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Why Do We Care about Disruption?

The other week, two of my colleagues were engaged in a fierce debate about whether a particular business was or not in fact "disruptive." When they asked my opinion, I surprised them by answering, "I don't really care."

"But we're all about disruptive innovation aren't we?" one of them asked.

"Well yes," I replied, "but we're all even more about building successful, sustainable, scalable businesses."

It's natural to think that our sole raison d'etre is disruption. Innosight's co-founder Clayton Christensen coined the term "disruptive technology," and we've built a business around putting Christensen's and related academics' work into practice.

But the academic research and our applied field work really isn't about disruptive innovation, business model innovation — or even innovation. Disruption is a means to an end. The goal is to build a sizable business with defensible competitive advantage that earns attractive returns. It just so happens that the disruptive innovation models and tools provide a great means to foster the creation of businesses that transform companies and markets, unlocking substantial value for shareholders, employees, and customers.

Adapting a disruptive mindset allows you to see opportunities that would otherwise be hidden. The suite of business model tools that my colleague Mark Johnson describes in his book, Seizing the White Space, allows you to blueprint and build a sustainable model to seize that opportunity.

These models and approaches don't change the fundamentals of business.

Read the rest at the Havard Business The Conversation blog.

Quick: Describe your company's business model.

Having trouble? That wouldn't surprise me. In reality, there isn't really any consensus about what the term "business model" even means. Suggestions range from the all-encompassing, everything-in-your-value-chain approach to the reductionist "A business model is nothing else than a representation of how an organization makes (or intends to make) money."

That latter definition is from Peter Drucker. And while I applaud his attempt to reach for the essence of the idea, I think he went too far. A business model has to specify more than just how a company intends to make money. It also needs to include some information about why a customer would ever want to give the company any money.

As something of a middle ground, I've proposed (in both an HBR article and in more depth in my book Seizing the White Space) a framework meant to be specific enough to overcome the reductionist problem but selective enough to overcome the unwieldiness of the kitchen-sink camp. I've broken it out into four boxes that answer the following questions:

1. Why would someone want to buy something from you?
2. How will you make money selling it?
3. What, exactly, are the important things you need to do to pull off the plan?

(I know that's three questions, but the answer to that last question comes in two parts, so the model requires four boxes.)

Read the rest at the Havard Business The Conversation blog.

Near the end of December, I created a survey with a single question: "Which companies do you think have done the best job of driving growth through disruption — transforming what exists or creating what doesn't through simplicity, convenience, affordability or accessibility — between 2000-2009?"

More than 3,000 individuals nominated close to 300 different organizations or individuals (a few may have been less serious, such as the three nominating my mother).

I sifted through the nominations, and identified the most frequent nominations in three categories: established high-technology companies, established non technology companies, and emerging companies (at least as of 2000). I then turned to a handful of disruptive experts to get their perspectives. Without further ado, the results:

Read the rest at Scott's Havard Management blog, Innovation Insights.

In the past few days there’s been a lot of buzz surrounding the announcement of Google’s new touch-screen handset, Nexus One. The handheld device, which Google is calling a “superphone,” has a beautiful 3.7-inch display, an ultra-thin body, a long-lasting battery, and of course Google’s heralded Android operating system. Google has obviously produced a nifty device, and it’s given rise to expected debates and chatter  over how the Nexus One matches up against and poses a threat to Apple’s iPhone.

But there is much more to this story than just a slightly improved sustaining technology.  What’s most noteworthy about the Nexus One is not necessarily the phone itself, but rather the disruptive potential of Google’s new business model. The real story here is that the phone will be sold exclusively through a new Google-hosted Web site. Highlighting this point, Google announced the Nexus One not as “a new phone by Google” but rather as “the first phone we'll be selling through this new Web store.” Riding high on the wave of superphone euphoria, Google is more subtly but strategically positioning itself to go direct to consumers through online retailing. With nearly five million unique visitors viewing a link to the phone (and thus the Web store) on Google’s homepage each day, plenty of people will get a chance to experience the new Web store firsthand.

But is the risk really worth it? Last time I checked, it seems that Google has a pretty healthy business. And isn’t selling ads really the core of its business anyway? In this sense what sets Google apart is how demonstrably willing it is to innovate its own business model in times of healthy success. Google is displaying courage and dexterity similar to IBM and especially Amazon, which has gone from book retailer to consumer goods retailer to brokerage services provider to Web services provider to original equipment manufacturer.

Google’s brave move illustrates a point Mark Johnson makes in his new book Seizing the White Space — “To thrive in today‘s marketplace, to be built to last, every business now must be built to transform.” Aware of the likelihood that, as Harvard Business School Professor David B. Yoffie has noted, the new paradigm-to-be is mobile computing and mobility, Google has seen this change coming for years and is fearlessly preparing for it.

So is the risk really worth it? After all, not even Google has a flawless record of success in new business ventures (when was the last time you used Google’s Orkut or Knol?). But in an era of shorter business cycles and increasing competition, risk is inevitable, and being built to transform has become the new imperative. The surest path, then, is to not be bound by doing merely what you’re good at or what you’ve always done, but to vigilantly identify new ways to address customer jobs more simply, conveniently, and affordably, regardless of how this may or may not fit with your current business model.

While I'm busy tallying the results from the Disruptor of the Decade contest — more than 3,000 people nominated close to 300 different organizations — I thought it would be a good opportunity to highlight an emerging disruption in India.

My colleague Vijay Raju went on a vacation in the last week of December that took him to the jungle areas on the border of the states of Kerala and Karnataka in India. He noticed a new advertising approach from many mobile operators that that made their advertisements even more ubiquitous than soft drink companies.

If a picture is worth 1,000 words, Vijay's excellent photo essay (which you can download either as a PowerPoint or a PDF) is worth a Stephen King novel (in length at least).

It's an interesting hidden disruption. Companies can use the approach to drive brand awareness in areas with low literacy and television penetration. Villagers can benefit by accessing an affordable way to upgrade their houses.

As my feet get more firmly settled in Asia (we're moving in the next couple of months), I hope to send more of these kinds of postcards. Thanks to Vijay for sharing his story!

Read the rest at Scott's Havard Management blog, Innovation Insights.

In 2005, Rupert Murdoch was the toast of the media world. News Corp's septuagenarian CEO had swooped in and picked up social networking darling MySpace for a price ($580 million) that seemed steep but not outrageous. Months later, MySpace signed a massive deal with Google, justifying Murdoch's optimism. Growth surged. Seemingly overnight, Murdoch went from crusty old corporate titan to hip new media king.

Four short years later, however, MySpace's shine has dulled. Upstart Facebook has blown past MySpace to claim dominant leadership in the social networking space. MySpace's market share has dropped from 66 percent of all social networking users in 2008 to 30 percent in 2009.

An article last week in the Financial Times describing MySpace's malaise highlights important lessons for managing disruptive innovation.

When News Corp acquired MySpace (technically, MySpace's parent company Intermix), it sought to give its new venture a high degree of autonomy. However, it had MySpace report to an executive — Ross Levinsohn — whose vision for the company differed from the founding team. Levinsohn hired a team to speed integration and begin to upgrade MySpace's underlying technology.

According to the Financial Times, MySpace's founders continued to encourage rampant experimentation, which frustrated the News Corp executives who were used to more disciplined execution. "Every time we tried to professionalize the place they resisted," Levinsohn said.

In 2007, News Corp told analysts how the business was poised to get to $1 billion in revenue by 2008. How was MySpace going to hit that number? It had tremendous amount of traffic that looked attractive to advertisers. So it naturally increased the number of advertisements per page and shut down innovation efforts that would reduce page counts, even if they increased user loyalty.

Growing advertisements, however, began to irritate users who felt inundated by ads. They began fleeing MySpace and joining Facebook.

Read the rest at Scott's Havard Management blog, Innovation Insights.