Meeting the challenge of disruptive change

Meeting the challenge of disruptive change

 

 

Meeting the Challenge of Disruptive Change, Clayton Christensen and Michael Overdorf. Link to HBR full text here

-Why is it important: Innovate or Die
-Rating: 8/10
-Reading time: ~5 minutes
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- - - - - - - -Notes- - - - - - - 

“It’s not that managers in big companies can’t see disruptive changes coming. Usually they can. Nor do they lack resources to confront them. Most big companies have talented managers and specialists, strong product portfolios, first-rate technological know-how, and deep pockets. What managers lack is a habit of thinking about their organization’s capabilities as carefully as they think about individual people’s capabilities. ...organizations themselves—independent of the people and other resources in them—have capabilities.”

“Our research suggests that three factors affect what an organization can and cannot do: its resources, its processes, and its values. When thinking about what sorts of innovations their organization will be able to embrace, managers need to assess how each of these factors might affect their organization’s capacity to change.”

“We define an organization’s values as the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important, whether an idea for a new product is attractive or marginal, and so on”

“The larger and more complex a company becomes, the more important it is for senior managers to train employees throughout the organization to make independent decisions about priorities that are consistent with the strategic direction and the business model of the company. A key metric of good management, in fact, is whether such clear, consistent values have permeated the organization”

“As successful companies mature, employees gradually come to assume that the processes and priorities they’ve used so successfully so often are the right way to do their work. Once that happens and employees begin to follow processes and decide priorities by assumption rather than by conscious choice, those processes and values come to constitute the organization’s culture.”

“As companies grow from a few employees to hundreds and thousands of them, the challenge of getting all employees to agree on what needs to be done and how can be daunting for even the best managers. Culture is a powerful management tool in those situations. It enables employees to act autonomously but causes them to act consistently.”

“Hence, the factors that define an organization’s capabilities and disabilities evolve over time—they start in resources; then move to visible, articulated processes and values; and migrate finally to culture.”

“Successful companies, no matter what the source of their capabilities, are pretty good at responding to evolutionary changes in their markets—what in The Innovator’s Dilemma (Harvard Business School, 1997), Clayton Christensen referred to as sustaining innovation. Where they run into trouble is in handling or initiating revolutionary changes in their markets, or dealing with disruptive innovation”

“Sustaining innovations are nearly always developed and introduced by established industry leaders. But those same companies never introduce—or cope well with—disruptive innovations.”

“The reason, therefore, that large companies often surrender emerging growth markets is that smaller, disruptive companies are actually more capable of pursuing them. Start-ups lack resources, but that doesn’t matter. Their values can embrace small markets, and their cost structures can accommodate low margins. Their market research and resource allocation processes allow managers to proceed intuitively; every decision need not be backed by careful research and analysis. All these advantages add up to the ability to embrace and even initiate disruptive change”

“when an organization needs new processes and values—because it needs new capabilities—managers must create a new organizational space where those capabilities can be developed. There are three possible ways to do that. Managers can
• create new organizational structures within corporate boundaries in which new processes can be developed,
• spin out an independent organization from the existing organization and develop within it the new processes and values required to solve the new problem,
• acquire a different organization whose processes and values closely match the requirements of the new task.”

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