Professor of Business Administration at Harvard Business School. In addition to his most recent volume, How Will You Measure Your Life?, he has authored seven critically acclaimed books, including several New York Times bestsellers: The Innovators Dilemma, The Innovators Solution, and, most recently, Disrupting Class. Christensen is the cofounder of Innosight, a global strategy and innovation consultancy; Rose Park Advisors, an investment firm; and the Clayton Christensen Institute for Disruptive Innovation, a nonprofit think tank. In 2011 and 2013, Christensen was named the worlds most influential business thinker by Thinkers50.

RICHARD ALTON is a senior researcher at the Forum for Growth and Innovation at Harvard Business School.

JOSEPH L. BOWER is the Donald Kirk David Professor of Business Administration at Harvard Business School.

SCOTT COOK is the cofounder and chairman of Intuit, based in Mountain View, California.

TADDY HALL is the chief strategy officer of the Advertising Research Foundation in New York City.

MARK W. JOHNSON is the chairman and a cofounder of Innosight, a strategic innovation and investing company based in Boston.

HENNING KAGERMANN is a former CEO of SAP AG, a software corporation based in Germany.

STEPHEN P. KAUFMAN , a senior lecturer at Harvard Business School, is the retired chairman and CEO of Arrow Electronics.

RORY MCDONALD is an assistant professor at Harvard Business School.

MICHAEL OVERDORF is a Deans Research Fellow at Harvard Business School.

MICHAEL E. RAYNOR is a director with Deloitte Research, and a professor at the Richard Ivey School of Business in London, Ontario, Canada.

CURTIS RISING is the managing director of Harvard Square Partners, a consulting practice focused on inorganic growth and leadership assessment and based in Cambridge, Massachusetts.

WILLY C. SHIH is a professor of management practice at Harvard Business School. He held executive positions at IBM, Silicon Graphics, and Kodak.

MATTHEW VERLINDEN is a manager at Integral, an international strategy consulting firm based in Cambridge, Massachusetts.

ANDREW WALDECK is a partner at Innosight, an innovation and strategy consulting firm in Watertown, Massachusetts.

MAXWELL WESSEL is a fellow at the Forum for Growth and Innovation and a senior researcher at Harvard Business School.

Catching the Wave. by Joseph L. Bower and Clayton M. Christensen

ONE OF THE MOST CONSISTENT patterns in business is the failure of leading companies to stay at the top of their industries when technologies or markets change. Goodyear and Firestone entered the radial-tire market quite late. Xerox let Canon create the small-copier market. Bucyrus-Erie allowed Caterpillar and Deere to take over the mechanical excavator market. Sears gave way to Wal-Mart.

The pattern of failure has been especially striking in the computer industry. IBM dominated the mainframe market but missed by years the emergence of minicomputers, which were technologically much simpler than mainframes. Digital Equipment dominated the minicomputer market with innovations like its VAX architecture but missed the personal-computer market almost completely. Apple Computer led the world of personal computing and established the standard for user-friendly computing but lagged five years behind the leaders in bringing its portable computer to market.

Why is it that companies like these invest aggressivelyand successfullyin the technologies necessary to retain their current customers but then fail to make certain other technological investments that customers of the future will demand? Undoubtedly, bureaucracy, arrogance, tired executive blood, poor planning, and short-term investment horizons have all played a role. But a more fundamental reason lies at the heart of the paradox: leading companies succumb to one of the most popular, and valuable, management dogmas. They stay close to their customers.

Although most managers like to think they are in control, customers wield extraordinary power in directing a companys investments. Before managers decide to launch a technology, develop a product, build a plant, or establish new channels of distribution, they must look to their customers first: Do their customers want it? How big will the market be? Will the investment be profitable? The more astutely managers ask and answer these questions, the more completely their investments will be aligned with the needs of their customers.

This is the way a well-managed company should operate. Right? But what happens when customers reject a new technology, product concept, or way of doing business because it does not address their needs as effectively as a companys current approach? The large photocopying centers that represented the core of Xeroxs customer base at first had no use for small, slow tabletop copiers. The excavation contractors that had relied on Bucyrus-Eries big-bucket steam- and diesel-powered cable shovels didnt want hydraulic excavators because initially they were small and weak. IBMs large commercial, government, and industrial customers saw no immediate use for minicomputers. In each instance, companies listened to their customers, gave them the product performance they were looking for, and, in the end, were hurt by the very technologies their customers led them to ignore.

We have seen this pattern repeatedly in an ongoing study of leading companies in a variety of industries that have confronted technological change. The research shows that most well-managed, established companies are consistently ahead of their industries in developing and commercializing new technologiesfrom incremental improvements to radically new approachesas long as those technologies address the next-generation performance needs of their customers. However, these same companies are rarely in the forefront of commercializing new technologies that dont initially meet the needs of mainstream customers and appeal only to small or emerging markets.

Idea in Brief

Goodyear, Xerox, Bucyrus-Erie, Digital. Leading companies allyet they all failed to stay at the top of their industries when technologies or markets changed radically. Thats disturbing enough, but the reason for the failure is downright alarming. The very processes that successful, well-managed companies use to serve the rapidly growing needs of their current customers can leave them highly vulnerable when market-changing technologies appear.