World-renowned Harvard Business School professor, consultant and best-selling author Clayton M. Christensen knows the power and potential of what he calls "disruption innovation," but he also knows that unlocking it requires the courage to ask the simple questions competitors simply fail to consider.

"What causes successful companies to fail?" Christensen inquired at the 2011 World Innovation Forum, where ExecuNet exclusively reported for attendees. The revelation, he suggested, is resident in organizations' and leaders' respective capacity to risk failure and all that is required to explore disruptive innovation and their willingness to effectively envision business failure if they do not connect with customers' real needs.

Just consider how Toyota entered the US automobile market. Because it made no sense to the US automakers to "defend the least profitable piece of the business," they watched as Toyota brought the Corona, then the Tercel and Corolla, and eventually, many other models to market. By the time the US car manufacturers realized the bigger threat, it was too late to save Detroit, which is now seeking its own reawakening.

Now, Christensen explained, Toyota is watching Korean carmakers Hyundai and Kia enter at the low end of the market and move upstream. In the future, the professor forecasted, the Chinese will bring their compact cars to market and attempt to displace the rest. Across industries, and especially with advancements in technology, Christensen said, it's not hard to envision other businesses "coming in at the low end of the market and cleaning out the leaders."

For added proof, Christensen said, consider these comparative, historical footnotes. "Canon did it to Xerox. Sony did it to RCA. Mitsui did it to the shipping industry. Japan disrupted the United States," he recalled, and the US economy is still struggling with the aftermath of a shrunken manufacturing industry and the loss of millions of jobs. On this point, the professor said, microeconomic issues have a major ripple effect on macroeconomic conditions.

The willingness to continually challenge one's market position in relation to key customer segments has to stretch far beyond what senior managers may have learned in business school. Learning not only from the missteps, but even the highly plausible decision-making of companies and executives that have experienced failure can help innovators learn what they might apply differently to achieve positive business outcomes.

The more one digs into failed business ventures, Christensen shared, the less one should be inclined to simply blame a "stupid manager." Sometimes, a competitor's capacity to compete with a 20 percent cost advantage is enough to disrupt and redistribute global market share.

Because the trajectory of many organizations' technological improvements almost always outstrips their customers' abilities to use them, innovating carries risk. Customers' abilities to utilize or absorb changes into their daily lives, routines and processes should be paramount concerns.

Christensen said dominating markets through disruptive innovation requires organizations to:

• Focus on core competencies
  
  
• Consider what the enterprise has to be good at tomorrow to be successful
  
  
• Think long-term. Don't let short-term profit or return on net assets (RONA) drive key business decisions, especially when it comes to defending lower-profit business units.
  
  

"Disruption keeps happening over and over again," Christensen said. "We have to have the ability to start new companies up. The only way for the leader who is being disrupted to catch the disruption is to create a completely different business unit and give it an unfettered charter to kill the parent," he added.

"To make something simple and affordable is very complicated. When you make it affordable and simple, it enlarges the market. Try to make a good product but then focus on moving up market. This is where success begins or ends."

Joseph Daniel McCool
Joseph Daniel McCool is senior contributing editor with ExecuNet and principal of management recruiting/succession advisory firm The McCool Group. He is also the author of Deciding Who Leads: How Executive Recruiters Drive, Direct & Disrupt the Global Search for Leadership Talent, recognized widely as "one of the best business books of 2008," and its Brazilian Portuguese translation, Escolhendo Líderes, published in June 2010.

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