Exploring Clayton Christensen

This assignment points out who Clayton Christensen is and what are his main findings in the area of innovation management in commercial enterprises. This text is divided in four parts. First, an introduction of the person Clayton Christensen with some background information about his career. The second part outlines his major work of disruptive innovation. Based on this theory he made some suggestions how to deal with this type of innovation, which will be discussed in the fourth part. A brief summary and a personal statement will end up this paper.

Clayton M. Christensen is a Business Administration professor at Harvard Business School. He has a joint appointment in the technology and operations management and general management faculty group. He holds a B.A. in economics from Brigham Young University, a Master in economics from Oxford University, and an MBA and DBA from Harvard Business School (Christensen & Anthony & Roth 2004). Before he became a professor he cofounded a material science firm, was White House Fellow and worked for the Boston Consulting Group. The most famous publication he has written until now is the book “The Innovator’s dilemma”, which won the global business book award in 1997 (Christensen & Raynor 2003). Two other mostly recognised books are “The innovator’s solution” and “Seeing what’s next” which are based on the findings in the aforementioned award winning book.

The disruptive innovation theory is Christensen’s major finding. This theory is about the fact that even if managers are doing a perfect job, their companies lose market share. Doing a perfect job in this case means that they have their competitive antennae up, listen astutely to their customers, and invest aggressively in new technologies (Christensen 2003). The findings from Christensen’s study show, that disruptive innovations are one of the main aspects why established companies lose a lot of market shares in business where they have almost no competitor. A good example is IBM who was the market leader in the mainframe sector but lost huge parts of its market share to companies that produce minicomputers (Christensen & Bower 1996).

A disruptive innovation is the opposite of a so called sustaining innovation. Sustaining innovations are improvements of products mostly through new technologies that make existing products cheaper, more reliable, and offer greater service to the customer. A disruptive innovation on the other side is an innovation that serves the same needs of the customer but in more or less new ways. The first product of these innovations are mostly worse in performance compared to existing products in the business sector, and are initially made for niche businesses within the sector. To refer to the minicomputer case, it first offered only a few applications and was not as reliable as the mainframe. But after some years in the market the technology caught up in fields of reliability and offered applications. At that point the advantages of the new technology overweighed the mainframe ones. Furthermore, based on growing sales rates the price went down through economies of scale. At that point even the mainframes customers that stated that they never buy something else than a mainframe changed their minds. They realized that it is possible to get a more convenient device for less the price of a mainframe. Furthermore, the customer needs varies over the time which makes it possible that some product characteristics which are useless today become essential tomorrow. Apart from the fact, that customer replace a preferred product with another one when it is cheaper, simpler, smaller, and more convenient there is another finding in Christensen’s studies (Christensen 2003).

A comparison of the trajectories of market need and technology improvement shows that for some products the technical improvement develops more quickly than customer needs do. Therefore at a specific point the product performance exceeds the market need. As far as customers agree that the money they spend for a product is an overall good investment it works out. But if the feeling rises that part of the product is not worth to pay for, they look for alternatives. At that point a disruptive innovation, as described before, has the possibility to get a foothold in the market by offering a product which is cheaper and serves the basic needs of the customer. A current example is the shift from normal fixed line phones to internet services like Skype. More and more customers are not satisfied with the rising prices of telecommunication services argued through a wider range of services. A lot of these services like video calls offered through telephone companies are not important for their customers. Therefore they look for alternatives that offer a smaller range of services for less the price of a fixed line service. In this case Skype is a disruptive innovation that is in a niche market since ten years but gets its foothold in the main telecommunication market through the fact that competitors overshoot their customer needs (Anthony 2007). Many examples are known where established market leader lost their leading position to unknown small competitors through a disruptive innovation. Christensen especially focuses on the disc drive industry in the United States. In his studies he unveiled why many established companies fail to invest in disruptive technologies.

It could be estimated that established companies have a lack of technological competence and therefore are not able to develop disruptive innovations. But Christensen’s studies show that it is more a question of investment and risks taking that build up the obstacles to develop these innovations. Established companies have settled internal processes that have to be followed if investments are supposed to be made. Therefore, a new technology has to get approval from the marketing department, and finance department. Both have to make a decision about the investment. What happens in case of disruptive innovations is that the responsible marketing manager offers a prototype of the new product to the lead existing customers to get to know if they are interested. Most of the time, this customers are not interested in new technologies they want to have improved existing products. But the pitfall is that customers first think about themselves and not about the fact if this innovation could be disruptive and gain market share (Scudder 2007). Furthermore, the first market of a disruptive innovation is an emerging market which offers little margins and small sales. The result is that the marketing manager will prove small sales forecasts for the product. The financial manager mostly joins the marketing manager because the risk factor in a known environment