

Clayton Christensen Presentation on Disruption - joebadmo
http://gartner.mediasite.com/mediasite/play/9cfe6bba5c7941e09bee95eb63f769421d?t=1320659595

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joebadmo
This strikes me as a transcendent work. It's one of those amazing artifacts in
which the structure reinforces the special insight of the subject matter.

I'm referring to the sort of fractal way in which each nested story builds the
theme through repetition, but also reflects the story in which it's nested, in
the same appropriately meta-textual way as all my favorite works of
literature, like the _Iliad_ and _Infinite Jest_.

That is, each structural level of the talk points to a higher rung on the
ladder of abstraction. And the talk itself, while on its face is about
disruption and business practices, keeps pointing up the ladder. At each level
it constructs a more abstract narrative that provides insight into what is
really happening.

Disruption happens because businesses measure the wrong things. But they
measure the wrong things because they haven't built the apparatus to figure
out what to measure. And they haven't built that apparatus because they don't
even know that they should be. They work on received wisdom, they let the
numbers do the thinking for them.

Ultimately, it's a talk about the value of true critical thinking, of forming
the correct narrative, and of stepping outside the bounds of the particular
level of abstraction to see the same set of facts from different perspectives.

As a literature major, this is a talk about the value of a liberal arts
education.

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dmarble
Summary

Some ideas to create new growth businesses:

(1) Go after the least profitable / bottom of someone else's product lines.
Examples include specialty steel mini-mills starting with re-bar and moving up
to finer steel products, and car makers that start by undercutting the bottom
of the market (Toyota started with the Corona in the 60s, Korean car companies
more recently, Chinese and Indian possibly next).

(2) Compete against non-consumption. Instead of focusing on existing customer
bases, make something that opens up new possibilities for non-consumers. Make
something simpler, more affordable. The Sony transistor radio was pretty bad,
but it was cheap and infinitely better than nothing. This is where most job
growth in America has come from, and where we should focus more.

Technology centralization is followed by de-centralization. Mainframe ->
smartphone. Health care is still awaiting a lot of decentralization. It can
become affordable by developing and marketing technology to allow low cost
venues and low cost providers to do more sophisticated things. America's
future depends on this.

(3) Understand jobs people need to accomplish, not just the customer's needs.
"The customer rarely buys what the company thinks it is selling him" (Peter
Drucker). Create an experience surrounding a product that helps get a job
done. Products are easy to copy, but "integration around a job creates
defensible differentiation."

Regarding outsourcing: "Outsourcing often sets in motion disruptive business
model liquidation." AsusTek disrupted Dell. They started with circuit boards
for Dell, moved to motherboards for Dell (Dell revenues unaffected, components
moved off the books, profitability improved), moved to doing product assembly
(Dell and Asus profits went up), moved to supply chain & logistics, moved to
product design (Dell and Asus profits went up), moved to branding by selling
their own. Same thing is happening in IT (TCS, Infosys, Wipro), auto companies
(tier one suppliers), petroleum (Halliburton, Schlumberger), pharmas (CROs),
and (with laughter) wall street analysts outsourcing their brains to
Bloomberg.

Profitability is too often looked at as a percentage, for which many companies
focus on shorter and shorter immediate wins. We focus a lot on IRR (internal
rate of return), RONA (return on net assets - the fewer the assets, the higher
the RONA!). In semiconductors, Intel is the only big American company that
makes their own products. The rest are fab-less, which we think is a badge of
honor because of some ratios and risk factors. Personal anecdote: Morris
Chang, Chairman of TSMC noted to me that banks don't accept ratios as a
deposit; and that he measures their profitability by, oh, TONS OF MONEY
(laughter). RONA only works as a measurement if cash is a scarce resource. We
need more concentration on innovations that actually grow our economy.

If you're wondering about his occasional slurring and use of the wrong word,
he had a stroke not too long ago and had to re-learn a ton of vocabulary.
Sometimes the right word just isn't there when his mind goes to find it!

There was an article on his life, work, and the past three years of hard-
hitting health issues (cancer, a heart attack, and a stroke) in Forbes earlier
this year. [http://www.forbes.com/forbes/2011/0314/features-clayton-
chri...](http://www.forbes.com/forbes/2011/0314/features-clayton-christensen-
health-care-cancer-survivor.html)

For such a brilliant contributor to the world, he's as genuine and kind as
anyone I've met.

