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July 13, 2014

Harvard Rejects Christensen's Advice to Try Disruptive MOOCs



PorterMichaelHBS2014-06-01.jpg "Harvard Business School faced a choice between different models of online instruction. Prof. Michael Porter favored the development of online courses that would reflect the school's existing strategy." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) Universities across the country are wrestling with the same question -- call it the educator's quandary -- of whether to plunge into the rapidly growing realm of online teaching, at the risk of devaluing the on-campus education for which students pay tens of thousands of dollars, or to stand pat at the risk of being left behind.

At Harvard Business School, the pros and cons of the argument were personified by two of its most famous faculty members. For Michael Porter, widely considered the father of modern business strategy, the answer is yes -- create online courses, but not in a way that undermines the school's existing strategy. "A company must stay the course," Professor Porter has written, "even in times of upheaval, while constantly improving and extending its distinctive positioning."

For Clayton Christensen, whose 1997 book, "The Innovator's Dilemma," propelled him to academic stardom, the only way that market leaders like Harvard (p. 4) Business School survive "disruptive innovation" is by disrupting their existing businesses themselves. This is arguably what rival business schools like Stanford and the Wharton School have been doing by having professors stand in front of cameras and teach MOOCs, or massive open online courses, free of charge to anyone, anywhere in the world. For a modest investment by the school -- about $20,000 to $30,000 a course -- a professor can reach a million students, says Karl Ulrich, vice dean for innovation at Wharton, part of the University of Pennsylvania.

"Do it cheap and simple," Professor Christensen says. "Get it out there."

But Harvard Business School's online education program is not cheap, simple, or open. It could be said that the school opted for the Porter theory.


. . .


"Harvard is going to make a lot of money," Mr. Ulrich predicted. "They will sell a lot of seats at those courses. But those seats are very carefully designed to be off to the side. It's designed to be not at all threatening to what they're doing at the core of the business school."

Exactly, warned Professor Christensen, who said he was not consulted about the project. "What they're doing is, in my language, a sustaining innovation," akin to Kodak introducing better film, circa 2005. "It's not truly disruptive."


. . .


One morning, [Harvard Business School Dean Nitin Nohria] sat down for one of his regular breakfasts with students. "Three of them had just been in Clay's course," which had included a case study on the future of Harvard Business School, Mr. Nohria said. "So I asked them, 'What was the debate like, and how would you think about this?' They, too, split very deeply."

Some took Professor Christensen's view that the school was a potential Blockbuster Video: a high-cost incumbent -- students put the total cost of the two-year M.B.A. at around $100,0000 -- that would be upended by cheaper technology if it didn't act quickly to make its own model obsolete. At least one suggested putting the entire first-year curriculum online.

Others weren't so sure. " 'This disruption is going to happen,' " is how Mr. Nohria described their thinking, " 'but it's going to happen to a very different segment of business education, not to us.' " The power of Harvard's brand, networking opportunities and classroom experience would protect it from the fate of second- and third-tier schools, a view that even Professor Christensen endorses -- up to a point.

"We're at the very high end of the market, and disruption always hits the high end last," said Professor Christensen, who recently predicted that half of the United States' universities could face bankruptcy within 15 years.



For the full story, see:

JERRY USEEM. "B-School, Disrupted." The New York Times, SundayBusiness Section (Sun., June 1, 2014): 1 & 4.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the story has the date MAY 31, 2014, and has the title "Business School, Disrupted.")


Some of Christensen's thoughts on higher education can be found in:

Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.



ChristensenClaytonHBS2014-06-01.jpg
















"On the topic of online instruction, Prof. Clayton Christensen said: 'Do it cheap and simple. Get it out there."" Source of caption and photo: online version of the NYT article quoted and cited above.






June 9, 2014

Government Regulations Favor Health Care Incumbents



WhereDoesItHurtBK2014-05-28.jpg





Source of book image: online version of the WSJ review quoted and cited below.





(p. A11) The rise in U.S. health-care costs, to nearly 18% of GDP today from around 6% of GDP in 1965, has alarmed journalists, inspired policy wonks and left patients struggling to find empathy in a system that tends to view them as "a vessel for billing codes," as the technologist Dave Chase has put it.

Enter Jonathan Bush, dyslexic entrepreneur, . . .


. . .


. . . , Mr. Bush touts technology as a driver of change. It has revolutionized the way we shop for books and select hotels, but health-care delivery has been stubbornly resistant. Mr. Bush notes that the number of people supporting each doctor has climbed to 16 today from 10 in 1990--half of whom, currently, are administrators handling the mounting paperwork. Astonishingly, as Mr. Bush observes, the government had to pay doctors billions of dollars, via the 2009 HITECH Act, to incentivize them to upgrade from paper to computers. Meanwhile, fast-food chains discovered computers on their own, because the market demanded it.


. . .


Let entrepreneurs loose on these challenges, Mr. Bush believes, and they will come up with solutions.

Mr. Bush identifies three major obstacles to the kinds of change he has in mind. First, large hospital systems leverage their market position to charge hefty premiums for basic services, then use the proceeds to buy more regional hospitals and local practices. "As big ones take over the small," Mr. Bush laments, "prices shoot up. Choices vanish." Second, government regulations, especially state laws, favor powerful incumbents, shielding "imaging centers and hospitals from competition." Third, heath care suffers from a risk-avoidant culture. The maxim "do no harm," Mr. Bush says, should not be an excuse for clinging to a flawed status quo.



For the full review, see:

David A. Shaywitz. "BOOKSHELF; A System Still in Need of Repair; Routine medical services can be done for less cost--one of many obvious realities that current health-care practices studiously ignore." The Wall Street Journal (Mon., May 19, 2014): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date May 18, 2014, and has the title "BOOKSHELF; Book Review: 'Where Does It Hurt?' by Jonathan Bush; Routine medical services can be done for less cost--one of many obvious realities that current health-care practices studiously ignore.")


The book under review is:

Bush, Jonathan, and Stephen Baker. Where Does It Hurt?: An Entrepreneur's Guide to Fixing Health Care. New York: Portfolio, 2014.






May 16, 2014

"The Experts Keep Getting It Wrong and the Oddballs Keep Getting It Right"



HydraulicFracturingOperationInColorado2014-04-25.jpg "A worker at a hydraulic fracturing and extraction operation in western Colorado on March 29[, 2014]." Source of caption and photo: online version of the WSJ article quoted and cited below.



(p. C3) The experts keep getting it wrong. And the oddballs keep getting it right.

Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world's leading producer.

What's most surprising about both events is how few experts saw them coming--and that a group of unlikely outsiders somehow did.


. . .


Less well known, but no less dramatic, is the story of America's energy transformation, which took the industry's giants almost completely by surprise. In the early 1990s, an ambitious Chevron executive named Ray Galvin started a group to drill compressed, challenging formations of shale in the U.S. His team was mocked and undermined by dubious colleagues. Eventually, Chevron pulled the plug on the effort and shifted its resources abroad.

Exxon Mobil also failed to focus on this rock--even though its corporate headquarters in Irving, Texas, were directly above a huge shale formation that eventually would flow with gas. Later, it would pay $31 billion to buy a smaller shale pioneer.

"I would be less than honest if I were to say to you [that] we saw it all coming, because we did not, quite frankly," Rex Tillerson, Exxon Mobil's chairman and CEO said last year in an interview at the Council on Foreign Relations.


. . .


The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture--or frack--and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering.



For the full commentary, see:

GREGORY ZUCKERMAN. "ESSAY; The Little Guys Who Saw Our Economic Future; Corporate Caution and Complacency Come at a Cost." The Wall Street Journal (Sat., Nov. 2, 2013): C3.

(Note: ellipsis, and bracketed year in caption, added.)

(Note: the online version of the commentary was updated Nov. 3, 2013, and has the title "ESSAY; The Outsiders Who Saw Our Economic Future; In both America's energy transformation and the financial crisis, it took a group of amateurs to see what was coming." )


Zuckerman's commentary, quoted above, is partly based on his book:

Zuckerman, Gregory. The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters. New York: Portfolio/Penguin, 2013.






April 7, 2014

William Vanderbilt Helped Disrupt His Gas Holdings by Investing in Edison's Electricity



(p. 84) But even the minimal ongoing work on the phonograph would be pushed aside by the launch of frenzied efforts to find a way to fulfill Edison's premature public claim that his electric light was working. A couple of months later, when asked in an interview about the state of his phonograph, Edison replied tartly, "Comatose for the time being." He changed metaphors and continued, catching hold of an image that would be quoted many times by later biographers: "It is a child and will grow to be a man yet; but I have a bigger thing in hand and must finish it to the temporary neglect of all phones and graphs."

Financial considerations played a part in allocation of time and resources, too. Commissions from the phonograph that brought in hundreds of dollars were hardly worth accounting for, not when William Vanderbilt and his friends were about to advance Edison $50,000 for the electric light. Edison wrote a correspondent that he regarded the financier's interest especially satisfying as Vanderbilt was "the largest gas stock owner in America."



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

(Note: ellipses, and capitals, in original.)






December 3, 2013

Amazon's Story of the Evolution and Revolution of Disruptive Innovation



EverythingStoreBK2013-10-29.jpg

















Source of book image:
http://i1.wp.com/allthingsd.com/files/2013/10/Stone_EverythingStore1.jpg



(p. C5) Mr. Stone, a senior writer for Bloomberg Businessweek and a former reporter for The New York Times, tells this story of disruptive innovation with authority and verve, and lots of well-informed reporting. Although "The Everything Store" retraces early ground covered by Robert Spector's 2000 book, "Amazon.com: Get Big Fast," Mr. Stone has conducted more than 300 interviews with current and former Amazon executives and employees, including conversations, over the years, with Mr. Bezos, who "in the end was supportive of this project even though he judged that it was 'too early' for a reflective look" at the company.

"The Everything Store" does not examine in detail the fallout that Amazon's rise has had on book publishing and on independent bookstores, but Mr. Stone does a nimble job of situating the company's evolution within the wider retail landscape and within the technological revolution that was remaking the world at the turn of the millennium.



For the full review, see:

MICHIKO KAKUTANI. "BOOKS OF THE TIMES; Selling as Hard as He Can." The New York Times (Tues., October 29, 2013.): C1 & C5.

(Note: the online version of the review has the date October 28, 2013.)


The book under review is:

Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013.


StoneBrad2013-10-29.jpg










"Brad Stone" Source of caption and photo: online version of the NYT review quoted and cited above.







November 22, 2013

Pretentious Studios Were Pushed Aside by Grounded Googlers



(p. 261) Kamangar didn't put a value judgment on the way the labels and studios worked but tried to crack their code, talking to executives, producers, agents, and managers. One day he happened to be in New York and was invited to meet with the CEO of Universal Music Group, Doug Morris. Kamangar was escorted by bodyguards to a private elevator and ushered to a fancy office high above the city. He couldn't help thinking of the contrast with Google, where you stumbled in and went to the microkitchen for coffee. Kamangar didn't dwell on the (p. 262) irony that it was the scruffy kids in shorts, munching energy bars and writing analytics programs, who were pushing aside the old power structure. While he put the pieces of YouTube together, though, he always kept in mind that he was documenting a traditional media system on the verge of collapse. He had to deal with the music world as it was but also plan for the way it would be after disruptions, which Google and YouTube were accelerating.


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






September 11, 2013

Yahoo Execs Complained that Google Did Yahoo Searches too Well



(p. 45) Even though Google never announced when it refreshed its index, there would invariably be a slight rise in queries around the world soon after the change was implemented. It was as if the global subconscious realized that there were fresher results available.

The response of Yahoo's users to the Google technology, though, was probably more conscious. They noticed that search was better and used it more. "It increased traffic by, like, 50 percent in two months," Manber recalls of the switch to Google. But the only comment he got from Yahoo executives was complaints that people were searching too much and they would have to pay higher fees to Google.

But the money Google received for providing search was not the biggest benefit. Even more valuable was that it now had access to many more users and much more data. It would be data that took Google search to the next level. The search behavior of users, captured and encapsulated in the logs that could be analyzed and mined, would make Google the ultimate learning machine.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






September 9, 2013

Silicon Valley May Be Insulated from the Jobs Ordinary People Need to Get Done




A long while ago I read somewhere that in his prime Bill Gates deliberately tested Microsoft software on the limited hardware that mainstream customers could afford, rather than on the cutting edge hardware he himself could easily afford. I thought that this gave an important clue to Gates' and Microsoft's success.

Christensen and Raynor (2003) suggest that the successful entrepreneur will think hard about what jobs ordinary people want to get done, but are having difficulty doing.

The passages quoted below suggest that Silicon Valley entrepreneurs are insulated from ordinary life, and so may need to work harder at learning what the real problems are.



(p. B5) Engineers tend to move to the Bay Area because of the opportunity to get together with other engineers and, just maybe, create a great company, Mr. Smith said. But in a region that has the highest concentration of tech workers in the United States, according to the Bureau of Labor Statistics, the bars, restaurants and other haunts of entrepreneurs can be an echo chamber. The result can be a focus on solutions for mundane problems.


. . .


. . . too often, says Jason Pontin, the editor in chief and publisher of MIT Technology Review, . . . start-ups are solving "fake problems that don't actually create any value." Mr. Pontin knows a thing or two about companies that aren't exactly reaching for the stars. From 1996 to 2002, he was the editor of Red Herring, a magazine in San Francisco that chronicled the region's dot-com boom and eventual collapse.



For the full commentary, see:

NICK BILTON. "Disruptions: The Echo Chamber of Silicon Valley." The New York Times (Mon., June 3, 2013): B5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date June 2, 2013.)


The Christensen and Raynor book that I mention above, is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.






September 7, 2013

Yahoo Valued "Marketing Gimmicks" More than Search Speed



(p. 44) Google had struck a deal to handle all the search traffic of Yahoo, one of the biggest portals on the web.

The deal--announced on June 26, 2000--was a frustrating development to the head of Yahoo's search team, Udi Manber. He had been arguing that Yahoo should develop its own search product (at the time, it was licensing technology from Inktomi), but his bosses weren't interested. Yahoo's executives, led by a VC-approved CEO named Timothy Koogle (described in a BusinessWeek cover story as "The Grown-up Voice of Reason at Yahoo"), instead were devoting their attention to branding--marketing gimmicks such as putting the purple corporate logo on the Zamboni machine that swept the ice between periods of San Jose Sharks hockey games. "I had six people working on my search team," Manber said. "I couldn't get the seventh. This was a company that had thousands of people. I could not get the seventh." Since Yahoo wasn't going to develop its own search, Manber had the task of finding the best one to license.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: italics in original.)






September 2, 2013

Jeb Bush Reads Clayton Christensen on His Kindle



BushJebCaricature2013-08-12.jpg














Jeb Bush. Source of caricature: online version of the WSJ article quoted and cited below.




Clayton Christensen is a kindred spirit: he cares about making the world a better place through innovation in free markets. He research is almost always thought-provoking, and sometimes highly illuminating. So it speaks well of Jeb Bush that he has the good judgement to be reading one of Christensen's books on education.


(p. A11) Currently [Bush is] reading "Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns" -- on his Kindle electronic reader.


For the full interview, see:

FRED BARNES. "THE WEEKEND INTERVIEW with JEB BUSH; Republicans Must Be a National Party Florida's former governor on immigration, school choice, and the GOP's limited-government foundation." The Wall Street Journal (Sat., February 14, 2009): A11.

(Note: words in brackets added.)


The Christensen book mentioned on education, is:

Christensen, Clayton M., Curtis W. Johnson, and Michael B. Horn. Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. New York: NY: McGraw-Hill, 2008.

(Note: a revised edition of the book appeared in 2011.)






February 15, 2013

Steve Jobs Framing a Decision in Terms of Christensen's "The Innovator's Dilemma"





The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.



(p. 532) It's important that we make this transformation, because of what Clayton Christensen calls "the innovator's dilemma," where people who invent something are usually the last ones to see past it, and we certainly don't want to be left behind. I'm going to take MobileMe and make it free, and we're going to make syncing content simple. We are building a server farm in North Carolina. We can provide all the syncing you need, and that way we can lock in the customer.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






February 14, 2013

Arne Duncan Endorses Christensen's Disruption of All Levels of Education



DisruptingClassAndChristensen2013-01-11.jpg

Source of book image and photo of Christensen: http://images.businessweek.com/ss/08/12/1215_best_design_books/image/disruptingclass.jpg



(p. C6) Clayton Christensen is a provocative thinker, and I have been greatly influenced by his work on disruptive innovation and how it can transform education.


For the full review essay, see:

Arne Duncan (author of passage quoted above, one of 50 contributors to whole article). "Twelve Months of Reading; We asked 50 of our friends to tell us what books they enjoyed in 2012--from Judd Apatow's big plans to Bruce Wagner's addictions. See pages C10 and C11 for the Journal's own Top Ten lists." The Wall Street Journal (Sat., December 15, 2012): passim (Duncan's contribution is on p. C6).

(Note: the online version of the review essay has the date December 14, 2012.)



Christensen's books suggesting disruptive innovations for education are:

Christensen, Clayton M., Curtis W. Johnson, and Michael B. Horn. Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. updated ed. New York: NY: McGraw-Hill, 2011.

Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.






January 18, 2013

Steve Jobs Was Deeply Influenced by Clayton Christensen's "The Innovator's Dilemma"



(p. 408) Microsoft was willing to license its Windows Media software and digital rights format to other companies, just as it had licensed out its operating system in the 1980s. Jobs, on the other hand, would not license out Apple's FairPlay to other device makers; it worked only on an iPod. Nor would he allow other online stores to sell songs for use on iPods. A variety of experts said this would eventually cause Apple to lose market share, as it did in the computer wars of the 1980s. "If Apple continues to rely on a proprietary architecture," the Harvard Business School professor Clayton Christensen told Wired, "the iPod will likely become a niche product." (Other than in this case, Christensen was one of the world's most insightful business analysts, and Jobs was deeply (p. 409) influenced by his book The Innovator's Dilemma.) Bill Gates made the same argument. "There's nothing unique about music," he said. "This story has played out on the PC."


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






May 30, 2012

"Innovation" Should Be Reserved for Electricity, Printing Press, Telephone and iPhone



LightBulbInnovationGraphic2012-05-29.jpg Source of graphic: online version of the WSJ article quoted and cited below.



(p. B1) "Most companies say they're innovative in the hope they can somehow con investors into thinking there is growth when there isn't," says Clayton Christensen, a professor at Harvard Business School and the author of the 1997 book, "The Innovator's Dilemma."


. . .


Scott Berkun, the author of the 2007 book "The Myths of Innovation," which warns about the dilution of the word, says that what most people call an innovation is usually just a "very good product."

He prefers to reserve the word for civilization-changing inventions like electricity, the printing press and the telephone--and, more recently, perhaps the iPhone.


. . .


Mr. Berkun tracks innovation's popularity as a buzzword back to the 1990s, amid the dot-com bubble and the release of James M. Utterback's "Mastering the Dynamics of Innovation" and Mr. Christensen's "Dilemma."


. . .


(p. B8) Mr. Christensen classifies innovations into three types: efficiency innovations, which produce the same product more cheaply, such as automating credit checks; sustaining innovations, which turn good products into better ones, such as the hybrid car; and disruptive innovations, which transform expensive, complex products into affordable, simple ones, such as the shift from mainframe to personal computers.

A company's biggest potential for growth lies in disruptive innovation, he says, noting that the other types could just as well be called ordinary progress and normally don't create more jobs or business.

But the disruptive innovations can take five to eight years to bear fruit, he says, so companies lose patience.

It is far easier, he adds, for companies to just say they're innovating. "Everybody's innovating, because any change is innovation."



For the full story, see:

LESLIE KWOH. "You Call That Innovation? Companies Love to Say They Innovate, but the Term Has Begun to Lose Meaning." The Wall Street Journal (Weds., May 23, 2012): B1 & B8.

(Note: ellipses added.)






May 11, 2012

Harvard and M.I.T. Free Online Courses May Disrupt Mid-Tier Universities



(p. A17) In what is shaping up as an academic Battle of the Titans -- one that offers vast new learning opportunities for students around the world -- Harvard and the Massachusetts Institute of Technology on Wednesday announced a new nonprofit partnership, known as edX, to offer free online courses from both universities.

Harvard's involvement follows M.I.T.'s announcement in December that it was starting an open online learning project, MITx. Its first course, Circuits and Electronics, began in March, enrolling about 120,000 students, some 10,000 of whom made it through the recent midterm exam. Those who complete the course will get a certificate of mastery and a grade, but no official credit. Similarly, edX courses will offer a certificate but not credit.

But Harvard and M.I.T. have a rival -- they are not the only elite universities planning to offer free massively open online courses, or MOOCs, as they are known. This month, Stanford, Princeton, the University of Pennsylvania and the University of Michigan announced their partnership with a new commercial company, Coursera, with $16 million in venture capital.


. . .


Education experts say that while the new online classes offer opportunities for students and researchers, they pose some threat to low-ranked colleges.

"Projects like this can impact lives around the world, for the next billion students from China and India," said George Siemens, a MOOC pioneer who teaches at Athabasca University, a publicly supported online Canadian university. "But if I were president of a mid-tier university, I would be looking over my shoulder very nervously right now, because if a leading university offers a free circuits course, it becomes a real question whether other universities need to develop a circuits course."



For the full story, see:

TAMAR LEWIN. "Harvard and M.I.T. Join to Offer Web Courses." The New York Times (Thurs., May 3, 2012): A17.

(Note: ellipsis added.)

(Note: the online version of the story is dated May 2, 2012, and has the title "Harvard and M.I.T. Team Up to Offer Free Online Courses.")






October 16, 2011

Finance and Strategy Should Be More Integrated



ChristensenClayton2011-07-19.jpg"'God never said that finance and strategy are fundamentally different functions.' --Clayton Christensen" Source of caption and photo: online version of the WSJ interview quoted and cited below.




MR. MURRAY: We've talked about the innovator's dilemma, but what's the solution?

MR. CHRISTENSEN: The financial function stands in the way of much of this. God never said that finance and strategy are fundamentally different functions, yet the business schools decided to teach strategy and teach finance. This gets implemented in companies where strategy is the responsibility of this group, and finance this group. And a lot of the things that make sense financially make no sense strategically.


. . .


MR. MURRAY: The United States has led the world in various types of innovation for much of the past century. Is that something that will continue?

MR. CHRISTENSEN: I am very worried about America. I was thinking about this hard over the past year. It turns out that the majority of the entrepreneurs that made Silicon Valley happen weren't Americans. They were from Israel, China and India. We were a magnet to bring to our shores the best technologists in the world. Now our message to the rest of the world is, "You guys, we don't want you." The minute we say that and push those to Singapore and to Britain and elsewhere, I worry.



For the full interview, see:

Alan Murray, interviewer. "The Innovator's Solution; Clayton Christensen, Glenn Hutchins and Ellen Kullman on being cutting edge--without breaking the bank." The Wall Street Journal (Weds., June 27, 2011): C9.

(Note: bold and italics in original; ellipsis added.)





May 19, 2011

Entrepreneur Ken Olsen Was First Lionized and Then Chastised



OlsenKenObit2011-05-16.jpg"Ken Olsen, the pioneering founder of DEC, in 1996." Source of caption and photo: online version of the NYT article quoted and cited below.


I believe in The Road Ahead, Bill Gates describes Ken Olsen as one of his boyhood heroes for having created a computer that could compete with the IBM mainframe. His hero failed to prosper when the next big thing came along, the PC. Gates was determined that he would avoid his hero's fate, and so he threw his efforts toward the internet when the internet became the next big thing.

Christensen sometimes uses the fall of minicomputers, like Olsen's Dec, to PCs as a prime example of disruptive innovation, e.g., in his lectures on disruptive innovation available online through Harvard. A nice intro lecture is viewable (but only using Internet Explorer) at: http://gsb.hbs.edu/fss/previews/christensen/start.html



(p. A22) Ken Olsen, who helped reshape the computer industry as a founder of the Digital Equipment Corporation, at one time the world's second-largest computer company, died on Sunday. He was 84.


. . .


Mr. Olsen, who was proclaimed "America's most successful entrepreneur" by Fortune magazine in 1986, built Digital on $70,000 in seed money, founding it with a partner in 1957 in the small Boston suburb of Maynard, Mass. With Mr. Olsen as its chief executive, it grew to employ more than 120,000 people at operations in more than 95 countries, surpassed in size only by I.B.M.

At its peak, in the late 1980s, Digital had $14 billion in sales and ranked among the most profitable companies in the nation.

But its fortunes soon declined after Digital began missing out on some critical market shifts, particularly toward the personal computer. Mr. Olsen was criticized as autocratic and resistant to new trends. "The personal computer will fall flat on its face in business," he said at one point. And in July 1992, the company's board forced him to resign.



For the full obituary, see:

GLENN RIFKIN. "Ken Olsen, Founder of the Digital Equipment Corporation, Dies at 84." The New York Times (Tues., February 8, 2011): A22.

(Note: ellipsis added.)

(Note: the online version of the story is dated February 7, 2011 and has the title "Ken Olsen, Who Built DEC Into a Power, Dies at 84.")


Gates writes in autobiographical mode in the first few chapters of:

Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.


Christensen's mature account of disruptive innovation is best elaborated in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





December 22, 2010

Under Health Care 'Reform' the Total Cost of Health Care Will "Go through the Roof!"



BushJonathanAthenahealth2010-12-20.jpg










"Jonathan Bush, nephew of one former president and cousin of another, built a small medical practice into a national enterprise with nearly 1,200 employees." Source of caption and photo: online version of the NYT article quoted and cited below.




(p. B10) In the world of health care innovation, the founder and chief executive of Athenahealth has an outsize name. In part, that's because his name is Jonathan Bush, and he is the nephew of one former president and the cousin of another. But it's also because his company has mastered the intricacies of the doctor-insurer relationship and become a player in the emerging medical records industry.

Based in Watertown, Mass., Athenahealth offers a suite of administrative services for medical practices. It collects payments from insurers and patients, and it manages electronic health records and patient communication systems. All of this is done remotely through the Internet -- or "in the cloud," as Mr. Bush puts it. Doctors don't have to install or manage software or pay licensing fees; instead, Athenahealth keeps a percentage of the revenue.


. . .


Q. What's going on in the health care industry to deliver that kind of growth to you?

A. We are a disruptive technology. We are the only cloud-based service in an industry segment full of sclerotic, enormous, personality-free corporations that have been in business making 90 percent margins doing nothing for decades and decades.

Q. What keeps other companies from building cloud-based systems?

A. For software companies, the biggest barrier to entry is that they give up their business model. Those companies would get hammered on Wall Street if they started selling a service that they have to deliver at a loss for five years. In terms of new entrants, there are two things that we've done that would take a good decade to replicate. One, we've built out the health care Internet. We've been building connections into insurance companies and laboratories and hospital medical records for years and years and years.

And the other barrier to entry is that rules engine. Every time a doctor anywhere in the country gets a claim denied, we have analysts ask the Five Whys. When we get to root cause, we write a new rule into Athenanet and from that day on, no other doctor gets that particular denial from that particular insurance company ever again. We now know of 40 million ways that a doctor can have a claim denied in the United States. The average practice has to rework about 35 percent of their claims, and we only have to rework about 5 percent of ours.

Q. What's the prognosis for bill collecting under health care reform?

A. Well, there's going to be new connectors and a whole series of new insurance products that will be managed by the states' health insurance commissioners. And the law provides for every state to do all of these its own way, so they will have their own rules and regulations, and each state will do it differently. That sounds like springtime in Complexity Land.

Q. What do you think will happen to the total cost of health care under reform?

A. Oh, it's going to go through the roof! It's widely accepted that this is not a cost-reform bill -- it's an access bill. It's in fact a cost-expansion bill.



For the full story, see:

ROBB MANDELBAUM. "Views of Health Care Economics From a C.E.O. Named Bush." The New York Times (Thurs., September 9, 2010): B10.

(Note: ellipsis added.)

(Note: the online version of the article has the date September 8, 2010.)





September 20, 2010

Christensen's Innovator's Dilemma Is "Most Influential Business Book"



(p. W3) . . . in today's world, gale-like market forces--rapid globalization, accelerating innovation, relentless competition--have intensified what economist Joseph Schumpeter called the forces of "creative destruction."


. . .


When I asked members of The Wall Street Journal's CEO Council, a group of chief executives who meet each year to deliberate on issues of public interest, to name the most influential business book they had read, many cited Clayton Christensen's "The Innovator's Dilemma." That book documents how market-leading companies have missed game-changing transformations in industry after industry--computers (mainframes to PCs), telephony (landline to mobile), photography (film to digital), stock markets (floor to online)--not because of "bad" management, but because they followed the dictates of "good" management. They listened closely to their customers. They carefully studied market trends. They allocated capital to the innovations that promised the largest returns. And in the process, they missed disruptive innovations that opened up new customers and markets for lower-margin, blockbuster products.



For the full commentary, see:

ALAN MURRAY. "The End of Management; Corporate bureaucracy is becoming obsolete. Why managers should act like venture capitalists." The Wall Street Journal (Sat., AUGUST 21, 2010): A17.

(Note: ellipses added.)


The most complete and current account of Christensen's views can be found in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 19, 2010

HP Turns Down Wozniak Again



(p. 193) But I went to talk to the project manager, Kent Stockwell. Although I had done all these computer things with the Apple I and Apple II, I wanted to work on a computer at HP so bad I would have done anything. I would even be a measely printer interface engineer. Something tiny.

I told him, "My whole interest in life has been computers. Not calculators."

(p. 194) After a few days, I was turned down again.

I still believe HP made a huge mistake by not letting me go to its computer project. I was so loyal to HP. I wanted to work there for life. When you have an employee who says he's tired of calculators and is really productive in computers, you should put him where he's productive. Where he's happy. The only thing I can figure is there were managers and submanagers on this computer project who felt threatened. I had already done a whole computer. Maybe they bypassed me because I had done this single-handedly. I don't know what they were thinking.

But they should've said to themselves, "How do we get Steve Wozniak on board? Just make him a little printer interface engineer." I would've been so happy, but they didn't bother to put me where I would've been happiest.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





July 11, 2010

How HP Turned Down the Apple PC



Wozniak tells the story of how he offered to develop the PC within HP, but HP turned him down. The story seems highly compatible with the account of disruptive innovations given by Clayton Christensen.

Another aspect of the story is worth highlighting. Sometimes it is alleged, as e.g., with the Tucker auto story, that large incumbent corporations suppress innovations. But in this case, although HP did not want to develop the PC themselves, they did not try to keep Wozniak and Jobs from developing it on their own.


(p. 175) Before the partnership agreement was even inked, I realized something and told Steve. Because I worked at HP, I told him, everything I'd designed during the term of my employment contract belonged to HP.

Whether that upset Steve or not, I couldn't tell. But it didn't matter to me if he was upset about it. I believed it was my duty to tell HP about what I had designed while working for them. That was the right thing and the ethical thing. Plus, I really loved that company and I really did believe this was a product they should do. I knew that a guy named Miles Judd, three levels above me in the company structure, had managed an engineering group at an HP division in Colorado Springs that had developed a desktop computer.

It wasn't like ours at all--it was aimed at scientists and engineers and it was really expensive--but it was programmable in BASIC.

I told my boss, Pete Dickinson, that I had designed an inexpensive desktop computer that could sell for under $800 and could run BASIC. He agreed to set up a meeting so I could talk Miles.

(p. 176) I remember going into the big conference room to meet Pete, his boss, Ed Heinsen, and Ed's boss, Miles. I made my presentation and showed them my design.

"Okay," Miles said after thinking about it for a couple of minutes. "There's a problem you'll have when you say you have output to a TV. What happens if it doesn't look right on every TV? I mean, is it an RCA TV a Sears TV or an HP product that's at fault?"

HP keeps a close eye on quality control, he told me. If HP couldn't control what TV the customer was using, how could it make sure the customer had a good experience? More to the point, the division didn't have the people or money to do a project like mine. So he turned it down.

I was disappointed, but I left it at that. Now I was free to enter into the Apple partnership with Steve and Ron. I kept my job, but after that I was officially moonlighting. Everybody I worked with knew about the computer board we were going to sell.

Over the next few months, Miles would keep coming up to me. He knew about BASIC-programmable computers because of his division out in Colorado, and even though they didn't want my design, he said he was intrigued by the idea of having a machine so cheap that anyone could own one and program it. He kept telling me he'd been losing sleep ever since he heard the idea.

But looking back, I see he was right. How could HP do it? It couldn't. This was nowhere near a complete and finished scientific engineer's product. Everybody saw that smaller, cheaper computers were going to be a coming thing, but HP couldn't justify it as a product. Not yet. Even if they had agreed, I see now that HP would've done it wrong anyway. I mean, when they finally did it in 1979, they did it wrong. That machine went nowhere.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.


The main Christensen book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 8, 2010

Low End Tech Upstart Moves Up-Market to Compete with Incumbents



MediaTekRevenueGraph2010-05-20.gif













Source of graph: online version of the WSJ article quoted and cited below.



The MediaTek example briefly mentioned below, seems a promising fit with Christensen's theory of disruptive innovators.


(p. B7) TAIPEI--A little-known Taiwanese chip-design company is making waves in the cellphone business, grabbing market share from larger U.S. rivals and helping drive down phone prices for consumers.


. . .


While MediaTek isn't known for cutting-edge innovation, it has been able to apply the nimble, cost-cutting approach of Taiwan's contract manufacturers to the business of designing semiconductors, in which engineers use advanced software to lay out the microscopic circuits that make gadgets like cellphones function.

"MediaTek has brought down the cost significantly," says Jessica Chang, an analyst at Credit Suisse Group AG, who says mobile-phone makers are increasingly drawn to MediaTek's products because of their functionality and low cost.



For the full story, see

TING-I TSAI. "Taiwan Chip Firm Shakes Up Cellphone Business." The Wall Street Journal (Mon., APRIL 19, 2010): B7.

(Note: ellipsis added.)


On Christensen's theories, see:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 6, 2010

Porter Airlines Beats Incumbents in Serving High End Customers



DeluceRobertOfPorterAirlines2010-05-20.jpg"Robert Deluce set up Porter Airlines at Billy Bishop Toronto City Airport in October 2006." Source of caption and photo: online version of the WSJ article quoted and cited below.


Clayton Christensen explains why upstart entrepreneurs who move up-market to serve under-served customers, will almost always lose to motivated incumbents.

Apparently Robert Deluce has not read Christensen.


(p. B8) TORONTO--As a teenager, Robert Deluce learned to fly at this city's small airport just outside the downtown on a Lake Ontario island.

Lately, the 59-year-old airline entrepreneur has been giving his own brand of flying lessons there in a dogfight with larger competitors over a lucrative flying niche: the high-margin business traveler.

n 2005, Mr. Deluce bought the airport's ramshackle terminal and later kicked out an Air Canada regional partner named Jazz Air. Then, he set up Porter Airlines, which has become a hit with business fliers for its top-notch service and convenient location, a one-minute ferry ride from the downtown waterfront. Earlier this month, closely held Porter opened the first phase of a gleaming, 150,000-square-foot terminal that eventually will house two passenger lounges and 10 aircraft gates.


. . .


The new carrier's mascot is a raccoon. "He's mischievous and determined and pretty much always achieves his desired goal," said Mr. Deluce, chuckling over breakfast at a Toronto hotel. "Air Canada and Jazz probably think he's over-mischievous."


. . .


In recent years, Toronto's waterfront has been revitalized, with high-rise condos and parks replacing grain elevators and industrial warehouses. Air Canada's partner Jazz and a predecessor, which had been flying to and from the downtown airport for years, reduced service even as the redevelopment was progressing. The airport's traffic waned to 25,000 fliers in 2005 from 400,000 a year in the late 1980s.

Smelling opportunity, Mr. Deluce pounced, acquiring the old terminal and evicting Jazz. He raised C$126 million in start-up capital and placed a US$500 million order for 20 Canadian-built turboprop aircraft. With 70 seats, they are perfectly sized for the airport's short, 4,000-foot runway. Porter took wing in October 2006.

His aggressive tactics as CEO have earned him both criticism and grudging respect. Brian Iler, chairman of CommunityAir, a Toronto citizens advocacy group that wants the airport shut because of noise issues and other concerns, gives Mr. Deluce his due. "Everything he has done, he's managed to turn things his way," Mr. Iler says. "It's an amazing run of luck."


. . .


Porter now flies to four U.S. destinations and seven other cities in Eastern Canada, with an eighth coming this month. It had its first month of profitability in June 2007 and paid out to its employee profit-sharing plan that year and in 2008, Mr. Deluce says. He won't say whether Porter was profitable in 2009.

The new airline has attracted a following for its downtown location, competitive fares, leather seats with generous legroom and complimentary beer, wine and snacks. Female flight attendants wear retro pillbox hats and peplum jackets.

Christopher Sears, vice president of research for Montreal-based brokerage firm MacDougall, MacDougall & MacTier Inc., said he has flown Porter 30 to 40 times between Montreal and Toronto. Once he arrives in Toronto, he grabs a free shuttle to a hotel two blocks from his firm's Toronto office.

"Porter has built up a lot of goodwill with me," he says, vowing to stick with the company even if rivals break into the downtown airport.




For the full story, see

SUSAN CAREY. "Tiny Airline Flies Circles Around Its Rivals; Top-Notch Service, Proximity to Downtown Toronto Make Porter a Hit With High-Margin Business Travelers." The Wall Street Journal (Weds., MARCH 17, 2010): B8.

(Note: ellipses added.)

(Note: the online version of the article has the slightly different title "Tiny Airline Flies Circles Around Rivals; Top-Notch Service, Proximity to Downtown Toronto Makes Porter a Hit With High-Margin Business Travelers.")


On Christensen's theories, see:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.


BillyBishopAirportTrafficGraph2010-05-20.gif














Source of graph: online version of the WSJ article quoted and cited above.





December 21, 2009

Did Fairchild Fail Due to Bad Management or Disruptive Technology?



Clayton Christensen has shown how good management, following respected practices, can fail in the face of disruptive technologies. It would be interesting to investigate whether Fairchild was an example of what Christensen is talking about, or whether it just did not have good management.


(p. 89) Andrew Grove . . . had played a central role in bringing Fairchild to the threshold of a new era. But Fairchild would not enjoy the fruits of his work. Following the path of venture capital pioneer Peter Sprague were scores of other venture capitalists seeking to exploit the new opportunities he had shown them. Collectively, they accelerated the pace of entrepreneurial change--splits and spinoffs, startups and staff shifts--to a level that might be termed California Business Time ("What do you mean, I left Motorola quickly?" asked Gordon Campbell with sincere indignation. "I was there eight months!").

The venture capitalist focused on Fairchild: that extraordinary pool of electronic talent assembled by Noyce and Moore, but left essentially unattended, undervalued, and little understood by the executives of the company back in Syosset, New York. Fairchild leaders John Carter and Sherman Fairchild commanded the microcosm: the most important technology in the history of the human race. Noyce, Moore, Hoerni, Grove, Sporck, design genius Robert Widlar, and marketeer Jerry Sanders represented possibly the most potent management and technical team ever assembled in the history of world business. But, hey, you guys, don't forget to report back to Syosset. Don't forget who's boss. Don't give out any bonuses without clearing them through the folks at Camera and Instrument. You might upset some light-meter manager in Philadelphia.

They even made Charles Sporck, the manufacturing titan, feel like "a little kid pissing in his pants." Good work, Sherman, don't let the big lug put on airs, don't let him feel important. He only controls 80 percent of the company's growth. Widlar is leaving? Great, he never fit in with the corporate culture anyway. Sporck has gone off with Peter Sprague? There are plenty more where he came from.

"It was weird," said Grove, "they had no idea about what the company or the industry was like, nor did they seem to care. . . . Fairchild was just crumbling. If you wish, the semiconductor division management consisted of twenty significant players: eight went to National, eight went into Intel, and four of them went to Alcoholics Anonymous or something." Actually there were more than twenty and they went into startups all over the Valley; some twenty-six new semiconductor firms sprouted up between 1967 and 1970. "It got to the point," recalled one man quoted in Dirk Hanson's The New Alchemists, "where people were practically driving trucks over to Fairchild and loading up with employees."





Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: the first ellipsis was added; the others were in the original. The italics were also in the original.)





October 9, 2009

Doctors Seek to Regulate Retail Health Clinic Competitors



NursePractitioner2009-09-26.jpg"A nurse practitioner with a patient at a retail clinic in Wilmington, Del." Source of caption and photo: online version of the WSJ article quoted and cited below.


Clayton Christensen, in a chapter of Seeing What's Next, and at greater length in The Innovator's Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.

An obstacle to the realization of Christensen's vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:


(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors' groups and hospitals.

Walgreen Co.'s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.


. . .


As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.


. . .


(p. B2) But such moves are raising the ire of physicians' groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.


. . .


The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.



For the full story, see:

AMY MERRICK. "Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors." The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.

(Note: ellipses added.)


A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. "How CEOs Can Help Fix Health Care." The New York Times (Tues., July 28, 2009).



For the full account, see:

Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator's Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.


RetailHealthClinicGraph2009-09-26.gif












Source of graph: online version of the WSJ article quoted and cited above.






September 12, 2009

"Axel Springer Has Dared to Compete with Itself"



The European newspaper publisher Axel Springer, discussed in the story quoted below, appears to be following the advice of Christensen and Raynor in their book The Innovator's Solution. In that book, they suggest that incumbent firms need to be willing to set up units that compete with their older business models, if they hope to survive the introduction of disruptive innovations.


(p. B4) PARIS -- As the death toll in the American newspaper industry mounted this month, the German publisher Axel Springer, which owns Bild, the biggest newspaper in Europe, reported the highest profit in its 62-year history.


. . .


Axel Springer generates 14 percent of its revenue online, more than most American newspapers, even though the markets in which it operates -- primarily Germany and Eastern Europe -- are less digitally developed than the United States.

One reason, Mr. Döpfner said, is that Axel Springer has dared to compete with itself. Instead of trying to protect existing publications, it acquired or created new ones, some of which distribute the same content to different audiences.

At one newsroom in Berlin, for example, journalists produce content for six publications: the national newspaper Die Welt, its Sunday edition and a tabloid version aimed at younger readers; a local paper called Berliner Morgenpost, and two Web sites.



For the full story, see:

ERIC PFANNER. "European Newspapers Find Creative Ways to Thrive in the Internet Age." The New York Times (Mon., March 29, 2009): B4.

(Note: ellipsis added.)

The Christensen and Raynor book mentioned above, is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 20, 2009

Durant and Studebaker Made Transition from Carriage to Car



Christensen's theory of disruptive innovation predicts that incumbents will seldom survive a major disruption. So it is interesting that Durant and Studebaker, appear to have been exceptions, since they made the transition from producing carriages to producing cars. (Willie Durant founded General Motors in 1908.)


(p. 189) In 1900, fifty-seven surviving American automobile firms, out of hundreds of contenders, produced some 4,000 cars, three-quarters of which ran on steam or electricity. Companies famous for other products were entering the fray. Among them were the makers of the Pope bicycle, the Pierce birdcage, the Peerless wringer, the Buick bathtub, the White sewing machine, and the Briscoe garbage can. All vied for the market with stationary-engine makers, machine-tool manufacturers, and spinoffs of leading carriage firms, Durant and Studebaker. Among the less promising entrants seemed a lanky young engineer from Edison Illuminating Company named Henry Ford, whose Detroit Automobile Company produced twenty-five cars and failed in 1900.

. . .


(p. 191) Willie Durant, who knew all about production and selling from his carriage business, decided it was time to move into cars after several months of driving a prototype containing David Buick's valve-in-head engine--the most powerful in the world for its size--through rural Michigan in 1904. Within four years, Durant was to parlay his sturdy Buick vehicle into domination of the automobile industry, with a 25 percent share of the market in 1908, the year he founded General Motors.



Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

(Note: ellipsis added.)


Christensen's theory is most fully expressed in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





May 2, 2009

GM's Saturn Shows Problems With Incumbent Firms Disrupting Themselves



SaturnFirstCarSpringHill1990.jpg "In July 1990, the first Saturn rolled off the Spring Hill, Tenn., assembly line, with Roger Smith of General Motors holding the key." Source of the caption and the photo: online version of the NYT article quoted and cited below.


Clayton Christensen has shown that incumbent firms find it extremely difficult to adopt disruptive innovations that would leapfrog their current dominant business model. GM's abandonment of its Saturn experiment would seem to be an apt illustration of the point:

(p. A29) "I'm absolutely convinced that the Saturn way could have worked," said Michael Bennett, the original U.A.W. leader at Saturn. "But what we had was never embraced or adopted."

Mr. Bennett, like many others, can point fingers to explain why Saturn fell short of its promise.

Mr. Bennett blamed a lack of interest by G.M. executives who succeeded Roger Smith, who as chief executive in the 1980s committed $5 billion to begin Saturn.

But those who followed him -- including John F. Smith Jr., who became chief executive in 1992, and G.M.'s current chief executive, Rick Wagoner, who ran its North American operations in the 1990s -- had bigger worries.

They had to lead the company through the financial turbulence at G.M. in the early 1990s. And with managers at G.M.'s other, older brands begging for investment, G.M. executives declared Saturn would have to prove it deserved more support, even though its small cars were accomplishing their main goal of winning buyers from imports.

Despite G.M.'s pledge that Saturn would be run as a separate company, with its own car development and purchasing operations, it was folded into G.M.'s small-car operations in 1994, and its lineup did not receive any new models for the next five years.



For the full story, see:

MICHELINE MAYNARD. "With Saturn, G.M. Failed a Makeover." The New York Times (Thurs., December 3, 2008): A1 & A29.

Christensen's fullest complete expression of his views can be found in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.


SaturnLastCarSpringHill2007.jpg "The final Saturn built at the plant in March 2007." Source of the caption and the photo: online version of the NYT article quoted and cited above.





February 17, 2009

Christensen Book Re-Thinks Basic Assumptions About Health Care Innovation



Innovators PrescriptionBK.jpg







Source of book image: http://images.barnesandnoble.com/images/34000000/34009038.jpg


Christensen's new book hit the shelves in December 2008. His ideas on health care are promising, if the special interests don't get in the way. (I have not yet read the new book, but have read earlier versions of his proposals on how disruptive innovations can improve health care.)

(p. R2) BUSINESS INSIGHT: Your coming book, "The Innovator's Prescription," takes a look at health care. How likely do you think it is we'll see substantial innovation in the structure of the U.S. health-care system?

DR. CHRISTENSEN: Well, one great benefit of the current economic crisis is that it will create pressure to find a real solution to the health-care problem. Right now, emergencies exist at companies like General Motors, which has got to drive the cost of its health care down. Every city and town in America would be bankrupt if they kept their books the way private-sector companies keep their books -- because of the obligation cities and towns have taken upon themselves to provide health care for their retirees.

And so we really are in an emergency where it's likely that employers and health-care providers are open to completely rethinking some of the basic assumptions that made innovation seem impossible. What we're hoping with this book is that we can just bring a way to frame the problem that can help people reach consensus around a course of action that otherwise, at another time, would have seemed quite counterintuitive.



For the full interview, see:

Martha E. Mangelsdorf, interviewer. "Executive Briefing; How Hard Times Can Drive Innovation." Wall Street Journal (Mon., DECEMBER 15, 2008): R2.

(Note: ellipses added.)




February 13, 2009

New Business Model for Promoting Disruptive Innovation


ChristensenClayton2009-01-21.jpg








"Clayton M. Christensen" Source of caption and photo: online version of the WSJ interview quoted and cited below.


(p. R2) BUSINESS INSIGHT: . . . There must be, . . . , cases where concerns about the market cause companies to abandon their plans for new products or really retrench. Or do you see that happening less these days as companies realize the importance of keeping up with changing markets?

DR. CHRISTENSEN: In the next two years, I think the answer will hinge quite a bit on the role that hedge funds play in driving stock prices. By now, 95% of all trades on the stock exchange are executed by hedge funds, mutual funds or pension funds that you could not call shareholders. They're share owners, but they don't even hold the shares long enough, on average, to vote the proxy. And long-term shareholders are always better for innovation than the short-term people are.

BUSINESS INSIGHT: So we might see innovation more from private companies?

DR. CHRISTENSEN: Absolutely right. And there's another business model toward which more and more companies need to move. It's a business model you see with Li & Fung in Hong Kong, Tata Sons in India, and Cox Enterprises in Atlanta. In this model, the holding company is privately held, and then certain of the subsidiary companies that have the right characteristics take their shares public on the market.

What that allows those companies to do is, when they have a disruptive innovation that they need to launch, they can just do it under the private umbrella of the holding company, and not have it reduce the near-term performance of the publicly held subsidiaries.



For the full interview, see:

Martha E. Mangelsdorf, interviewer. "Executive Briefing; How Hard Times Can Drive Innovation." Wall Street Journal (Mon., DECEMBER 15, 2008): R2.

(Note: ellipses added.)




November 27, 2008

Microsoft Still Risks Becoming "Road Kill on the Information Highway"


BallmerSteveNewEra.jpg



"Steve Ballmer is the second Microsoft chief executive to butt his head against the view that a new era in technology brings a new market leader." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) The Yahoo affair obscures the larger story: Microsoft's long, long struggle -- since 1993 -- to maintain its leadership position while the Internet grew ubiquitous. Mr. Ballmer, who joined Microsoft in 1980 as its 15th employee, and Bill Gates, his mentor who will retire next month as a full-time Microsoft employee, have certainly tried their best to avert the inevitable decline of the company's influence.

In 2000, Mr. Ballmer credited Mr. Gates for noting that no company in the computer business had ever stayed on top through what Mr. Gates called "a major paradigm shift." The two men wanted Microsoft to be the first company to achieve that goal. An interesting challenge, but some problems are of a size that dwarf the abilities of multibillionaire mortals.

In a 1995 internal memo, "The Internet Tidal Wave," Mr. Gates alerted company employees to the Internet's potential to be a disruptive force. This was two years before Clayton M. Christensen, the Harvard Business School professor, published "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" (1997). The professor presented what would become a widely noted framework to explain how seemingly well-managed companies could do most everything to prepare for the arrival of disruptive new technology but still lose market leadership.

It's Google, of course, that has developed the musculature to step forward and lay claim to being Microsoft's successor as industry leader in the Internet era. If there had been any way Microsoft could have prepared for this day, it had ample time to do so. In 1993, fully five years before Google's founding and two years before Mr. Gates's memo, Nathan P. Myhrvold, then Microsoft's chief technology officer, wrote his own memo, "Road Kill on the Information Highway." It spelled out in prescient detail how each of many industries would be flattened by the build-out of digital networks, and it said that the PC software business would be no exception.



For the full commentary, see:

RANDALL STROSS. "Digital Domain; The Computer Industry Comes With Built-In Term Limits." The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.




November 14, 2008

A Schumpeterian Policy Program Promotes Innovation and Creative Destruction


McCraw on the nature of "a Schumpeterian program" :

(p. 169) Yet it is not difficult to identify a Schumpeterian program---at whatever level of analysis one chooses: the individual entrepreneur, the business firm, the industry, or even the country. At all levels, Schumpeter's litmus test is whether the players are pursuing innovation and bringing about creative destruction. If they are, then the program is Schumpeterian.


Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.




August 31, 2008

Kodak Ignored Digital to Its Peril


SassonStevenKodakInventor.jpg "Steven J. Sasson, an electrical engineer, created the first digital camera." Source of caption and photo: online version of the NYT article quoted and cited below.

Kodak's problems in detailed in the article below, fit very well Christensen's account about how difficult it is for incumbent firms to embrace major disruptive technologies.

(p. C1) ROCHESTER -- Steven J. Sasson, an electrical engineer who invented the first digital camera at Eastman Kodak in the 1970s, remembers well management's dismay at his feat.

"My prototype was big as a toaster, but the technical people loved it," Mr. Sasson said. "But it was filmless photography, so management's reaction was, 'that's cute -- but don't tell anyone about it.' "

. . .

(p. C2) The company now has digital techniques that can remove scratches and otherwise enhance old movies. It has found more efficient ways to make O.L.E.D.'s -- organic light-emitting diodes -- for displays in cameras, cellphones and televisions.

This month, Kodak will introduce Stream, a continuous inkjet printer that can churn out customized items like bill inserts at extremely high speeds. It is working on ways to capture and project three-dimensional movies.

. . .

Paradoxically, many of the new products are based on work Kodak began, but abandoned, years ago. The precursor technology to Stream, for example, pushed ink through a single nozzle. Stream has thousands of holes and uses a method called air deflection to separate drops of ink and control the speed and order in which they are deposited on a page.

"I remember wandering through the labs in 2003, and seeing the theoretical model that could become Stream," said Philip J. Faraci, Kodak's president. "The technology was half-baked, but it was a real breakthrough."

Other digital technologies languished as well, said Bill Lloyd, the chief technology officer. "I've been here five years, and I'm still learning about all the things they already have," he said. "It seems Kodak had developed antibodies against anything that might compete with film."

It took what many analysts say was a near-death experience to change that. Kodak, a film titan in the 20th century, entered the next one in danger of being mowed down by the digital juggernaut. Electronics companies like Sony were siphoning away the photography market, while giants like Hewlett-Packard and Xerox had a lock on printers.

"This was a supertanker that came close to capsizing," said Timothy M. Ghriskey, chief investment officer at Solaris Asset Management, which long ago sold its Kodak shares.



For the full story, see:

CLAUDIA H. DEUTSCH. "At Kodak, Some Old Things Are New Again." The New York Times (Fri., May 2, 2008): C1-C2.

(Note: ellipses added.)


CampAllenTechnicianKodak.jpg "Allan Camp, a technician at Kodak's inkjet development center in Rochester, works on the development of print heads for printers." Source of caption and photo: online version of the NYT article quoted and cited above.




August 30, 2008

European Bureaucrat Forces Businesses to Make "a Smart Business Decision"



If open standards are always "a smart business decision" why do business managers need government bureaucrats to force that decision on them (through fining firms, like Microsoft, that sometimes favor proprietary standards)?

In fact, there are circumstances in which open standards are better for customers, and there are also circumstances in which proprietary standards are better.

To better understand these issues consult Shapiro and Varian's Information Rules and Christensen and Raynor's The Innovator's Solution.

(p. C8) BRUSSELS -- The European Union's competition commissioner, Neelie Kroes, delivered an unusually blunt rebuke to Microsoft on Tuesday by recommending that businesses and governments use software based on open standards.

Ms. Kroes has fought bitterly with Microsoft over the last four years, accusing the company of defying her orders and fining it nearly 1.7 billion euros, or $2.7 billion, on the grounds of violating European competition rules. But her comments were the strongest recommendation yet by Ms. Kroes to jettison Microsoft products, which are based on proprietary standards, and to use rival operating systems to run computers.

"I know a smart business decision when I see one -- choosing open standards is a very smart business decision indeed," Ms. Kroes told a conference in Brussels. "No citizen or company should be forced or encouraged to choose a closed technology over an open one."



For the full story, see:

JAMES KANTER. "Harsh Words for Microsoft Technology." The New York Times (Weds., June 11, 2008): C8.


References mentioned:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Shapiro, Carl, and Hal R. Varian. Information Rules: A Strategic Guide to the Network Economy. Boston, MA: Harvard Business School Press, 1999.





August 27, 2008

A.D.A. Tries to Stop Dental Therapists from Competing with Dentists


JohnsonAuroraDentalTherapist.jpg "Aurora Johnson, left, a dental therapist, filled cavities for Paul Towarak, 10, in the village of Unalakleet, Alaska. For more involved procedures, Ms. Johnson refers patients to a dentist." Source of caption and photo: online version of the NYT article quoted and cited below.

Clayton Christensen (and co-authors) have suggested that disruptive technologies could reduce the cost and improve the quality of health care. One pathway for this to occur is new technologies that permit effective treatment to be carried out by para-professionals with less education than MD's.

The article below illustrates Christensen's idea, and also highlights the main obstacle to its implementation: professional organizations asking the government to regulate and restrict competition from the lower-cost para-professionals.

(p. A1) UNALAKLEET, Alaska -- The dental clinic in this village on the edge of the Bering Sea looks like any other, with four chairs, a well-scrubbed floor and a waiting area filled with magazines.

But to the Alaska Dental Society and the American Dental Association, the clinic is a place where the rules of dentistry are flouted daily. The dental groups object not because of any evidence that the clinic provides substandard care, but because it is run by Aurora Johnson, who is not a dentist. After two years of training in a program unique to Alaska, Ms. Johnson performs basic dental work like drilling and filling cavities.

Some dentists who specialize in public health, noting that 100 million Americans cannot afford adequate dental care, say such training programs should be offered nationwide. But professional dental groups disagree, saying that only dentists, with four years of postcollegiate education, should do work like Ms. John-(p. A15)son's. And while such arrangements are common outside the United States, only one American dental school, in Anchorage, offers such a program.

. . .

(p. A15) In Alaska, the A.D.A. and the state's dental society had filed a lawsuit to block the program that trained people like Ms. Johnson, who are called dental therapists. The groups dropped the suit last summer after a state court judge issued a ruling critical of the dentists. But the A.D.A. continues to oppose allowing therapists to operate anywhere in the lower 49 states. Currently, therapists are allowed to practice only in Alaska, and only on Alaska Natives.

. . .

Therapists are a low-cost way to provide care to people who might not otherwise have access to it, according to Dr. Ron Nagel, a dentist and consultant for the Alaska Native Tribal Health Consortium, a nonprofit group financed mostly by federal money that provides medical and dental care to tribal communities. "There's a huge need for these basic services," Dr. Nagel said.

. . .

Since 1990, the number of private dentists has remained roughly flat, at 150,000, even as the United States population has increased 22 percent. As a result, dentists can easily fill their appointment books without seeing people who cannot meet their fees, and patients who have decayed teeth are suffering needlessly, said Tammy Guido, 50, who is one of seven students now training in Anchorage to become a therapist.

"We're meeting a need that is not being met," Ms. Guido said.

Alaskan tribal organizations sponsor Ms. Guido and the other students in Anchorage for the program. To be accepted, students must have a high school diploma or equivalency degree; for the newest class, 7 of 18 candidates were accepted.

In interviews, the students in this year's class all said they were enthusiastic about the chance to serve communities that have little access to care. All seven had quit full-time jobs and must now get by on a $750 monthly stipend during the two years of training.

"Anybody who's ever had a toothache can tell you it hurts," said Ben Steward, 24, the only man in this year's class. "But talk to someone who's had a toothache for a year."



For the full story, see:

ALEX BERENSON. "Dental Clinics, Meeting a Need With No Dentist." The New York Times (Mon., April 28, 2008): A1 & A15.

(Note: ellipses added.)

One source of Christensen's views on health care can be found in a chapter in:

Christensen, Clayton M., Scott D. Anthony, and Erik A. Roth. Seeing What's Next: Using Theories of Innovation to Predict Industry Change. Boston, MA: Harvard Business School Press, 2004.




July 29, 2008

Talking a Good Game is Little Correlated with Getting it Done


Bossidy and Charan's advice below on hiring managers fits with Christensen and Raynor's advice to hire managers who have had the right experiences, in preference to those who have the 'right stuff' (aka 'charisma').

(p. 119) In our experience, there's very little correlation between those who talk a good game and those who get things done come hell or high water. Too often the second kind are given short shrift. But if you want to build a company that has excellent discipline of execution, you have to select the doer.


Source:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.




May 15, 2008

Schumpeterians Lead Ranking of Business Gurus


GuruGraphic.gif Source of graphic: online version of the WSJ article quoted and cited below.

The top two business gurus in the WSJ's latest ranking, have each written major books that make substantial use of Schumpeter's concept of creative destruction. (The Hamel book is Leading the Revolution, and the Thomas Friedman book is The Lexus and the Olive Tree.)

Others among the top 20 gurus who have written favorably of the process of creative destruction, include Clayton Christensen, Jack Welch, and Tom Peters.

(p. B1) The guru game is changing.

Psychologists, journalists and celebrity chief executives crowd the top of a ranking of influential business thinkers compiled for The Wall Street Journal. The results, based on Google hits, media mentions and academic citations, ranked author and consultant Gary Hamel No. 1.

But Dr. Hamel is the only traditional business guru in the top five, which includes two journalists, Thomas Friedman and Malcolm Gladwell, and a former CEO, Bill Gates. Mr. Gladwell is among three thinkers in the top eight who focus on psychology. His 2005 book "Blink: The Power of Thinking Without Thinking" examined the role of snap judgments in decision-making. Howard Gardner, a professor of education at Harvard best known for the theory of "multiple intelligences," is No. 5, while Daniel Goleman, a psychologist who has written about "emotional intelligence," ranks eighth.

Thomas H. Davenport, a management professor at Babson College, compiled the ranking, employing the same methodology he used in a 2003 book, "What's the Big Idea?" Several well-known business gurus fell lower in the updated list, including Michael Porter and Tom Peters, who topped the 2003 ranking and dropped to Nos. 14 and 18, respectively. Harvard's Prof. Porter noted that his last book was on health care rather than general management, and that "I feel like my recent work continues to have an impact in my various fields."

Dr. Davenport says the changes show that time-strapped managers are hungry for easily digestible advice wherever they can find it. Today, the most pressing themes include globalization, motivation and innovation. Traditional business gurus writing "weighty tomes" are in decline, he says.


For the full story, see:

ERIN WHITE. "New Breed of Business Gurus Rises; Psychologists, CEOs Climb in Influence, Draw Hits, Big Fees." Wall Street Journal (Mon., May 5, 2008): B1.

GuruTop20table.gif

Source of table:

ERIN WHITE. "What Influential Business Thinkers Focus On; Top Gurus Ponder Manager's Worries, New Approaches." Wall Street Journal (Mon., May 5, 2008): B6.

(Note: the online version of the article has the title: "Quest for Innovation, Motivation Inspires the Gurus; Leading Thinkers Apply Varied Skills For Global Solutions.")




March 4, 2008

Why Entrepreneurs Are Needed to Bring Important Innovations to Market

 

   Source of book image:  http://www.bigbadbookblog.com/wp-content/uploads/Blink.jpg

 

In my classes I sometimes comment on the failure of much marketing research, sometimes quoting the founder of Sony on using his own judgment on what is useful to customers.

There's some useful insight into this issue in Malcolm Gladwell's stimulating Blink book.  He argues, and presents examples, that marketing research can provide useful information when the product being evaluated is familiar to the customers being surveyed.  But when the product is new and unfamiliar, it may take awhile for the customer to figure out what they think of it.  There initial reaction will usually be negative, simply as a reaction to the unfamiliarity.  But with time, the product may grow on them as they figure out what "jobs" the product might be able to do for them in the full context of their lives.  (The "jobs" formulation is Christensen's, not Gladwell's.)

What is worse, it is precisely those innovations that are most innovative, and ultimately prove most useful, that are most unfamiliar, and hence are most likely to be panned by customers in initial evaluations. 

This has implications for why an entrepreneur-friendly economy is so important for innovations.  Incumbent firms are apt to rely on some formal (a.k.a. marketing research) methods to evaluate new innovations.  So if innovations are to be introduced, it is crucial that there be entrepreneurs with the courage, passion, knowledge, and financial means to pursue the innovation through the period of skepticism.

 

The reference for the Blink book, is: 

Gladwell, Malcolm.  Blink: The Power of Thinking without Thinking.  Back Bay Books, 2005.

 




March 2, 2008

Racetrack Memory May Become a General Purpose Technology

 

    Source of graph:  online version of the NYT article quoted and cited below.

 

The article quoted below suggests that an important new "disruptive" memory technology may be on the horizon.  It sounds as though it would be what economists call a "general purpose technology" that would be useful in generating a large number of innovative applications. 

(My guess is that in Christensen's terminology, this technology would be more sustaining, than disruptive, since the technology seems as though it would be of immediate interest to the mainstream market.)

 

(p. C1)  SAN JOSE, Calif. -- The ability to cram more data into less space on a memory chip or a hard drive has been the crucial force propelling consumer electronics companies to make ever smaller devices.

It shrank the mainframe computer to fit on the desktop, shrank it again to fit on our laps and again to fit into our shirt pockets.

. . .  

Mr. Parkin thinks he is poised to bring about another breakthrough that could increase the amount of data stored on a chip or a hard drive by a factor of a hundred. If he proves successful in his quest, he will create a "universal" computer memory, one that can potentially replace dynamic random access memory, or DRAM, and flash memory chips, and even make a "disk drive on a chip" possible.

. . .

(p. C8)  Mr. Parkin's new approach, referred to as "racetrack memory," could outpace both solid-state flash memory chips as well as computer hard disks, making it a technology that could transform not only the storage business but the entire computing industry.

"Finally, after all these years, we're reaching fundamental physics limits," he said. "Racetrack says we're going to break those scaling rules by going into the third dimension."

His idea is to stand billions of ultrafine wire loops around the edge of a silicon chip -- hence the name racetrack -- and use electric current to slide infinitesimally small magnets up and down along each of the wires to be read and written as digital ones and zeros.

. . .

Mr. Parkin said he had recently shifted his focus and now thought that his racetracks might be competitive with other storage technologies even if they were laid horizontally on a silicon chip.

I.B.M. executives are cautious about the timing of the commercial introduction of the technology. But ultimately, the technology may have even more dramatic implications than just smaller music players or wristwatch TVs, said Mark Dean, vice president for systems at I.B.M. Research.

"Something along these lines will be very disruptive," he said. "It will not only change the way we look at storage, but it could change the way we look at processing information. We're moving into a world that is more data-centric than computing-centric."

This is just a hint, but it suggests that I.B.M. may think that racetrack memory could blur the line between storage and computing, providing a key to a new way to search for data, as well as store and retrieve data.

And if it is, Mr. Parkin's experimental physics lab will have transformed the computing world yet again.

 

For the full story, see: 

JOHN MARKOFF.  "Redefining the Architecture of Memory."  The New York Times   (Tues., September 11, 2007):  C1 & C8.

(Note:  ellipses added.)

 

     Of the two photos at the bottom of the entry, the first is of Stuart S. P. Parkin's lab at I.B.M, and the second is of Parkin in the lab.  Source of photos:  online version of the NYT article quoted and cited above.

 




February 27, 2008

Big is Not Always Better

 

It is an enduring puzzle why the West has been so much more succesful than China in achieving economic growth over the past several centuries.  The puzzle arises because there is considerable evidence of early Chinese acheivements in technology.

One example would be the exploratory voyages of Zheng He.  The Chinese ships were much, much larger than those of Christopher Columbus.  But as Clayton Christensen has shown in a more modern context, size does not always matter as much as nimbleness and motivation. 

(And another part of the story involves culture and institutions.)

  

 

The most complete account of Christensen's thinking, so far, is his book with Raynor:

Christensen, Clayton M., and Michael E. Raynor.  The Innovator's Solution:  Creating and Sustaining Successful Growth.  Boston, MA: Harvard Business School Press, 2003.

 

(Note:  I am grateful to Prof. Yu-sheng Lin for first informing me of the large difference in size between the ships.  I am also grateful to Prof. Salim Rashid, and Liberty Fund's Mr. Leonidas Zelmanovitz, for my having the opportunity to encounter Prof. Lin.)

 




January 26, 2008

Free Market Can Provide Better, Cheaper Health Care

 

   "Eve Linney, 5, who had an infected finger, went with her family last week to a walk-in clinic at a Duane Reade drugstore on Broadway in Manhattan. Her father, John, is at the counter."  Source of caption and photo:  online version of the NYT article quoted and cited below.  

 

Clayton Christensen and co-authors in Seeing What's Next, make a plausible case for the improvement of health care through disruptive innovation.  A key aspect of their vision is the increasing role of nurse-practitioners in taking on increasingly routinized tasks, a development they see as generally both effective, and cost-efficient.

The article excerpted below suggests that this trend is promising, if it does not get killed by the government, and by organized medical doctors protecting their turf from competition.

 

(p. A1)  The concept has been called urgent care “lite”:  Patients who are tired of waiting days to see a doctor for bronchitis, pinkeye or a sprained ankle can instead walk into a nearby drugstore and, at lower cost, with brief waits, see a doctor or a nurse and then fill a prescription on the spot.

With demand for primary care doctors surpassing the supply in many parts of the country, the number of these retail clinics in drugstores has exploded over the past two years, and several companies operating them are now aggressively seeking to open clinics in New York City. 

. . .

More than 700 clinics are operating across the country at chain stores including Wal-Mart, CVS, Walgreens and Duane Reade.

New York State regulators are investigating the business relationships between drugstore companies and medical providers to determine whether the clinics are being used improperly to increase business or steer patients to the pharmacies in which the clinics are located.

And doctors’ groups, whose members stand to lose business from the clinics, are citing concerns about standards of care, safety and hygiene, and they have urged the federal and state governments to step in to more rigorously regulate the new businesses.

. . .

(p. A16)  Patients, however, have flocked to the clinics, according to a new industry group, the Convenient Care Association.

“I think it’s great you don’t have to make an appointment. That could take weeks,” said Ezequiel Strachan, 33, who lives in Manhattan and walked into the clinic at the Duane Reade store at 50th Street and Broadway on a recent morning for treatment of a sore throat. “People here value their time a lot.”

The average waiting time for an exam at such clinics nationwide is 15 to 25 minutes, according to the Convenient Care Association.

The association estimated that 70 percent of clinic patients have health insurance and are using the clinics because of convenience. For them, costs may not be much different from those at doctors’ offices, because the same insurance co-payments apply. But uninsured patients could reap substantial savings.

In New York City, one in five residents lacks a regular doctor and one in six is uninsured, according to a recent survey by the city’s Department of Health and Mental Hygiene, and overcrowded emergency rooms are often their first resort for routine care.

. . .

MinuteClinic officials insisted that there was nothing improper in the relationships between providers and the drugstores and that medical care is not being compromised.

“We are transparent with regulators,” said Michael C. Howe, the chief executive of MinuteClinic, which is based in Minneapolis and operates more than 200 clinics nationwide. using the motto “You’re Sick, We’re Quick.”

Mr. Howe said the concerns of doctors’ groups and other critics “are being raised by voices of people who have not really studied the model.”

Preliminary data from a two-year study of claims from MinuteClinic by a Minnesota health maintenance organization, HealthPartners, which was released to The Minneapolis Star Tribune in July, showed that each visit to the retail clinic cost an average of $18 less than a visit to other primary-care clinics, but that pharmacy costs were $4 higher per patient.

Duane Reade, New York City’s largest drugstore chain, which opened four clinics in Manhattan in May, plans to open as many as 60 more across the city in the next 18 months. A key difference at the Duane Reade clinics is that they use doctors, while nurse practitioners and physician assistants typically provide the care at most retail clinics.

 

For the full story, see:

SARAH KERSHAW.  "Tired of Waiting for a Doctor?  Try the Drugstore."  The New York Times  (Thurs., . August 23, 2007):  A1 & A16.

(Note:  the title of the online version is "Drugstore Clinics Spread, and Scrutiny Grows."  Ellipses added.)

 

   "Dr. Maggie Bertisch saw Eve while her mother, Claire, waited."  Source of caption and photo:  online version of the NYT article quoted and cited above.  

 




January 22, 2008

Alaska Air Used Skunk Works to Develop Check-In Innovation

 

AlaskaAirDeparturesTable.gif   Source of graphic:  online version of the WSJ article cited below.

 

The innovation described in the article excerpted below is credited as arising from a 'skunk works' project.  There's a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology.  (Their plant was in a smelly part of town, so it was dubbed the 'Skunk Works.')

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure. 

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.) 

 

(p. B1)  ANCHORAGE, Alaska -- When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don't want is a ticket counter," said Ed White, the airline's vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier's 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach -- which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport -- has doubled Alaska's capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4)  Alaska's design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn't trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta's vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago -- and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn't aware of a visit to Anchorage but doesn't dispute it.

. . .  

Alaska, the nation's ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline's ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

 

For the full story, see: 

SUSAN CAREY.  "Case of the Vanishing Airport Lines; Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters."  The Wall Street Journal  (Thurs., August 9, 2007):  B1 & B4.

 

  Source of graphic:  online version of the WSJ article cited above.

 




December 11, 2007

"Hit 'em Where They Ain't"

 

LinearTechnologysProfits.gif   Source of graph:  online version of the WSJ article cited below. 

 

The key to business success is usually thought to be to beat the competition.  An alternative sketched by Clayton Christensen, and in the book Blue Ocean Strategy, is to do something that the competition isn't doing.  As a once-famous, old-time baseball player once said:  "Hit 'em where they ain't." 

 

MILPITAS, Calif. -- Erik Soule had been waiting 15 months for this moment. The semiconductor engineer was about to launch a new chip, and he needed his pricing approved. In a conference room at Linear Technology Corp., Mr. Soule anxiously explained why his amplifier chip is so advanced that it should sell for $1.68, a third more than its rivals.

His bosses' reaction: Charge even more. The chip is 30 times better than the competition, they asserted, and high-end customers will crave it on any terms. Why not boost the $1.68 list price by 10 cents? Mr. Soule was nervous. "I can live with that," he guardedly replied, "but what does that accomplish?"

"It's a dime!" declared Linear's chairman and founder, Robert Swanson. "And those dimes add up."

For many U.S. companies, such exuberant pricing power vanished long ago. They now struggle to deliver more at lower prices, amid intense global competition. But Linear has built one of the world's strongest profit fortresses by staying strictly at the fringes, where competition is low and margins are still high.

Away from the semiconductor industry's frenzied center stage, this midsize company makes 7,500 arcane, unglamorous products that solve real-world problems for a long list of customers. Instead of the better-known digital chips that power the brains of the world's computers and bring in 85% of the industry's revenue, Linear makes so-called analog chips that are too cheap for customers to haggle over, but perform chores too important to ignore.

Pick apart a medical ultrasound machine, a hybrid car battery or thousands of other costly devices, and somewhere inside is a Linear chip that helps monitor power consumption or guard against voltage surges. It's a backwater of high tech well-suited to Linear's engineer-driven culture, where quirky developers shop for old part testers at flea markets to keep costs down. Many of Linear's chips cost less than 50 cents to build and sell for three to four times as much, but customers seldom complain about the markup.

Linear made a 39% profit on its $1.1 billion in sales in calendar 2006 -- more than five times the average for U.S. industrial companies. Linear easily outpaced even the tech industry's best-known profit powerhouses, Microsoft Corp. and Google Inc., which earned profits of 26% and 24% of sales for the same period.

 

For the full story, see: 

GEORGE ANDERS.  "PRICING POWER; In a Tech Backwater, A Profit Fortress Rises; Maker of Arcane Chips Earns Better Margins Than Google, Microsoft."  The Wall Street Journal   (Tues., July 10, 2007):  A1 & A19. 

 

SwansonRobertLinearTechnologyCEO.gif   CEO of Linear Technology Corp.  Source of image:  online version of the WSJ article cited above.

 




November 23, 2007

Motorola Hurt By Failing to Leapfrog Itself

 

MotorolaStockRazrBurn.gif   Source of graph:  online version of the WSJ article cited below.

 

Clayton Christensen, in a series of books, has highlighted why it is difficult for a successful incumbent to prepare a successor for its own winning product.  The Motorola case below is another example.

Note, though, that Motorola's failure is not the understandable one of failing to prepare what Christensen calls a "disruptive innovation."  If the story below is right, it is a case of the less understandable failure to continue to deliver with what Christensen calls "sustaining innovation."

 

(p. A1)  A year ago, Motorola Inc. appeared headed for a third straight year of rich profits under Chief Executive Ed Zander, driven by its hit cellphone the Razr. "A lot of you are always asking what is after the Razr," Mr. Zander said in an April 2006 conference call after another quarter of 30%-plus growth. "I say more Razrs."

But behind the scenes, Motorola was working furiously to get a successor phone to market by the second half of 2006, according to people familiar with the matter. When it failed to do so, profit margins on handsets narrowed and the company swung to a loss. Key executives left. And as the stock slid, activist investor Carl Icahn built up a position and began campaigning for a board seat to address what he called Motorola's "operational problems."

Motorola's travails illustrate the risks for a company that rides high with a big consumer hit. Amid its success with the Razr, it fell behind on developing a phone with the next generation of technology. Missing a beat is especially hazardous in cellphones, where it can take two to three years to develop a new line.

. . .

(p. A14)  As the Razr grew hot, some former designers and engineers say Motorola repeated mistakes it had made a decade earlier with another big hit, the compact flip-top phone known as the StarTAC. That phone was a huge seller, but it also was an analog phone, and its popularity blinded the company to an industry shift to digital technology. Similarly, while Motorola was selling countless Razrs, competitors were hard at work on more sophisticated products for 3G networks.

Motorola put engineers and designers who could have been working on new products on the Razr and its derivatives, some former executives say. "All resources went to feeding the beast," says a former Motorola designer. "Suddenly, you created this thing that requires a lot of energy and attention." Other former executives dispute that the focus on the Razr diverted work from other products and contend Motorola was right to ride the still-popular Razr as long as possible.

 

For the full story, see: 

CHRISTOPHER RHOADS and LI YUAN.  "DROPPED CALL; How Motorola Fell A Giant Step Behind; As It Milked Thin Phone, Rivals Sneaked Ahead On the Next Generation."   The Wall Street Journal  (Fri., April 27, 2007):  A1  & A14. 

(Note:  ellipsis added.)

 

The most complete source of Christensen's theory and examples is:  

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

 

ZanderEdMotorolaCEO.gif  Motorola CEO.  Source of image:  online version of the WSJ article cited above.

 




September 10, 2007

When You Need to Know the Difference Between Glacier Creek and Big Thompson River

 

  Is it Glacier Creek, or Big Thompson River?  Source of photo:  me. 

 

On May 17, 2007, in Estes Park, Colorado, I was the co-leader of a "two hour" hike with 15 Montessori middle-schoolers from Omaha, Nebraska.  At some point what we were seeing didn't seem to correspond with what our roughly drawn YMCA map told us we should be seeing--we worried that we had taken a wrong turn and were lost.

II we were on course, then the water beside us should be Glacier Creek.  If we were lost, then it was probably Big Thompson River.  (It's appearance didn't help--it looked a bit larger than a creek, but a lot smaller than a 'big river.')

The first person I found to ask was a tourist who admitted upfront that she was extremely uncertain about where we were.  She pulled out a modest map, and pointed to where she thought we might be, which was along the Big Thompson River.

Seeking confirmation, I apologetically interrupted a fellow teaching his girl-friend how to fly fish.  This fellow was dressed as an outdoors-man, and exuded confidence.  He talked about hiking on a glacier the day before.  He helpfully strode back to his SUV with me and pulled a detailed, authoritative-looking map.  With no doubt, he pointed on the map to where we were, on Glacier Creek, as I had hoped.  As we walked back to where he had been fishing, he pointed in the direction that we had been hiking, and said that without question, we should continue to hike in that direction.

The scenery was fantastic, but Cindy began to worry whether we were going in the right direction, pointing out that there didn't seem to be any opening in the mountains in the direction in which we were supposing the YMCA camp should be.  I agreed with her observation, but said that there must be some non-obvious route, because the fellow who pointed us in this direction had exuded credibility.

We finally got to a small museum.  There, an old park service employee asked where we were from.  When I said "Omaha" he jokingly asked if knew his old friend Warren Buffet?  He told us that he had lived in this area all his life, and that we were definitely walking along Big Thompson River.  Then he tried to draw a map to show us how to get back.  He scratched his head, discarded his first attempt, and started trying again.  Then he asked us (again) where we were from?  At this point, I was really worried.

But his second attempt at a map was a good one--it got us back to the YMCA camp.

Maybe we should look for advice from those who are self-critical, as the old man was, rather than from those who exude undoubting self-confidence, as the fly fisherman did?  (Or maybe the key was local credentials?)

Maybe, I made a mistake that Christensen and Raynor warn against in their The Innovator's Solution:  looking at charisma and confidence as signs of who to follow.  (In fairness to myself, at the time, I didn't have much else to go on.)

 




April 18, 2007

Another Effort to Explore the Black-Box of Innovation

 

(p. 210)  Schumpeter argues that innovation can happen endogenously and that its main source is the creative entrepreneur.  Schumpeterian innovation is still black-boxed, however, because it is the product of the ingenuity of entrepreneurs and cannot be reproduced systematically.

. . .

The reconstructionist view takes off where the new growth theory left off.  Building on the new growth theory, the reconstructionist view suggests how knowledge and ideas are deployed in the process of creation to produce endogenous growth for the firm.  In particular, it proposes that such a process of creation can occur in any organization at any time by the cognitive reconstruction of existing data and market elements in a fundamentally new way.

 

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.

 




April 8, 2007

Kodak Tries to Survive Creative Destruction

   A Kodak digital production printer.  Source of photo:  online version of the NYT article cited below. 

 

Digital photography replacing film technology is an example of Schumpeter's process of creative destruction, and maybe also of the gradual growth of a disruptive technology.  Leading incumbent firms frequently have trouble prospering, or even surviving, during such a change.  Both the Wall Street Journal and the New York Times had articles on the latest news from Kodak.  Here is an excerpt from the New York Times version:  

 

On Tuesday, as the Eastman Kodak Company unveiled its long-anticipated consumer inkjet printer in New York, the mood at the company’s Rochester headquarters could not have been more positive.

“People know we are back on the offensive,” said Frank Sklarsky, Kodak’s chief financial officer.  “And that’s making them a lot more charged up about coming to work.”

But yesterday, Kodak gave them reason again to feel depressed.  The company said it would cut 3,000 more jobs this year, on top of the 25,000 to 27,000 it had already said would be gone by the end of 2007.  At that rate, Kodak will end the year with about 30,000 employees, half the number of just three years ago and a fraction of the 145,000 people it employed in 1988, when its brand was synonymous with photography.

Kodak executives insist that the new cuts do not indicate any snags in the continuing struggle to transform itself from a film-based company into a major competitor in digital imagery.  And analysts, too, say the cuts are inevitable, and probably healthy.

 

For the full NYT story, see: 

CLAUDIA H. DEUTSCH.  "Shrinking Pains at Kodak."  The New York Times   (Fri., February 9, 2007): C1 & C4.

 

For the related WSJ story, see: 

WILLIAM M. BULKELEY and ANGELA PRUITT.  "Kodak Sees More Job Cuts, Higher Restructuring Costs."  The Wall Street Journal  (Fri., February 9, 2007):  B4.

 

 

 KodakJobsBarGraph.gif KodakJobsGraph.gif PrinterMarketSharePieChart.gif   Source of the first and third graphic:  the WSJ article cited above.  Source of the second graphic:  the NYT article cited above.

 




February 25, 2007

"Good to Great" is Good, but Not Quite Great

  Source of book image:  http://images.barnesandnoble.com/images/7770000/7775266.jpg

 

When Ameritrade founder Joe Ricketts spoke to my Executive MBA class a few years ago, I mentioned to him that I had heard from Bob Slezak that Ricketts was a fan of Clayton Christensen's The Innovator's Dilemma.  Ricketts said that was true, but that the recent business book that he was most enthused about was Jim Collin's Good to Great.

Ricketts is not alone.  Good to Great has become a business classic since it came out.  Recently I finally got around to reading it.

Well, I think it's good, but not quite great.  I like the empirical, inductive methodology mapped out at the beginning.  And some of the conclusions ring true.  For example the importance of facing the "brutal facts."  And the importance of developing a thought-out "hedgehog" concept.  And the importance of getting the right people on the bus.  And the importance of slowly, consistently building momentum.

But I've got some big bones to pick, too. 

Maybe the biggest "bone" is Collins' assumption that our goal should be the survival and greatness of a firm.  Instead of almost viewing firms as ends in themselves, why can't we view firms as vehicles for getting great things done? 

Maybe great things can be done through firms that last and are lastingly great.  Or maybe great things can be done by shooting star firms, that are glorious while they last, but don't last long.  Collins says it must be the former.  But either way works for me.

A smaller "bone" is the conclusion that "level 5" leaders tend to be modest.  Well maybe.  But some of that conclusion is derived from Collins' defining "great" in terms of high growth of stock value.  A modest leader will be unappreciated by Wall Street, and her company's stock value will show higher growth when she succeeds.  But has she thereby accomplished more than if she had built exactly the same company, but been more transparent and enthused about the company's future prospects, and hence generated more realistic expectations from Wall Street?  Remember, the value of a stock grows, not by the company doing well, but by it doing better than investors expected.  (On this issue, Collins should read the first couple of chapters of Christensen and Raynor's The Innovator's Solution.)

But don't get me wrong:  this is a very good book.  Those interested in how the capitalist system works, should read it, as should those who want to manage well.

 

The book is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don't. New York: HarperCollins Publishers, Inc., 2001.

 




January 4, 2007

Risk Diversification Only Works If Risks are Random

RiskIntelligenceBK.jpg   Source of book image:   http://www.inbubblewrap.com/2006/08/should_i_do_it_should_i.php

 

According to Mr. Apgar, managing director of the Corporate Executive Board and a former McKinsey consultant, the problem is that our traditional tool set deals only with random risk.  Equity prices, interest rates, natural catastrophes -- all operate, more or less, as perfect markets, distributing risk with equal probability among all the players.  No one consistently knows more about what drives these phenomena than anyone else.  We can bear or hedge these risks in the secure sense that competitors don't have an inside lead on the future.

. . .

In real business, though, many of the risks that can potentially wipe us out are non-random -- what Mr. Apgar calls "learnable risks" -- involving customers, technologies, marketing strategies, supplier relationships and so on.  The challenge is not just to learn, quickly, enough about them to survive but to determine whether someone else can learn about them even faster and thus put us out of business.

. . .

. . .   Mr. Apgar also explains how to perform a "risk audit," judging a company's current projects by how they diversify total risk or demonstrate risk intelligence.  Here is where his program differs most widely from conventional wisdom -- because, as he notes, risk diversification is no virtue if the risks are non-random and we have little intelligence of any of them.  If you don't know much about poisonous snakes, keeping several different species won't make you any safer.

Like liberty, risk intelligence demands eternal vigilance -- and for the same reason:  threats evolve.  Mr. Apgar's analysis of the life cycle of a business risk is particularly fruitful.  He notes that a successful company needs to maintain a risk pipeline, constantly probing into areas where it has higher risk intelligence and opportunities for real diversification -- just as technology and pharmaceutical companies need a proportion of blue-sky research to innovate into the future.

 

For the full review, see: 

MICHAEL KAPLAN.  "BOOKS; The Hazards of Fortune."  Wall Street Journal  (Fri., December 8, 2006):  W6.

(Note:  ellipses added.) 

 




December 27, 2006

Evan Williams Spurns Bad Money

   Evan Williams (on left) with Noah Glass, co-founded Odeo.  Source of photo:  http://www.nytimes.com/2005/02/25/technology/25podcast.html?ex=1267419600&en=b80f1d3808f556cc&ei=5088

 

Evan Williams' story illustrates Christensen and Raynor's advice that disruptive innovators need to seek good money, and spurn bad money.  Good money is patient for growth, but impatient for profit.  Bad money is the opposite. 

 

EVAN WILLIAMS recently bought his freedom.  It cost him a bit more than $2 million, and he says it was worth every penny.

I'm not talking about paying off a big debt to one of Tony Soprano's loan-shark underlings.  Mr. Williams is a serial entrepreneur, one of those Silicon Valley characters who start company after company.  And he purchased his freedom from the venture capitalists and others who financed his company, Odeo.  Mr. Williams dug into his pockets and gave them back their money.  He got to keep his struggling podcast company and renamed it the Obvious Corporation.

In the process, Mr. Williams, who is 34, has become something of a cause célèbre among a small group of mostly young entrepreneurs who seem determined to turn their back on venture capitalists.  They say they yearn for a new entrepreneurship model.  They talk about building ''sustainable companies'' suggesting something idealistic in their quest.  With comments on blogs urging Mr. Williams to ''keep up the goodness,'' it feels a bit like the birth of a mini-movement in the Valley.

. . .

In candid posts on his blog, Mr. Williams chronicled Odeo's story, warts and all. He admitted to making mistakes.  Getting too much venture money too early was one of them.  It made it harder to persuade the board and the company's 14 employees to change course when, for example, Apple Computer introduced a competing product that cut into Odeo's prospects.  ''It's a bigger ship to turn,'' Mr. Williams said.

 

For the full story, see: 

MIGUEL HELFT.  "STREET SCENE: VC NATION; Yearning for Freedom From Venture Capital Overlords."   The New York Times  (Fri., November 24, 2006):  C5.

(Note:  ellipsis added.)

 

The reference for the Christensen and Raynor book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

 




December 21, 2006

Silicon Graphics' Jim Clark Understood Disruptive Innovation

There's a great passage in The New, New Thing about Jim Clark trying to convince Silicon Graphics to produce a PC.  Clark talks about how hard it is for a company to create a product that competes with itself. 

Shades of Clayton Christensen:

 

Clark thought that Silicon Graphics had to "cannibalize" itself.  For a technology company to succeed, he argued, it needed always to be looking to destroy itself.  If it didn't, someone else would.  "It's the hardest thing in business to do," he would say.  "Even creating a lower-cost product runs against the grain, because the low-cost products undercut the high-cost, more profitable products."  Everyone in a successful company, from the CEO on down, has a stake in whatever the company is currently selling.  It does not naturally occur to anyone to find a way to undermine that creative destruction, and he was prepared to do the deed.  He wanted Silicon Graphics to operate in the same self-corrosive spirit.  (p. 66 of hb edition)

 

The reference to The New, New Thing is:

Lewis, Michael. The New New Thing: A Silicon Valley Story. New York: W. W. Norton & Company, 2000.

Christensen's most important book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.




November 28, 2006

Is Variety Good?

Chris Anderson has a stimulating and useful chapter in The Long Tail on why having variety and choice is good.

Not all agree.  My old Wabash economics professor, Ben Rogge, with wry amusement, used to refer us to Alvin Toffler's Future Shock.  Toffler's view was that choice was stressful---visualize the Robin Williams' Russian émigré character in "Moscow on the Hudson," when he collapses in panic on not knowing how to choose amongst the variety of coffees in the Manhattan supermarket aisle.

What amused Rogge was the contrast between the old critics of capitalism, who criticized capitalism for providing too few goods for the proletariat, and the new critics, like Toffler, who criticized capitalism for providing too many goods for the proletariat. 

Although Toffler has recanted his earlier views, others, such as Barry Schwartz in The Paradox of Choice, have picked up the anti-choice banner.

Here's my current two cents worth.  Sometimes we value variety for its own sake, and sometimes not.  I may find the variety of ethnic restaurants exciting, but not the variety of music on I-tunes.

But even when I don't value variety for its own sake, I still may value it because it increases the odds that the product I can find matches the product I want.  Let me explain.

In the language of Clayton Christensen and co-author Raynor, in The Innovator's Solution, generally what I want is a good that does well, a "job" that I want or need to get done.

Some critics of mass production descried the loss of the variety of products produced by pre-industrial craftsmen.  But what good did it do the peasants that no two chairs were quite alike, if all of them were too hard and misshapen for the job of comfortably sitting in them?

Mass production reduced variety, but increased quality, in the sense of bringing (cheaply) to market, products that were far better at doing the jobs that most people wanted/needed to get done. 

If the modern varieties of chairs are a response to differences in the jobs that different consumers need to get done, then I might generally, and accurately, presume that variety is usually good, not because I want to constantly sample a lot of different chairs (like I want to sample a lot of different ethnic foods), but rather because variety increases the odds that I will find the one or two particular chairs that allow me to do the job that I want a chair to do for me.  

Specifically, recently, we were looking for a chair that was firm, spill-resistant, would swivel to allow talking to someone in the kitchen, would recline for watching television, would be dog-chew resistant, and would have a color/fabric complementary to the rest of the furniture.  We shopped at Nebraska Furniture Mart, which is the largest furniture store in the U.S., with the greatest selection, because we hoped to find the one chair that would do all of these jobs.

We came close, but I wish there was a store with even greater selection.

   




October 25, 2006

The Missing Pillow: A Lack of Incentives Leaves an Obvious 'Job' Undone


In late July, I had an appointment for a treadmill stress-test at Omaha's Methodist Hospital.  They told me the process would be over in an hour, but it took about two hours, due to another patient having some sort of crisis during their stress-test. 

They had me put on a gown, they stuck an I-V "dye" drip in back of my hand, and they pasted about six electrodes to my chest, after shaving and applying something like sand paper to the parts of the chest where the electrodes were attached.  Then they had me lie on my side on a hard table, to wait.  It was very uncomfortable.  The first nurse said that there was supposed to be a pillow on the table, but did nothing to obtain one.  Every several minutes some technician or nurse would stop in to ask if I was ready for them.  (I was always ready.)  But it turned out that someone needed to do something to me first, and that person was, I guess, taking care of the crisis next door.  At least one of these visitors also mentioned that I was supposed to have a pillow, but did nothing to acquire one.  If memory serves, the first nurse came back in, and again mentioned that I was supposed to have a pillow, but again did nothing to obtain one.

These people were all pleasant and friendly.  For example, they had a lot of friendly chats amongst themselves, that I could not help but over-hear.  (One of them was pregnant with twins, but did not know the genders of the babes-to-be, and so had not yet spent the time to come up with names.)

But two hours later, when the whole process was over, I still did not have a pillow.

A week or two after the test, I received a several page survey from Methodist Hospital asking a bunch of questions about how I thought they had done during the test.  You see they really "care" about my opinion.  (They also run frequent, slick TV ads about how much they "care.")

Marketers, and management gurus, say that organizations need to invest in surveys and the like to figure out what the customer wants and needs.  And Clayton Christensen advocates spending resources to figure out what "job" the customer needs to have done.  And maybe, sometimes, it does take surveys and research.

But sometimes it is obvious that the customer needs a pillow.

What is missing is not a survey, or statistical analysis.

What is missing is the incentive for someone to go get the pillow. 

 

P.S.  You may wonder, then, if it is simply a mistake for the hospital to send out the survey?  I suspect that those who send out the survey are not making a mistake, but are trying to get a different job done than the one that appears to be intended.  It appears that they are trying to find out what customers want and need.  But maybe they already know that.  Maybe they are mainly sending out the survey so that if anyone asks if they are "customer-oriented" they can whip out the survey to prove that yes-indeed, they sure are.  In other words, the point of the survey is not to learn about customers; it is to cover rear-ends.





October 4, 2006

Sprint to Risk Billions on New Infrastructure

WiMaxSprintGraphic.gif  Source of graphic:  online version of the WSJ article cited below.

 

If Sprint bets on WiFi, they're betting with their money; if the government bets on WiFi, they're betting with your money.  If Sprint succeeds, thereby benefiting the consumer, at no risk to the consumer, the consumer should not object to their earning huge profits.

Note also, that this is a plausble candidate for a firm trying to follow Clayton Christensen's advice to try to disrupt itself.  (And see the comment at the end, for someone who hasn't read Christensen, or doesn't believe what he has read.)

 

Analysts say building a nationwide WiMax network could cost Sprint between $1 billion and $4 billion, a hefty sum for a company that is already struggling to meet Wall Street's expectations.  Sprint said it expects to invest $1 billion on the project in 2007 and between $1.5 billion and $2 billion in 2008.

Sprint's decision carries considerable risks:  Investors have hammered telecom companies that have made large capital investments in new technologies, banking on future markets to emerge.  For example, among other things, Verizon Communications Inc.'s stock has been under fire as the company is rolling out a costly new fiber optic network that it says will position the company to deliver a bundled TV, Internet, and phone service.  Also, WiMax technology is still untested on a large scale.

Sprint is making a huge bet that consumer demand for wireless Internet access and services such as cellphone downloads of music and video will continue to grow in the coming years.  Consumers already can get access to wireless Internet service at Wi-Fi "hotspots" in airports and coffee shops, and some cities, like Anaheim, Calif., are blanketing their terrain with Wi-Fi connections.

. . .

. . . , some analysts and industry experts question why the company is gearing up for such a major capital investment when it is already even or ahead the other top U.S. carriers, Verizon and Cingular Wireless, when it comes to data services. "Why compete against yourself? It doesn't make a lot of sense at this point," said Mike Thelander, principal analyst at Signals Research Group who predicted several weeks ago that Sprint would choose WiMax.

 

For the full story, see:

AMOL SHARMA and DON CLARK.  "Sprint Bets on New Wireless 'WiMax'."  Wall Street Journal  (Tues.,  August 8, 2006):  B1-B2.

(Note:  the above passages are from the online version, which was later, and less tentative about Sprint's intentions, than the print version.) 

(Note:  ellipses added.)




July 5, 2006

Russians Try to Steal Rocker's Vacuum Tube Factory

Mike Matthews holding one of the vacuum tubes produced in the Russian factory he owns.  Source of photo:  online version of the NYT article cited below.

 

(p. C1)  SARATOV, Russia — Mike Matthews, a sound-effects designer and one-time promoter of Jimi Hendrix, bought an unusual Russian factory making vacuum tubes for guitar amplifiers.  Now he has encountered a problem increasingly common here: someone is trying to steal his company.

Sharp-elbowed personalities in Russia's business world are threatening this factory in a case that features accusations of bribery and dark hints of involvement by the agency that used to be the K.G.B.

Though similar to hundreds of such disputes across Russia, this one is resonating around the world, particularly in circles of musicians and fans of high-end audio equipment.

Russia is one of only three countries still making vacuum tubes for use in reproducing music, an aging technology that nonetheless "warms up" the sound of electronic music in audio equipment.

"It's rock 'n' roll versus the mob," Mr. Matthews, 64, said in a telephone interview from New York, where he manages his business distributing the Russian vacuum tubes.  "I will not give in to racketeers."

Yet the hostile takeover under way here is not strictly mob-related.  It is a dispute peculiar to a country where property rights — whether for large oil companies, car dealerships or this midsize factory — seem always open to renegotiation.  It provides a view of the wobbly understanding of ownership that still prevails.

. . .

(p. C4)  If the tube factory dies, so will the future of a rock 'n' roll sound dating back half a century, the rich grumble of a guitar tube amplifier — think of Jimi Hendrix's version of "The Star-Spangled Banner" — that musicians say cannot be replicated with modern technology.

"It's nice and sweet and just pleasing sounding," Peter Stroud, the guitarist for Sheryl Crow, said in a telephone interview from Atlanta.  "It's a smooth, crunchy distortion that just sounds good.  It just feels good to play on a tube amp."

He added:  "It would be a catastrophe for the music industry if something happened to that plant."

 

For the full story, see: 

ANDREW E. KRAMER.  "From Russia, With Dread; American Faces a Truly Hostile Takeover Attempt at His Factory."  The New York Times   (Tuesday, May 16, 2006):  C1 & C4.

 

The transistor disrupted the vacuum tube, a case that would usually be described as an episode of creative destruction.  One secondary lesson from the story above is that there may be a previously unremarked symmetry to the process of disruption.  A disruptive technology typically appeals only to a niche in the market, while the incumbent technology dominates the mainstream.  But after the disruptive technology improves sufficiently to capture much of the mainstream market, maybe there often will remain a niche market that still prefers the older disruptive technology?

To use Danny DeVito's example in "Other People's Money," the car may have disrupted horse-and-buggies.  But for some nostalgic "jobs" the horse-and-buggy may still be the better product, so there will likely remain some demand for buggy whips.

To the extent that this phenomenon is significant, it might serve to ease the labor market transition when one technology leapfrogs another.

 

VacuumTubeBox.jpg A vacuum tube used in guitar amplifiers, that was produced in the factory that Mike Matthews owned.  Source of photo:  online version of the NYT article cited above.




May 14, 2006

Disruptive Innovation in Medicine

DoctorWaitingRoom.jpgSource of image:  http://online.wsj.com/article/SB114540135592529301.html?mod=home_personal_journal_middle

  

(p. D1) The dysfunctional doctor's office is getting a makeover.

A growing number of programs around the country are helping doctors redesign their offices to wring more profit out of their practices and fix problems that have long frustrated patients: weeks-long delays to get appointments, hours in the waiting room, too-brief visits with the doctor, and the near impossibility of getting the physician on the phone.  While the goal is to improve care, the programs also aim to avert a looming shortage of primary-care doctors who are frustrated with low pay, long hours and rising overhead costs.

The new programs borrow lessons from other industries to help doctors work more efficiently, especially those in solo and small group practices who account for the majority of outpatient office visits.  One approach employs calculations used by airlines, hotels and restaurants to predict demand:  The idea is that doctors can cut patient waits much the way restaurant chains seat diners and turn over tables efficiently.  Others involve relatively simple changes, such as leaving afternoon appointments open for urgent visits, or having patients fill out paperwork ahead of time online.

Managed-care giant Kaiser Permanente is launching a program to help 12,000 doctors that contract with its health plan increase their efficiency with a new electronic-medical-records system.  Portland, Ore., physician Chuck Kilo, whose GreenField Health Systems helps restructure medical practices, and is assisting with the program, says that too many doctors' appointments take up valuable office time with follow-up that could be accomplished with phone calls and email.

Other models involve more-radical change, such as one called "Ideal Micro Practice" that sharply reduces or even eliminates support staff.  With this blueprint, doctors rely on electronic health records and practice-management software to quickly dispense with administrative tasks.  And they may run their offices solo, greeting patients personally as they come in the door.

"The office practice hasn't changed much in 50 years," says John Wasson, a Dartmouth Medical School professor and practice redesign expert who is helping to launch a national program to expand the Micro Practice concept.  "This is a disruptive innovation that can lead to increased quality and reduced costs."

 

For the full story, see: 

LAURA LANDRO. "Cutting Waits at the Doctor's Office; New Programs Reorganize Practices to Be More Efficient; Applying 'Queuing Theory'." The Wall Street Journal (Weds., April 19, 2006): D1 & D3.

  

  Source of graphic:  http://online.wsj.com/article/SB114540135592529301.html?mod=home_personal_journal_middle

 

 




May 10, 2006

Google Evolves

Gary Hamel has recently penned some thoughtful observations about what practices of Google have led to its success.  An excerpt from that analysis appears below.  (Hamel earlier wrote a popular book in which he makes extensive use of Schumpeter's process of creative destruction.)

Only time will tell whether Google has succeeded in building an evolutionary advantage.  But consider:  Since it's founding, it has repeatedly morphed its business model.  Google 1.0 was a search engine that crawled the Web but generated little revenue; which led to Google 2.0, a company that sold its search capacity to AOL/Netscape, Yahoo and other major portals; which gave way to Google 3.0, an Internet contrarian that rejected banner ads and instead sold simple text ads linked to search results; which spawned Google 4.0, an increasingly global entity that found a way to insert relevant ads into any and all Web content, dramatically enlarging the online ad business; which mutated into Google 5.0, an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base.  More than likely, 6.0 is around the corner.

Of course Google may ultimately fall victim to hubris and imperial overstretch as it takes on Microsoft, Yahoo, eBay, the occasional telecom giant and pretty much everyone else in cyberspace.  Or like Microsoft, it may simply become like every other big company as it grows.  But that's not the way I'd bet.  Google seems to have grasped the new century's most important business lesson:  The capacity to evolve is the most important advantage of all.

 

For the full commentary, see:

Hamel, Gary.  "Management à la Google."  The Wall Street Journal  (Weds., April 26, 2006):  A16.

 

 

 

And here is the information on Hamel's most recent book:

 

Hamel, Gary. Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life. Revised & Updated ed.  Harvard Business School Press, 2002.

 

 Source of image: http://www.amazon.com/gp/product/B000EPFVBE/sr=8-1/qid=1146333251/ref=pd_bbs_1/104-5668094-9083929?%5Fencoding=UTF8




April 8, 2006

Jack Welch's Version of Christensen's "emergent strategy"

(p. 390) Business success is less a function of grandiose predictions than it is a result of being able to respond rapidly to real changes as they occur.

Welch, Jack. Jack: Straight from the Gut. New York: Warner Business Books, 2001.




February 18, 2006

Specialty Coffee: How Does it Fit Christensen?

Christensen and Raynor:
(p. 55) Not all innovative ideas can be shaped into disruptive stategies, however, because the necessary preconditions do not exist; in such situations, the opportunity is best licensed or left to the firms that are already in the market. On occasion, entrant companies have simply caught the leaders asleep at the switch and have succeeded with a strategy of sustaining innovation. But this is rare.

 

Source: 

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

 

In several later chapters of Mark Pendergrast's Uncommon Grounds, he documents how the major coffee retailers failed to perceive and respond to the threat posed to their business by the specialty coffee retailers.  In some ways specialty coffee firms would seem to be disruptors.  But they were neither "low end" nor "new market."  Wasn't specialty coffee what Christensen would call a "sustaining innovation"?

 




February 12, 2006

'Purpose Brands' Built by Understanding Jobs Customers Need to Do

. . . , the marketer's fundamental task is not so much to understand the customer as it is to understand what jobs customers need to do -- and build products that serve those specific purposes.

Marketers who do this well can build what we call "purpose brands" -- ones that become so tightly associated with the job they perform that they become inextricably linked to it. Most of today's most successful brands -- Crest, Starbucks, Kleenex, eBay and Kodak, to name a few -- started out as purpose brands.

. . .

Federal Express illustrates how successful purpose brands are built. A job had existed practically forever: the "I need to send this from here to there -- as fast as possible with perfect certainty" job. Some U.S. customers hired the Postal Service's airmail; a few desperate souls paid couriers to sit on airplanes. But because nobody had yet designed a service to do this job well, the brands of the unsatisfactory alternative services became tarnished when they were hired for this purpose. But after Federal Express specifically designed its service to do that exact job, and did it wonderfully again and again, the FedEx brand began popping into people's minds.

This was not built through advertising. It was built as people hired the service and found that it got the job done. FedEx became a purpose brand -- in fact, it became a verb in the international language of business that is inextricably linked with that specific job.

Purpose brands create enormous opportunities for differentiation, premium pricing and growth. But reckless management can erode the equity of these brands. There are only two ways to extend brands without destroying them: Marketers can apply the brand to different products that address the same job. Or they can apply the brand to endorse the quality of products that do other jobs and create new purpose brands that benefit from the endorser quality of the original brand.

Marriott followed this strategy in leveraging its brand across the jobs for which hotels might be hired. It built its hotel brand around full-service facilities that were good to hire for large meetings. When it extended its brand to other jobs for which hotels were hired, it adopted a two-word brand architecture, appending to the Marriott endorsement a purpose brand for the different jobs its new hotel chains were intended to do. Hence, individual business travelers who need to hire a quiet place to get work done can hire Courtyard by Marriott -- the hotel designed by business travelers for business travelers. Longer-term travelers can hire Residence Inn by Marriott, and so on. Even though these disruptive hotels were not constructed and decorated to the same standard as full-service Marriott hotels, the new chains actually reinforce the endorser qualities of the Marriott brand because they do the jobs well that they are hired to do.


For the full article, see:

CLAYTON M. CHRISTENSEN, SCOTT COOK and TADDY HALL. "MANAGER'S JOURNAL; It's the Purpose Brand, Stupid." The Wall Street Journal (Tues., November 29, 2005): B2.





December 28, 2005

Hiring Managers for Experiences They Have Had

Christensen and Raynor in The Innovator's Solution argue against hiring managers for having 'the right stuff' and favor hiring managers who have had the right experiences tor the job that needs to be done. Maybe western venture capitalists are following this advice in China?

SHENZHEN, China -- China still is a magnet for ambitious, Western-educated entrepreneurs coming home to start high-tech companies and cash in on China's economic boom. Take Charles Zhang, the Massachusetts Institute of Technology-trained founder of Web portal Sohu.com Inc., and Edward Tian, who earned a doctorate in the U.S. and once charmed Rupert Murdoch into joining the board of his Beijing telecommunications company.

But this favored class isn't looking quite so favored, at least in the eyes of venture capitalists looking to invest in China. The trend is largely anecdotal, but for many "seed capitalists" poking around Beijing and Shanghai, slick Westernized returnees are out. Local, rough-around-the-edges entrepreneurs are in.

"The less English you speak, the better," says David Zhang, a venture capitalist in Beijing with San Francisco's WI Harper Group. He and other investors say locally trained executives often are more thrifty with cash and better understand local Chinese markets -- and businesses that know how to tap them -- than people who have been abroad for years.

"A lot of the returnees, actually, they have lost touch with China," agrees Vincent C.H. Chan, a managing director at Jafco Asia, part of Jafco Co. of Japan.

Instead of courting Ivy League graduates with slick business plans, Messrs. Zhang and Chan are plowing money into no-frills Chinese start-up businesses such as wireless-services provider China Broad Media Corp. The company, funded by WI Harper, is the brainchild of Tian Song, an entrepreneur who went to college in Beijing and toiled in the state-owned telecommunications sector there. He says, through a translator, that his only visit to the U.S. was a brief trip to Las Vegas.

Jafco has helped to finance such entrepreneurs as Zhou Hongyi, who founded Chinese Internet search-engine concern 3721 Network Software Inc. Yahoo Inc., intrigued by Mr. Zhou's technology -- it enables people to use Chinese characters to search the Web -- bought the company nearly two years ago for $120 million.

Some returnees may have "studied in a good school," says Andy Yan, managing partner of Hong Kong investment firm SAIF Partners. But "when they come back, they think they know everything."

One of Mr. Yan's favorite home-grown success stories is Hu Xiang, a founder of SAIF portfolio company Mobile Antenna Technologies (Shenzhen) Co. Mr. Hu, 52 years old, is about as far from a polished returnee as one can get in China: He doesn't speak English and missed nearly 10 years of schooling during the Cultural Revolution that began in the 1960s. Mr. Hu dug tunnels and later was a low-level factory worker, sometimes going hungry.

That Mr. Hu suffered during the Cultural Revolution and had to work so hard for his success, instead of leading a more comfortable life abroad, appealed to Mr. Yan. "We've been through so much," says Mr. Yan, who had similar experiences. "The challenges now don't seem so big."

For the full story, see:

REBECCA BUCKMAN. "In China, That Ivy League Degree Isn't Gold; Some Venture Firms Seeking Talent Favor Homegrown Entrepreneurs; No English Spoken? No Problem." THE WALL STREET JOURNAL (Fri., September 23, 2005): C1 & C4.




December 26, 2005

The Innovator's Dilemma at the Movies?

Sounds like a possible example of Clayton Christensen's where the incumbent (movie theaters) move up-market in response to the threat from the disruptive technology (increasingly high quality home entertainment systems):

It was Saturday night at the Palace 20, a huge megaplex here designed in an ornate, Mediterranean style and suggesting the ambience of a Las Vegas hotel. Moviegoers by the hundreds were keeping the valet parkers busy, pulling into the porte-cochere beneath the enormous chandelier-style lamps. Entering the capacious lobby, some of them dropped off their small children in a supervised playroom and proceeded to a vast concession stand for a quick meal of pizza or popcorn shrimp before the show.

Others, who had arrived early for their screening of, say, ''Wedding Crashers'' or ''The Dukes of Hazzard'' -- their reserved-seat tickets, ordered online and printed out at home, in hand -- entered through a separate door. They paid $18 -- twice the regular ticket price (though it included free popcorn and valet service) -- and took an escalator upstairs to the bar and restaurant, where the monkfish was excellent and no one under 21 was allowed.

Those who didn't want a whole dinner, or arrived too late for a sit-down meal, lined up at the special concession stand, where the menu included shrimp cocktail and sushi and half bottles of white zinfandel and pinot noir. As it got close to curtain time, they took their food and drink into one of the adjoining six theater balconies, all with plush wide seats and small tables with sunken cup holders. During the film, the most irritating sound was the clink of ice in real glasses.

Not your image of moviegoing? Pretty soon it might be. At a time when movie attendance is flagging, when home entertainment is offering increasing competition and when the largest theater chains -- Regal Entertainment, AMC Entertainment (which has recently announced a merger with Loews Cineplex) and Cinemark -- are focused on shifting from film to digital projection, a handful of smaller companies with names like Muvico Theaters, Rave Motion Pictures and National Amusements are busy rethinking what it means to go to the movie theater. (B1)

BRUCE WEBER. "Liked the Movie, Loved the Megaplex; Smaller Theater Chains Lure Adults With Bars, Dinner and Luxury." The New York Times (Wednesday, August 17, 2005): B1 & B7.




December 22, 2005

Disruptive Innovation Threatens Boeing and Lockheed?

SpaceXHeavyLifters.gif Source of table: online version of WSJ article cited below.

EL SEGUNDO, Calif. -- Maverick entrepreneur Elon Musk, who says he is prepared to spend nearly $200 million of his personal fortune creating a family of low-cost, reusable rockets, recently landed an unexpected customer: the U.S. intelligence community.

Mr. Musk and his fledgling company, closely held Space Exploration Technologies Corp., for years worked on advanced technologies and less-expensive manufacturing concepts to build small rockets capable of launching commercial or government satellites weighing around 1,000 pounds.

But the new contract for a single, classified launch -- shrouded in such secrecy that neither the spy agency nor specific type of satellite was identified -- envisions construction of a massive rocket by Mr. Musk's company, known as SpaceX. The launch vehicle is slated to be comparable to the largest, most powerful models built by Boeing Co. and Lockheed Martin Corp., but costing a fraction of the prices charged by the rocket-industry leaders

. . .

Mr. Musk doesn't minimize the challenge of trying to win more government business while criticizing government procurement practices. "I think it's extremely risky," he says of his overall strategy, "but we've got to fight for our right to win customers." If development of simpler, less-costly rocket alternatives is left to major defense contractors, he argues, "I can assure you it will never, never happen."

. . .

In spite of skepticism and criticism of SpaceX, industry leaders are keeping a wary eye on Mr. Musk, with some vowing stepped-up competition against the industry newcomer.

Tom Marsh, a senior Lockheed Martin space official, told a space conference last month that his company "absolutely intends to pursue, and to pursue vigorously" the market for smaller rockets initially targeted by SpaceX.

ANDY PASZTOR. "For Rocket Start-Up, Sky's the Limit; Surprise Contract Boosts SpaceX as It Competes With Boeing, Lockheed." THE WALL STREET JOURNAL (Thurs., September 15, 2005): B6.




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