Before starting, the team members were invited to read a number of books and articles:For Clayton Christensen, The Innovator’s Dilemma is that, while listening to existing customers can inhibit innovation (because they don’t necessarily know what they want or what’s good for them), listening to existing customers can be the key to survival (because they sometimes know exactly what they want and what’s good for them). The distinction has to do with sustaining and disruptive innovation and technologies. Customers are obviously better at imagining and wanting the former than the latter.
Additionally, organisations dominant in their sector, according to Christensen, tend to focus on maintaining the product and service quality that won them their customers in the first place. This leaves new entrants free to focus on developing new products, services or applications.
Because disruptive technologies are often serving entirely new markets, and because markets that do not exist cannot be analysed, established companies will tend to shy away from investing in them. Among the answers are setting up ‘innovation islands’ in large businesses, spinning off start-up groups, taking equity positions in (i.e. buying bits of) new, independent companies, and so on.
From this point of view, it looks like The Economist Group was doing the right thing when the GMC decided to stand back and give Project Red Stripe a free hand to implement whatever idea it chose without first seeking approval from Group management. But, in practice, as we’ve seen, this was an unrealistic decision. The management team needed to know if the Economist Group was about to be committed to an expensive, high-profile, not-for-profit venture.
In his book, Christensen describes at some length the innovation process in the computer hard drive manufacturing sector. He explains how it simply wasn’t appropriate in 1979 for an established computer hard drive manufacturer to get out of the 8-inch drive business (where its customers were) and into the 5¼-inch drive business (which didn’t yet exist). But the predictable result was that the established manufacturer was supplanted by a newcomer and eventually went bust. In the same way, it wouldn’t have been appropriate for The Economist to focus on a philanthropy exchange website when its magazine publishing business was doing better then ever. One answer would have been to spin the idea off and invest in it if they liked the idea enough.
(Incidentally, I notice that the first of the SIPs (Statistically Improbable Phrases) that amazon.com lists for Christensen’s book is ‘value network framework’. Not only statistically, but also linguistically, improbable, I think.)
Additionally, organisations dominant in their sector, according to Christensen, tend to focus on maintaining the product and service quality that won them their customers in the first place. This leaves new entrants free to focus on developing new products, services or applications.
Because disruptive technologies are often serving entirely new markets, and because markets that do not exist cannot be analysed, established companies will tend to shy away from investing in them. Among the answers are setting up ‘innovation islands’ in large businesses, spinning off start-up groups, taking equity positions in (i.e. buying bits of) new, independent companies, and so on.
From this point of view, it looks like The Economist Group was doing the right thing when the GMC decided to stand back and give Project Red Stripe a free hand to implement whatever idea it chose without first seeking approval from Group management. But, in practice, as we’ve seen, this was an unrealistic decision. The management team needed to know if the Economist Group was about to be committed to an expensive, high-profile, not-for-profit venture.
In his book, Christensen describes at some length the innovation process in the computer hard drive manufacturing sector. He explains how it simply wasn’t appropriate in 1979 for an established computer hard drive manufacturer to get out of the 8-inch drive business (where its customers were) and into the 5¼-inch drive business (which didn’t yet exist). But the predictable result was that the established manufacturer was supplanted by a newcomer and eventually went bust. In the same way, it wouldn’t have been appropriate for The Economist to focus on a philanthropy exchange website when its magazine publishing business was doing better then ever. One answer would have been to spin the idea off and invest in it if they liked the idea enough.
(Incidentally, I notice that the first of the SIPs (Statistically Improbable Phrases) that amazon.com lists for Christensen’s book is ‘value network framework’. Not only statistically, but also linguistically, improbable, I think.)
Dilemmas:
Most organisations don’t want to be disrupted. Many of the most significant innovations and innovation technologies have been definitively disruptive.
Listening to existing customers can inhibit innovation and also be the key to survival.
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