Clay Christiansen, academician, thinker and author of two best
selling books on innovation-The Innovator's Dilemma and The Innovator's
Solution- is an amazing man. At six foot and plenty of inches, he would make
you believe that he would have a powerful style of teaching. But his delivery is
almost monotonous, and if it were not for his insightful content, one would
believe that he would lose his audience, which typically consists of CEOs and
extraordinarily ambitious and articulate MBA students. And his ideas are so
different that it forces one to not just listen to every word but also reflect
on one's own views on success through innovation.
Take the case of the steel industry, for example. The decimation
of the traditional steel mills by the mini mills was a process that was not one
of breakthrough product or process innovation but a steady replacement in key
market segments. It started with a move into the "rebar" construction
segment which needed low quality steel and the traditional mills were happy to
leave it to the mini mills. But soon, the mini mills started improving their
quality enough to challenge the incumbents in the angle iron segment. The
competition was again moving upward into the structural steel segment to finally
complete the conquest with the takeover of the sheet steel segment. This model,
which is what Clay calls the ability of innovators to beat their larger
competition with the "asymmetry of innovation", is one of great
learning for all of us who are playing the Innovation game in the IT industry.
The possibility of a new method or product, which would call for
new learnings and force "the elephant to dance" would be squashed
early in the game by both the firm and its incumbent supplier. However, when
disruptive technologies are introduced slowly, and almost invisibly, at the
lower end of the pyramid, the new entrants have a much better opportunity to
succeed since they are able to establish their "proof of concept" in a
lower stakes game and iron out the chinks and refine their value propositions to
ready themselves for the bigger battles for customer mind and wallet share.
Sometimes, the ability to address over-served customers with a
different business model, even if it provides higher quality or lower cost, can
be less evident than the ability to generate new market disruptions by competing
against non-consumption rather than the eight hundred pound gorilla incumbents.
Clay's approach calls for giving the innovation group air and
spinning it off as a different unit, which can set its own agenda and even its
own culture to succeed in a new market, this may seem to be the obvious
solution, but there is a different school of thought, led by another celebrated
academician and thinker Michael Tushman, who recommends the "leverage"
solution-use all the abilities of the larger organization and still create a
layer of independence on top of this interdependence to enable new ideas to be
tested out, both on new customers and existing customers of the organization. As
we research and disseminate ideas about the development of innovation in Nasscom-through
the Innovation Forum, and large companies like Accenture and TCS beginning to
share a platform to discuss innovation with the startups and mid-size firms-one
thing is clear: one size cannot fit all and each firm will have to make a
considered choice of what works best for it.
Finally, back to Clay and his intriguing comment on the Indian
offshore firms. He cautions American firms that while they, and, indeed, Wall
Street, may love it if they keep eliminating assets and people in the process of
comprehensive outsourcing, a day will come, very similar to what happened with
Flextronics and many of their PC OEM customers when all the value migrates to
the outsourcer. Are American firms listening? One would hope not!