Innovators solution - Chapter 10 - The Right Leadership to drive Innovation
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 be sure they would be around for 3-6 year horizons to reap rewards of long term initiatives. So they are incentivized to focus on initiatives that yield results within a quarter or at max a year. Professor Christensen also acknowledges this point and shows how most disruptive innovations have come from founder led companies and not so much in professionally managed listed companies. And even professionally managed companies, diversified companies have better chance of fostering innovation somewhere in the gaps between the businesses.
He mentions 4 steps around the leadership space to foster innovation. First is to have the process of creating next growth business when main business is still doing well and growing to avoid pressure on the new business. Second is to assign an influential leader to the new business to ensure sufficient resources are allocated and exemptions are obtained from stifling processes. Third is to have a dedicated team to grow the new business. Final step is to have a process for rest of the organization to bring up new ideas and channel to this new business team in an efficient manner.
He says every company should have this innovation engine running constantly with sufficient resources. But somehow the whole idea is counter intuitive and I am not aware of too many companies that have gone along this path. Also there have been many companies that have survived for years without going along this path. Ideally they should have gone extinct through the natural process of disruptive innovation. How they have managed to survive is worthy of study. Whether they have their own version of disruptive innovation process that is not observable or some characteristic of their business enables them to survive without innovation. After all, innovation is not the source of business value for all companies. There are rent seeking aspects such as brand perception, political networks, greater access to capitals, lands and other resources that are driving the advantage rather than innovation. One has to see what role disruptive innovation plays in these kind of scenarios as well. While one can agree rent seeking is not the most optimal behavior to maximize value across the system, it is a reality and can't be wished away while formulating a theory on how to succeed.