Spotlight
STRATEGY
What Is Disruptive Innovation?
Clayton M. Christensen, Michael Raynor, andRory McDonald | page 048
For the past 20 years, the theory ofdisruptive innovation has been enormously influential in business circles and apowerful tool for predicting which industry entrants will succeed.Unfortunately, the theory has also been widely misunderstood, and the “disruptive”label has been applied too carelessly anytime a market newcomer shakes upwell-established incumbents.
In this article, the architect ofdisruption theory, Clayton M. Christensen, and his coauthors correct some ofthe misinformation, describe how the thinking on the subject has evolved, anddiscuss the utility of the theory.
They start by clarifying what classicdisruption entails—a small enterprise targeting overlooked customers with anovel but modest offering and gradually moving upmarket to challenge theindustry leaders. They point out that Uber, commonly hailed as a disrupter,doesn’t actually fit the mold, and they explain that if managers don’tunderstand the nuances of disruption theory or apply its tenets correctly, theymay not make the right strategic choices. Common mistakes, the authors say,include failing to view disruption as a gradual process (which may leadincumbents to ignore significant threats) and blindly accepting the “Disrupt orbe disrupted” mantra (which may lead incumbents to jeopardize their corebusiness as they try to defend against disruptive competitors).
Theauthors acknowledge that disruption theory has certain limitations. But theyare confident that as research continues, the theory’s explanatory and predictivepowers will only improve.
HBR Reprint R1512B
Feature
ECONOMICS & SOCIETY
The Overvaluation Trap
Roger L. Martin and Alison Kemper | page100
The overvaluation trap was first identifiedby Michael Jensen in a 2005 article examining the dot-com bubble. He noted thatit often affects entire sectors and that in response to it executives tend toadopt two strategies: investing in hot, hyped technologies (as Global Crossingdid with fiber-optic cable) and glamorous acquisitions (Nortel’s downfall). Andwhen investment opportunities start to dry up, firms may turn to financialmanipulation (think WorldCom) to prop up their overpriced equity.
The authors point out that today companiesin the pharmaceutical and oil sectors are caught in this same trap. Their marketcaps are spectacularly high. But massive spending on R&D is not producingmore new drugs, and ever greater investment in oil reserve exploration is onlyexacerbating the glut of supply. The dance may be ending for both industries,and their executives need to figure out new and more-realistic narratives forvalue creation.
HBR Reprint R1512H
Managing Yourself
Succeed in New Situations
Keith Rollag | page 119
You can’t get very far in your careerwithout taking new jobs, joining new organizations, transferring to newlocations, and meeting and building relationships with new contacts. Butsurprisingly, many professionals stumble in these situations because theyhaven’t mastered three basic yet critical getting-to-know-you skills:introducing themselves, remembering names, and asking questions.
Fortunately, it’s fairly easy to get betterat them. In this article, a Babson professor who has spent 20 years counselingexecutives and MBAs offers tactics that will help you navigate new situationsmore confidently. For instance, introductions tend to go more smoothly ifyou’ve practiced your opening lines—and you know how to make the other personfeel valued. Names are easier to remember if you repeat and rehearse them andlink them to vivid mental images. And you’re more likely to get the answers youneed if you figure out the right person to approach—and the right time—and askshort, to-the-point questions. By paying attention and applying simple butpractical strategies like these, you can set yourself up for success with newchallenges.
HBR Reprint R1512J