The Innovator's Solution: Creating and Sustaining Successful Growth

At best one company in ten is able to sustain profitable growth. Yet capital markets demand that all companies seek it relentlessly and mercilessly punish those who fail. Why is consistent, persistent growth so difficult to achieve? Surprisingly, it’s not for lack of great ideas or capable managers, nor is it because customers are too fickle or innovation too unpredictable. Innovation fails, say Clayton M. Christensen and Michael E. Raynor, because organizations unwittingly strip the disruptive potential from new ideas before they ever see the light of day.

In his worldwide bestseller The Innovator’s Dilemma, Christensen explained how industry leaders get blindsided by disruptive innovations precisely because they focus too closely on their most profitable customers and businesses. The Innovator’s Solution shows how companies get to the other side of this dilemma, creating disruptions rather than being destroyed by them.

Drawing on years of in-depth research and illustrated by company examples across many industries, Christensen and Raynor argue that innovation can be a predictable process that delivers sustainable, profitable growth. They identify the forces that cause managers to make bad decisions as they package and shape new ideas—and offer new frameworks to help managers create the right conditions, at the right time, for a disruption to succeed. The Innovator’s Solution addresses a wide range of issues, including:

• How can we tell if an idea has disruptive potential?
• Which competitive situations favor incumbents, and which favor entrants?
• Which customer segments are primed to embrace a new offering?
• Which activities should we outsource, and which should we keep in-house?
• How should we structure and fund a new venture?
• How do we choose the right managers to lead it?
• How can we position ourselves where profits will be made in the future?

Revealing counterintuitive insights that will change your perspective on innovation forever, this landmark book shows how to create a disruptive growth engine that fuels ongoing success.

The Innovator's Solution builds on Professor Christensen's landmark book, The Innovator's Dilemma, and explains how managers can overcome the bias he described in the earlier book toward being blindsided by new entrants bringing disruptive technology and products to bear.

There's so much good material in The Innovator's Solution that it is hard to fairly summarize it.

Let me attempt to give you an overview. The authors point out, based on the studies of others, that few large companies are able to grow faster than average. Worse still for managers, they point out that studies of those few which have grown faster are often contradictory in their findings. Best practices may be nothing more than an accidental reaction to a temporary situation. The authors go on to create a generalized theory of what needs to be done in every situation that a company may face in creating and responding to disruptive technologies and products. It's as though Michael Porter had taken his tomes on competitive advantage and provided a single theory for when to apply what. As such, this is one of the most advanced books for creating management processes for using disruptive technologies and business models to discomfit the competition in profitable ways.

Appreciating Figure 2-3 on page 44 is worth the price of the book alone. The authors have created a graphic to explain how markets develop in growth and competitive characteristics. No one who ever sees this graphic depiction will ever think about competitive and development strategies in the same way again.

Although the authors use examples from many different industries, the most detailed and compelling examples come from technology based companies and industries. I found the Sony examples particularly interesting for their repeated creation of new markets and business models.

The book beautifully elaborates on the thinking processes that companies use to lose competitive advantage . . . and should help many leaders counter these wrong-headed thoughts and instincts.

Why, then, does the book have so much theory? As the authors candidly point out at the end, there are few models for what they are proposing. As a result, they have cobbled together a theory from bits and pieces of concepts that appeal to them and seem to fit with one another. Only with experience can we tell how good this theory is. But it's worth understanding and considering.

The authors seem to have missed the bulk of the examples of companies that have made continuing business model innovations in the last decade. That appears to be because they relied on the published literature prior to 2003 to find examples, rather than doing their own research from scratch. Since continuing business model innovators are seldom written about by academics and consultants, these are a little hard to find. A large number of such innovators appear in service industries, which are relatively little mentioned in The Innovator's Solution. Surprisingly, many continuing business model innovators in software, semiconductors, computer components and medical testing are missing from the book. I suspect that the proposed theory could have been much improved by considering these cases. I look forward to seeing what the authors have to say in the future as they look at more cases.

Without attempting to know if the theories are right or not, I can mention my own subjective reactions. The authors seem to be overly focused on products as compared to business models. It is helpful to use both perspectives as starting points for strategic thinking. Analyzing customer behavior by considering what job customers are trying to do seems to me to be much too simplistic. The most disruptive products, technologies and business models have often created changes in behavior where customers do things for the first time. On the other hand, the points made about how to beat the most powerful competitors, selecting the right target customers, scoping the business correctly, avoiding commoditization, managing strategic development, working with the right sources and amounts of funding, and the role of senior executives struck me as more often on the mark than not based on my own research and experiences. Any of the chapters except chapter 3 would probably make helpful reading for just about anyone.

Don't be put off by the authors' emphasis on theory. They are trying to help make you more practical . . . not more abstract. Think of their theory as being like an operating manual for a new product. You may get better results by having clear instructions rather than relying totally on trial and error.

I was extremely impressed by the gracious and thorough acknowledgments in the book of the thinking and research of others. Even when the authors point out the extreme weaknesses and limitations of a particular piece of work, they praise the positive aspects of that work in kind and thoughtful ways. I cannot remember the last time I read an academic book that took such a considerate approach.

After you finish this book, I suggest that you think through how you can inexpensively create a better and more effective balance between creating the industries of the future and optimizing the businesses of today. Your stakeholders will thank you.


Certain to Become a Business "Classic"   September 25, 2003
Robert Morris (Dallas, Texas)
42 out of 47 found this review helpful

In a previous work, The Innovator's Dilemma, Christensen examines why so many companies fail to remain competitive "when they confront certain types of market and technological change....the good companies -- the kinds that many managers have admired for years and tried to emulate, the companies known for their abilities to innovate and execute....It is about well-managed companies that have their competitive antennae up, listen astutely to their customers....invest aggressively in new technologies, and yet they still lose market dominance." According to Christensen, the innovator's dilemma occurs when the logical, competent decisions of management which are critical to the success of their companies are also the reasons why they lose their positions of leadership. I wholly agree with Christensen that a given problem must first be fully understood before efforts to solve it are initiated. The challenge is even greater when the given problem poses a dilemma which (in essence) involves a paradox: Whatever has been essential to success can also cause failure. What to do?

In The Innovator's Solution, Christensen and Raynor offer a wealth of strategies and tactics to solve such a dilemma, revealed by their rigorous research on hundreds of different companies. In their book, they summarize "a set of theories that can guide managers who need to grow new businesses with predictable success -- to become disruptors rather than disruptees -- and ultimately kill the well-run, established competitors." More specifically, Christensen and Raynor suggest appropriate responses to situations such as these:

* When a disruptive foothold is needed which competitors "will be happy to ignore or be relieved to walk away from"

* When there are opportunities to help customers "get done more conveniently and inexpensively what they are already trying to get done"

* When a low-end disruption is feasible and a business model is therefore necessary "that can make attractive profits at the discount prices required to capture customers at the low end of the market"

* When determining the criteria for selecting members of a management team for a new venture

NOTE: Christensen and Raynor correctly suggest that among the most important criteria is sufficient prior experience with solving problems comparable with those the new venture seems certain to encounter.

* When disruption (and competing against non-consumption in particular) "requires a longer runway before a steep ascent is possible."

Christensen and Raynor have no illusions whatsoever about the difficulties of creating and then sustaining successful growth, however "growth" may be defined and measured. Moreover, they observe "To our knowledge, no company has been able to build an engine of disruptive growth and keep it running and running."

Among the many reasons why I admire this book so much is its direct relevance to decision-makers in organizations which have already achieved success and seem to sustaining it. Better yet, let's say, these organizations dominate their competition in the given marketplace. As Christensen and Raynor explain so convincingly, the causes of that success may well prove to be the causes of eventual failure. Therefore, all organizations (regardless of size or nature) must be involved in what Schumpeter once described as "creative destruction,"especially when highly successful, inorder to free themselves from what O'Toole calls "the ideology of comfort and the tyranny of custom." As I see it, there are two options which can be posed in a question: Would you rather have creative but prudent "destruction" within your organization or have your organization disrupted (perhaps obliterated) by its competition? Well duh.

For many decision-makers who read The Innovator's Solution, I think it will prove be the most valuable business book they ever read. Why? Because it will guide and inform their efforts with associates to design, activate, and then maintain "a well-functioning disruptive growth engine." Even then, they must keep it mind that no such mechanism will keep "running and running" forever. Improvisation and adaptability are imperative. Eventually, a new "engine" will be required but at least they will possess the knowledge and experience needed to produce another one.


Illuminates Disruptive Innovation, Why Manager's Fail At It   October 7, 2004
Robert D. Steele (Oakton, VA United States)
30 out of 34 found this review helpful

Edited 20 Dec 07 to add links to natural capitalism books

I was talking to a friend the other day about why major (multi-billion dollar a year) companies are not good at innovation, and he recommended this book. Wow! Looking at the companies I know and admire, it all became clear. Innovation *is* disruptive; the most promising marketplace is the opposite of their existing defense and intelligence clients--the people that do not get adequate intelligence support from the existing cash cow; and all of the middle and senior managers (Washington-based) are incrementalists who had succeeded at building bodies-for-hire accounts over decades.

For those who feel an intuitive faith in disruptive endeavors, this book is inspiring and also instructional. It specifically suggests that entrants will beat incumbents when the objective is to substitute lower-cost good-enough solutions for client needs that are not satisfied by high end production. However, it also makes clear that the *last* place you want to sell disruptive solutions in to is the existing high end client base. Go for new customers and new contexts.

In government intelligence terms: stop trying to teach the spies that they need to do a better job on open sources of information in 33+ languages. Instead, go after the Departments of State, Commerce, Treasury, Agriculture, Homeland Security, and the elements of the Department of Defense that do not get adequate classified intelligence support. Establish Open Source Intelligence (OSINT) as a viable endeavor there, and in ten years come back and crush the spies in head on competition.

Three "litmus tests" that the authors put forward are very helpful to those seeking to monetize disruptive new ideas:

1) Is there a population of clients that has historically been under-funded, under-staffed, and have as a result *gone without*?
2) Is this group likely to appreciate lower cost "good enough" solutions?
3) Is it possible to be profitable while providing these clients lower cost good enough solutions (e.g. monitoring risk around the world, at the sub-state level, something the spies simply cannot do effectively despite their $50 billion a year budget)?

Another major lesson I drew from this book is that alternative channels can be phenomenally successful. One example the book uses: instead of selling low-cost throw away cameras through photography shops oriented to high-end perfectionists, move them into grocery stores and discount stores for the low-end market that could not afford a traditional camera. This *makes sense.* Hence, instead of trying to sell low-cost open source services to the people who think they have the most to lose from promoting them (the mandarins of the high-cost secrets), go instead to the least well-served end-users, the logisticians, acquisition managers, diplomats, etcetera, and get them to test localized rather than centralized solutions that then "explode" as other end-users see the low-cost success and emulate through decentralized adoption of new best practices.

The last half of the book is loaded with stuff useful to how I am going to structure my relationship with any major corporation--it focuses on a number of key factors including scale, profitability over growth, proprietary end to end solutions in the beginning, transitioning rapidly to open distributed solutions at the right moment, and ensuring that the team members are *not* (NOT) incrementalist line managers that succeeded by going along within a status quo system.

The following quote captures my perception of the imperfection of the guys at the top that don't get it: "In many ways, the managers that corporate executives have come to trust the most because they have consistently delivered the needed results in core businesses cannot be trusted to shepherd the creation of new growth." (Page 183).

The book goes on to discuss the conflict between the traditional processes of managing traditional businesses, the conflict between traditional business values versus those of disruptive innovators (who can tend to alienate and aggravate executives used to having life just so), and between the "pace" of big organizations that need 12 months to think about an opportunity, and small "fleet of foot" innovators that can evaluate, act, write a proposal, and win million-dollar jobs over a week-end.

The authors are generally negative about business unit consolidation, and make the point that the bigger the business gets, the more process takes precedence over people. They specifically caution against a strategy of acquisition as a means of growth, documenting the terrible toll this can take as a cash flow drain, in essence saying that really big growth cannot come from incrementalist approaches. I put the book down with the feeling that the really big companies need to think seriously about launching spin-offs, as Charles Schwab did, and the really small companies, like mine, have a fighting shot at beating the hell out of the established beltway bandits who are too slow, too arrogant, and too rich to be serious about innovation for the future.

This book made me smile, and it made me think. Super piece of work.

Here are some recently published books that can be combined with this one to reintegrate and re-energize our economy:
The Battle for the Soul of Capitalism: How the Financial System Underminded Social Ideals, Damaged Trust in the Markets, Robbed Investors of Trillions - and What to Do About It
Blessed Unrest: How the Largest Movement in the World Came into Being and Why No One Saw It Coming
Natural Capitalism: Creating the Next Industrial Revolution
The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Wharton School Publishing Paperbacks)
The Ecology of Commerce
Cradle to Cradle: Remaking the Way We Make Things
One from Many: VISA and the Rise of Chaordic Organization



Another win and the other shoe of the dillemma   October 14, 2003
M. McDonald (Chicago, IL United States)
10 out of 10 found this review helpful

The innovator's solution helps answer all of the questions raised in Christensen's first book: the innovator's dilemma. The book is well researched -- to be expected. However, what is different is that the explanations are clearer and more business focused. I can apply these concepts and through processes to my work, which is the best thing, one can say about a business book.

The chapters on growth and avoiding commoditization are particularly important in today's environment.

To be sure that some of the concepts are proposed in an academic way and it takes a while to understand what the "more than good enough" and "less than good enough" concepts. Nevertheless, it works and is worth the time to reflect on what these concepts mean to your business and your future.

Disruption is one of the forces in our society and business. It is one that this book explains very well. You do not have to read the first book "dilemma" to understand and get value out of this book, but once you read the "solution", you can gain a greater appreciation of Christensen's earlier works.


Skip the Dilemma, go straight to the Solution   August 15, 2004
G. G Thain (Madison, WI United States)
10 out of 10 found this review helpful

This is one of the best books on business strategy to be published in a long time. If you haven't read the earlier "Innovator's Dilemma", don't bother, just read this book instead.

One of the most interesting discussions in this book is just the definition of a disruptive innovation. It is not, as one might think, simply something new or technically innovative. More importantly, the disruption is relative to the current state of the business. In fact, the exact same innovation may be disruptive to some businesses, but sustaining for others. For example, online retailing, though technically innovative, is not disruptive to existing catalog retailers -- it is merely a more effecient method of doing business. However, it can be very disruptive to existing "bricks and mortar" businesses.

I particularly like the academic bent to the book. While by no means a textbook, the authors strongly emphasize that you can't just look for trends in business, and try to predict futures based on trends. Rather, you need to create defensible, testable theory based from the trends, and only then can you start to develop a more scientific approach to strategy.

For example, the authors cite popular books which champion opposite theories of vertical intergration. Rather than blithely saying the vertical integration is good or bad, they try to develop a theory for the contexts where this makes sense, or where outsourcing is a better way to operate.

All in all, this book is not the fundamental treatise on strategy that Michael Porter's seminal book is, but it is still a must read for the modern business.