A Butterfly in a World of Bulls and Bears

In this chapter, an algorithm is given to identify the blue ocean. This is a divergence from disruptive innovation approach which does not tell you how you can identify an opportunity.  The approach uses a few simple tools. First is to map out what they authors call a strategy canvas - basically a bunch of factors that a product or service competes on and where a particular brand stands there - high, medium or low. Let me illustrate this by taking an example of fiction novels in Indian market. If I were to list some of the factors, books compete on, they would be complexity of plot, complexity of setting, elegance of language, uniqueness of characters, novelty of theme, audience context and of course price. Two major best selling genres in India market were foreign commercial fiction and Literary fiction. Foreign commercial fiction would have high complexity of plot, high complexity of setting, medium language quality, medium  uniqueness of characters, high novelty of theme, low audien

The first Chapter of this book introduces the concept of blue ocean strategy as against red ocean strategy. Red being the intense fight for a share of the existing market and blue being the creation of a new market. At the outset this sounds very similar to Professor Christensen's disruptive innovation strategy. The book also mentions the idea of value innovation. It is mentioned just focusing on value will lead to incremental value which is similar to sustaining innovation and just focusing on innovation may lead to innovation that doesn't necessarily drive customer value. This is similar to trying to create a product to do a job that people don't need done.  This book talks about blue ocean as something that increases the value delivered to the buyer at the same time reducing cost. It does get a bit confusing when the target customers are currently non consumers. The disruptive innovation approach was reduction of cost and ease of use by decoupling and dropping some of th

The final chapter in the Innovators Solution deals with an important topic - the leadership needed to drive disruptive innovation in established firm. Professor Christensen challenges the conventional wisdom of CEOs and more senior leaders focusing on areas which bring more current revenue or have more number of people and not so much on growth businesses. But he argues that the high value traditional business has a well oiled machinery to make it deliver results and does not necessarily need leadership discretion. Whereas emerging businesses have special needs different from established businesses that require intervention of senior leadership with sufficient power to steer in the right direction. This is in line with the management thinking that daily order of business can continue without leadership intervention whereas leadership is needed for long term vision and growth. But practically companies are answerable to markets every quarters and CEOs and senior leaders can't even b

This chapter talks about what is the correct investment and what is a wrong investment. As per professor Christensen, the investment in new ventures must be small and the expectation must be that it become profitable fast which is in line with emergent strategy. On the other hand, investing a large amount and expecting huge growth in revenue but being patient about profitability would be a wrong investment. This is because it can lead to money being invested in a wrong idea. Even the right idea may take the wrong path if huge growth expectation comes in and focus is on their biggest customers instead of focusing on customers who are not being served today or have lower willingness to pay. Also if growth of main business stalls, the small business will be expected to take on the burden of growth. All this may set it up for failure. That is the reason it is better for emerging businesses not to attract big money and become profitable in a small scale as fast as it can. The same is true w

This chapter deals with the strategy formulation and execution process. Core of strategy is about what you choose to invest money on. This book talks of two approaches to do that and how each must complement the other. The first is top driven driven and with longer term focus - this is called deliberate strategy. The other is a driven at an operational level and are more an immediate response to opportunities and threats on the ground - this is called emergent strategy. The key to success is balancing between the two strategies.  The approach to both strategies are different as deliberate strategy is more predictable and can show immediate results while emergent strategies may not always show huge value or huge margins. Also many of these may fail. So often companies give up opportunities for emergent strategies and choose to pursue the more predictable big opportunities. This will bring immediate success but eventually as stable businesses dry up, they may find they have missed the bu

Anyone who has worked in a company will know the organizational structure, incentives and performance measurement structure are key to the success of any initiative. Here Professor Christensen uses his RPV (Resource, Process, Values) framework that he used for evaluating acquisitions in his earlier book to identify right organizational structure for the team driving the innovation. Resources are basically money, people, Intellectual property, infrastructure that a company has. Processes are the approach a company takes to plan, sell, make decisions, execute projects etc. Values are what the company prioritizes - whether it is higher margins or larger value sale or brand reputation. For a sustaining innovation typically the processes and values for the innovation will align with the original organization. So you don't need a new organization. However for a disruptive innovation, the processes and values will be different. So one needs to create a new organization with appropriate pr

The premise here is that while products may get commoditized, value never true leaves the overall value chain - it just migrates from one part to a different part. Professor Christensen presents the life cycle of a product as a series of commoditization and de-commoditization. This is closely linked to the concept of integration and modularization. What he says is a product become commodity for a market when it hits the highest level of performance customers require. Beyond that customizers start valuing flexibility and price. So there is a shift towards modularization and outsourcing non core elements to reduce price and develop ability to do mass customization by picking from components available in the market. However the performance and some core components will determine the broader solution's costs. So value will migrate to that component. Sustainable innovation on that component will tend to drive value.  Consider a product like an accounting service. At some point, it must

This is about deciding what activities a company should keep in house and what can be outsourced or contracted. Thinking of an end to end solution which could either be a product with various components or a solution with product and service components, one needs to decide if a company is best placed to deliver the complete solution or be just the assembler who assembles the solution using the various components from vendors or provide just one or two components. Now the answer is it depends in which stage of the innovation cycle the technology associated with the solution is. For an early stage innovation which is not meeting all performance requirements a clients need, integration works better as companies have to continuously tweak every component to arrive at the best performance. One company managing all the components can have much more agility and faster time to market. On the other hand, a more mature innovation is better served by breaking solution into solution components som