exec summaries the innovators solution

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Creating and Sustaining Successful Growth

THE INNOVATOR’SSOLUTIONTHE SUMMARY IN BRIEF

Roughly one company in every ten is able to sustain the kind of growththat translates into an above-average increase in shareholder returns overmore than a few years. Once a company’s core business has matured, thepursuit of new platforms for growth entails daunting risk — to put it simply,most companies just don’t know how to grow, and pursuing growth thewrong way can be worse than no growth at all.

In The Innovator’s Dilemma, Clayton Christensen showed how compa-nies that focus on high-end products for profitable customers can be blind-sided by “disruptive” innovations from new competitors — innovations thattarget low-end customers seeking cheaper products. In The Innovator’sSolution, Christensen and co-author Michael Raynor show establishedcompanies how to create disruptions rather than being destroyed by them— how to turn innovative ideas into new disruptive products that will leadto long-term profitable growth.

Concentrated Knowledge™ for the Busy Executive Vol. 25, No. 11 (3 parts) Part 1, November 2003 • Order # 25-26

CONTENTSHow Can We BeatOur Most PowerfulCompetitors?Pages 2, 3

What Products WillCustomers WantTo Buy?Pages 3, 4

Who Are the BestCustomersFor Our Products?Pages 4, 5

Getting the ScopeOf Business RightPages 5, 6

AvoidingCommoditizationPage 6

Is Your OrganizationCapable of DisruptiveGrowth?Page 7

Disruptive GrowthStarts at the TopPage 8

By Clayton M. Christensen andMichael E. Raynor

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What You’ll Learn In This Summary✓ How you can beat your most powerful competitors. It all starts with dis-

ruption — if you learn the elements of disruption and practice its theories, nocompetitor will be able to touch you.

✓ What products your customers will want to buy. Learn how to accuratelysegment your markets (hint — it’s not by demographics like age or gender),help your disruptions grow into healthy businesses, and avoid the marketforces that can fool you into making bad decisions.

✓ Who the best customers are for your products. How do you extractgrowth from an audience that doesn’t use your products at the moment? It’s asecret that can put you over the top.

✓ Get the scope of your business right. Should you take care of key func-tions in-house, or outsource them? Should you integrate your product offer-ings or modularize? Find out which is right for your business.

✓ Develop disruptive growth from the top down. Powerful executive lead-ership is essential in turning disruptive innovations into successful businesses.What should your executive leadership do to get the ball rolling toward suc-cessful disruptions? How can they help foster sustained business growth?

How Can We Beat Our MostPowerful Competitors?

Managers have long sought ways to predict the out-come of competitive fights based around innovations,but it has, in recent years, become increasingly difficultto do so. It’s not simply a matter of big companies hav-ing the resources to stomp out smaller competitors or tobring about incremental changes or innovations thatenable them to outlast the competition. It is the circum-stances of innovation that often determines whetherincumbent industry leaders or upstart companies win acompetitive fight.

Entrants are more likely to overtake entrenched lead-ers in disruptive circumstances — when the challenge isto commercialize a simpler, more convenient productthat sells for less money and appeals to new customers.Established companies, conversely, can capture disrup-tive growth (rather than be defeated by it), if they areaware of the circumstances of disruptive innovationsand are able to leverage them for their own benefit.

Three Elements of DisruptionThere are three critical elements of disruption (these

were first identified in the book, The Innovator’sDilemma and are illustrated in the chart at right):

● A rate of improvement that customers can fullyuse or absorb. This is represented by the dotted line.

● A rate of improvement that goes beyond whatcustomers can fully use or absorb. The pace of tech-nological progress almost always outstrips the ability ofcustomers in any given tier of the market to use it, inpart because companies keep striving to make betterproducts that they can sell for higher profit margins totheir most demanding, high-end customers. This rate ofimprovement is shown by the two solid lines in thechart.

● A distinction between sustaining and disruptiveinnovation. A sustaining innovation targets thosedemanding, high-end customers with better perfor-mance than previously available, whether that perfor-mance is an incremental improvement or a break-

through, leapfrog-over-competitors variety.Disruptive innovations do not attempt to bring better

products to established customers in existing markets.Instead, they introduce products and services that arenot as good as existing products, but which are simpler,more convenient, and less expensive than existing items.

Disruption often paralyzes industry-leading compa-nies, which are more accustomed to bringing about sus-taining innovations. In other words, established compa-nies are motivated to focus on pushing innovations tomeet the needs of their high-end customers (it’s hard toturn away from your most profitable customers.) Thisleaves the door open for new entrants to target yourlow-end customers. Eventually, however, the new

THE INNOVATOR’S SOLUTIONby Clayton M. Christensen and Michael E. Raynor

— THE COMPLETE SUMMARY

Published by Soundview Executive Book Summaries (ISSN 0747-2196), P.O. Box 1053, Concordville, PA 19331USA, a division of Concentrated Knowledge Corporation. Published monthly. Subscriptions: $195 per year in U.S.,Canada & Mexico, and $275 to all other countries. Periodicals postage paid at Concordville, PA and additional offices.

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SoundviewExecutive Book Summaries®

ROBERT SMITH – Senior Contributing EditorDEBRA A. DEPRINZIO – Art and Design

CHRIS LAUER – Managing EditorCHRISTOPHER G. MURRAY – Editor-in-Chief

GEORGE Y. CLEMENT – PublisherSoundview Executive Book Summaries®2

The authors: Clayton M. Christensen is the Robert andJane Cizik Professor of Business Administration at HarvardBusiness School. Michael E. Raynor is a Director atDeloitte Research.

Adapted by arrangement with Harvard Business SchoolPress, from The Innovator’s Solution by Clayton M.Christensen and Michael E. Raynor. Copyright© 2003 byHarvard Business School Publishing Corporation. 304pages. $29.95. 1-57851-852-0.

(continued on page 3)

The Disruptive Innovation Model

Sustaining Innovations

Time

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DisruptiveInnovations

Range OfPerformanceThat CustomersCan Utilize

Performance That CustomersCan Utilize or Absorb

Pace of Technological Progress

entrant will make improvements and move up-market— now targeting your high-end customers.

Value NetworksDisruptions create and exist in value networks—con-

texts within which companies respond profitably to thecommon needs of a class of customers through evaluat-ing and establishing appropriate processes and channelpartners. Two kinds of disruptions can create new valuenetworks:

● New-market disruptions. These disruptions all butcreate a need in customers, by virtue of their affordabili-ty and simplicity of ownership. Canon’s desktop photo-copiers, for example, made photocopying in one’s office(rather than shipping a job out to a print shop) easy, and,as a result, people made a lot more copies. As improve-ments are made in new-market disruptions, the compa-nies that foster them are able to pull customers out ofold, mainstream value networks and into new ones.

● Low-end disruptions. Disruptions that take root atthe low end of the original, mainstream value networkdo not create new markets, but simply feature low-costmodels that pick off an established firms’ least attractivecustomers. ■

What Products Will CustomersWant to Buy?

Marketers often segment markets by product type,price point, or demographics of the individuals or com-panies that comprise their customer base. This segmen-tation is often defined by the attributes of products orcustomers, which reveals correlations between thoseattributes and outcomes. It does not, however, offerplausible causality — confident assertions of what fea-tures, functions, and positioning will cause customers tobuy a product.

In essence, customers “hire” products to do specific“jobs,” and managers must segment their markets tomirror the way their customers experience life (seeMarriott example at right).

Companies that target their products at the circum-stances in which customers find themselves, rather thanat the customers themselves, are those that can launchpredictably successful products.

Knowing what job a product gets “hired” to do — and

knowing what jobs out there that are not getting donevery well — can give innovators a much clearer roadmap for improving their products to beat the true com-petition from the customer’s perspective, in everydimension of the job. This segmentation can then beused to gain a disruptive foothold — the initial productor service that is the point of entry for a new-marketdisruption.

The first time that builders of a new-growth businessneed to assess what the target customers really try to getdone is when they are searching for that disruptivefoothold. While it may never be possible to get everydimension of a product introduction in a new-marketdisruption right at the outset, using the “jobs-to-be-done” lens can help innovators come to market with aninitial product that is much closer to what customersultimately discover that they value. How does one dothis? By observing what people seem to be trying toachieve for themselves, then asking them about it.

Helping Disruptions GrowExciting growth happens when an innovation

improves in ways that allow it to displace incumbentofferings. These are sustaining improvements, relative tothe initial innovation—improvements that stretch tomeet the needs of more and more profitable customers.

With low-end disruptions, it can be easy to determinethe right sequence of product improvements in the up-market march. Target stores, for example, set out toreplicate the product line, brands, and ambience previ-

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The Innovator’s Solution — SUMMARY

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How Can We Beat Our Most PowerfulCompetitors?(continued from page 2)


Marriott’s Circumstance-BasedBrands

Marriott Corporation has developed a brand archi-tecture that is consistent with several different “jobs”its customers experience in life, thereby facilitatingthe creation of new disruptive businesses, whilesimultaneously strengthening the Marriott brandname. Marriott Hotels are positioned as the choicewhen the job is to host a business meeting;Courtyard by Marriott is the choice when the job isto get a clean, quiet place to work into the evening;Fairfield Inn by Marriott is the inexpensive choice forfamily getaways; Residence Inn by Marriott providesa home away from home.

Such a crisply defined purpose brand guides cus-tomers to hire the various hotels to do different jobs,thereby strengthening the Marriott brand and itsendorsing power.

ously only available in expensive, full-service depart-ment stores. The low-end disruptor’s marketing task isto extend the lower-cost business model up towardproducts that do the jobs that the more profitable cus-tomers are trying to get done. New-market disruptions,conversely, challenge innovators with inventing theupward path, because no one has been up that trajecto-ry before. ■

Who Are the Best CustomersFor Our Products?

Which initial customers are most likely to become thesolid foundation upon which we can build a successfulgrowth business? How can we reach them? It is quitetricky to find new market customers (or “noncon-sumers”) in the typical model of disruptive innovation.When only a fraction of a population is using a product,some of the nonconsumption may simply reflect the factthat there just is not a job that needs to be done in thelives of nonconsumers. Thus, a product that purports tohelp nonconsumers do something that they hadn’talready prioritized in their lives is unlikely to succeed.

Another kind of nonconsumption occurs when peopletry to get a job done but find themselves unable toaccomplish it themselves, because the available prod-ucts are too expensive or too complicated. Hence, theyput up with getting it done in an inconvenient, expen-sive, or unsatisfying way.

This type of nonconsumption is a growth opportunity,waiting for a new-market disruption that enables theseconsumers to begin buying and using a product thathelps them do the job for themselves.

Extracting Growth from NonconsumptionThere are four elements of a pattern of new-market

disruption, which managers can use to find ideal cus-tomers and market applications for disruptive innova-tions. These elements are—

● The target customers are trying to get a job done,but because they lack money or skill, a simple, inexpen-sive solution has been beyond reach.

● These customers will compare the disruptive prod-uct to having nothing at all. As a result, they are delight-ed to buy it, even though it may not be as good as otherproducts available at high prices to current users withdeeper expertise in the original value network (in otherwords, the bar one must scale to delight these customersis quite low).

● The technology that enables the disruption might bequite sophisticated, but disruptors deploy it to make thepurchase and use of the product simple, convenient, andfoolproof (enabling people with less money and trainingto begin consuming).

● The disruptive innovation creates an entire newvalue network. The new consumers typically purchasethe product through new channels and use the productin new venues.

Disruptions that fit this pattern succeed because estab-lished competitors view entrants in the emerging marketas irrelevant. The mainstream market the established


What Products Will CustomersWant to Buy?(continued from page 3)

Akio Morita Helps Sony CauseDisruptions

One of the best leaders in innovative disruptionswas Akio Morita, Sony’s founder.

From 1950 through 1982, the company success-fully built a dozen different new-market disruptivegrowth businesses, from the first solid-state blackand white television, to the introduction of theWalkman and 3.5-inch floppy disk drives. Every new-product launch decision in this era was made byMorita himself and a trusted group of associates.They looked for ways in which their miniaturized,solid-state electronics could help a larger populationof less-skilled and affluent people conveniently andcheaply accomplish jobs they already got donethrough awkward, unsatisfactory means. Moritaobserved the ways in which people accomplishedthese tasks and used that data to build innovationafter innovation.

The end of Sony’s disruptive odyssey came in1981, when Morita began withdrawing from activemanagement of the company in order to becomemore involved in Japanese politics. In his placecame a team of marketers who used sophisticated,quantitative techniques for segmenting markets andassessing market potential. Although these methodshave proven successful on a limited basis, the inno-vations that have arisen have been more sustainingin character—such products as the PlayStation videogame and the Vaio notebook computer were lateentrants into established markets. Time will tell if thecompany can ever quite return to the Morita era ofdisruptive innovation.

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companies sustain is unaffected by the new value net-work for some time. Incumbents might even think theyhave sensed a threat and are responding, investing inor-dinate amounts of money in an attempt to advance thetechnology enough to please the customers in the exist-ing value network, forcing the disruptive technology tocompete on a sustaining basis. This, of course, is thewrong response. ■

Getting the Scope of BusinessRight

Decisions about what activities to handle in-house andwhat to procure from suppliers and partners have a pow-erful impact on a new-growth venture’s chances for suc-cess. Most companies follow the core competencyrule—if something fits your core competence, youshould do it inside; if it’s not your core competence andanother firm can do it better, you should outsource it tothat firm.

The problem with the core-competence/not-core-com-petence categorization is that what might seem to be anoncore activity today might become an absolutely cru-cial competence to have mastered in a proprietary wayin the future, and vice versa. Consider, for example,IBM’s decision to outsource the microprocessor for itsPC business to Intel, and its operating system toMicrosoft. In the 1980s, when IBM made these deci-sions, it did so in order to focus on what it did best—designing, assembling, and selling computers—and tokeep development costs and time at bare minimum. Yet,in the process of outsourcing what was not its core or itscompetence, IBM helped raise the profile and businessstature of the two companies that eventually capturedmost of the profit in the industry.

To Integrate or To Outsource—That IsThe Question

The core/noncore categorization can lead to seriousand even fatal mistakes. Instead of asking what theircompany does best today, managers should determinewhat they need to master today and in the future inorder to excel on the trajectory of improvement that cus-tomers will define as important.

Remember the job-to-be-done approach—customerswill not buy your product unless it solves a problem forthem. What comprises a solution, however, differs acrosstwo circumstances — whether products are not goodenough, or more than good enough. The advantage goesto integration when products are not good enough, and to

outsourcing when products are more than good enough.

The Not-Good-Enough WorldWhen product functionality and reliability are not yet

good enough to address the needs of customers in agiven tier of the market, companies must compete bymaking the best possible products. Firms that build theirproducts around proprietary, interdependent architec-tures (i.e., if one part cannot be created or used indepen-dently of another part) enjoy important competitiveadvantage over competitors whose product architecturesare modular (in which the fit and function of all ele-ments are so connected, it doesn’t matter who makes theseparate components).

Companies that compete with proprietary, interdepen-dent architectures must be integrated—they must con-trol the design and manufacture of every critical compo-nent of the system in order to make any piece of thesystem.

Trajectory and ModularityOnce customers’ requirements for functionality and

reliability have been met, they redefine what is not goodenough, changing the basis of competition in that market.

The pressure of competing along this new trajectoryof improvement forces a gradual evolution in productarchitecture, away from the proprietary and interdepen-dent, toward more modular designs in a period of too-good performance. Modular architectures enable com-panies to introduce new products faster because theycan upgrade individual pieces of a product without hav-


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Why Computer“Appliances” Failed

It is difficult, if not impossible, to convince non-consumers to make a purchase if a given productdoes not fall within their prioritized needs. For exam-ple, in the 1990s, a number of companies, includingOracle, thought they saw a growth opportunity in thesignificant number of American households that didnot yet own a computer. These companies reasonedthat the cause of nonconsumption was the price of aPC, and they thought they could create growth bydeveloping an “appliance” PC that could access theInternet and perform basic PC functions at a pricearound $200.

Their efforts failed, in large part because expensewas not the solution for opening the market — thenonconsuming households simply did not haveenough “jobs” for any computers, regardless ofprice.

Soundview Executive Book Summaries®


Who Are the Best CustomersFor Our Products?(continued from page 4)

ing to create a brand new design. Modularity enablesindependent, nonintegrated organizations to sell, buy,and assemble components and subsystems. ■

Avoiding CommoditizationMany executives are resigned to the belief that,

regardless of the innovation, the inevitable fate of theirproducts is to be “commoditized.” However, there issome hope for them. Research has found that wheneverCommoditization is at work somewhere in a valuechain, a reciprocal process—call it “de-commoditiza-tion”—is at work somewhere else in the value chain.Whereas the lack of differentiability inherent to com-moditization undermines an organization’s ability tocapture profits, de-commoditization creates opportuni-ties to create and capture significant wealth. The compa-nies that position themselves at a spot in the value chainwhere performance is not yet good enough will capturethe profit.

Six Steps of CommoditizationThe natural and inescapable process of commoditiza-

tion occurs in six steps:1. As a new market coalesces, a company develops a

proprietary product (complete with a proprietary archi-tecture) that, while not good enough, comes closer tosatisfying customers’ needs than any of its competitors.

2. As the company strives to keep ahead of its directcompetitors, it eventually overshoots the functionalityand reliability that customers in lower tiers of the mar-ket can use.

3. This precipitates a change in the basis of competi-tion in those tiers.

4. The change in basis of competition precipitates anevolution toward modular architectures.

5. That evolution facilitates the disintegration of theindustry.

6. It becomes difficult to differentiate the performanceor costs of the product versus those of competitors, whohave access to the same components and assembleaccording to the same standards.

De-commoditizationAttractive profits of the future are often to be earned

elsewhere in the value chain, in different stages or layersof added value. This de-commoditization occurs in placesin the value chain where attractive profits were hard tomaintain in the past—in the formerly modular and undif-ferentiable processes, components, or subsystems.

Modular disruptors can only keep profits healthy if

they carry low-cost business models up-market asquickly as possible. This enables them to keep compet-ing against higher-cost makers of proprietary products.Competitive forces compel suppliers of these modularproducts to create architectures that, within modularsubsystems, are increasingly interdependent and propri-etary. The performance-defining subsystems thenbecome de-commoditized as the result of the end-useproducts becoming modular and commoditized.

The Value of BrandsExecutives who seek to avoid commoditization often

rely on the strength of their brands to sustain profitabili-ty, without considering that brands themselves, too,become commoditized and de-commoditized. Whenthings aren’t good enough yet in the value chain, andcustomers are not certain whether a product’s perfor-mance will be satisfactory, a well-crafted brand canclose some of the gap between what customers need andwhat they fear they might get if they buy from anunknown supplier.

The migration of branding power in a market that iscomposed of multiple tiers is a process, not an event.Brands of companies with proprietary products typicallycreate value as they attract customers who are not satis-fied with the functionality or reliability of the best avail-able products. When one deals with more modular prod-ucts and a greater emphasis on speed and convenience,the power to create profitable brands migrates moretoward subsystems and the channel used. ■

The Innovator’s Solution — SUMMARYGetting the Scope of Business Right(continued from page 5)


IBM LosesEarly Branding Power

In the early decades of the computer industry,investment in complex mainframe computer systemsunnerved most managers. Because IBM’s servicingcapabilities were unsurpassed, the IBM brand hadthe power to command price premiums of 30 to 40percent, compared with other companies’ compara-ble equipment.

How did the brands of Intel and MicrosoftWindows subsequently steal the valuable brandingpower from IBM in the 1990s? It happened whencomputers came to pack good-enough functionalityand reliability for mainstream business use, andmodular architectures became predominant in thosetiers of the market. At that point, the microprocessorand operating system running the computer becamenot good enough, and the locus of the powerfulbrands migrated to those new locations.

Is Your Organization CapableOf Disruptive Growth?

A surprising number of innovations fail becauseresponsibility to build these businesses is given tomanagers or organizations whose capabilities are notup to the task. Indeed, an organization’s capabilitiesbecome disabilities when disruption is afoot. The con-cept of such capabilities can be unpacked into threeclasses or sets of factors that define what an organiza-tion can and cannot accomplish— its resources, itsprocesses, and its values.

ResourcesResources (people, technology, information, cash, etc.)

are the most tangible of the three factors, because theycan be hired and fired, bought and sold, depreciated orbuilt. They are often visible and measurable, and can beeasily transported across the boundaries of an organiza-tion. Typically (and unfortunately), the wrong people arechosen to lead a disruptive venture. Why is that?

Those with the right stuff are usually the wrong peo-ple. When hiring potential managers, corporationsoften focus on attributes—“good communicator,”“decisive,” “good people skills” — that do not neces-sarily lend themselves to disruptive successes. Ratherthan focus on categories, companies should considerfocusing on prior experiences that show appropriateintuition and management skills for the disruptiveenvironment of a new-growth business venture. Whatsorts of problems have they wrestled with in the past?Have they learned enough to meet similar challengeshead-on in a new environment? Can they learn andbounce back from failure?

ProcessesOrganizations create value as employees transform

inputs of resources (the work of people, equipment,technology, etc.) into products and services of greaterworth. The patterns through which these transforma-tions are accomplished—the processes at work—include ways products are developed and made, and themethods by which procurement, research, budgeting,compensation, resource allocation, and more areaccomplished.

Processes are defined or evolve to address specifictasks, and the efficiency of a given process is deter-mined by how well these tasks are performed.Processes that define capabilities in executing certaintasks concurrently define disabilities in executing oth-ers. Consistency is key — processes are not as flexi-ble as resources, and must be applied in a consistentmanner, time after time. In addition, some processesare difficult to observe, and it can therefore be diffi-

cult to judge whether a process will facilitate orimpede a new-growth business.

ValuesAn organization’s values are the standards by which

employees make prioritization decisions—those bywhich they judge whether an order is attractive or unat-tractive, whether a customer is more or less importantthan another, etc. Whereas resources and processes areoften enablers that define what an organization can do,values often represent constraints that define what itcannot do.

If, for example, the structure of a company’s overheadcosts requires it to achieve gross profit margins of 40percent, a powerful value will likely evolve that will nixany idea that promises gross margins below 40 percent.Such an organization would be incapable of succeedingin low-margin businesses, because one cannot succeedwith an endeavor that cannot be prioritized. A differentorganization with a different cost structure might accorda high priority to a similar project. These differencescreate the asymmetries of motivation that exist betweendisruptors and “disruptees.”

The Right Organizational Home for DisruptiveBusinesses

Incumbent leaders in an industry almost alwaysemerge victorious in sustaining-technology battles,whereas historically they have almost always lost battlesof disruption. Industry leaders develop and introducesustaining technologies over and over again—theydevelop a capability for sustaining innovation thatresides in their processes. Sustaining-technology invest-ments also fit the values of the leading companies,because they promise improved profit margins from bet-ter or cost-reduced products.

Conversely, disruptive innovations occur so intermit-tently that no company has a practiced process for han-dling them. Disruptive products typically promise lowerprofit margins per unit sold and cannot be used by thebest customers, rendering disruptions inconsistent withmany companies’ values. They have the resourcesrequired to succeed, but their processes and values aredisabilities in their pursuit of disruptive innovation.

Smaller, disruptive companies are actually more capa-ble of pursuing emerging growth markets. They mightlack resources, but their values can embrace small mar-kets and their cost structures can accommodate lowermargins per unit sold. These advantages can add up toenormous opportunity for the organization whoseprocesses will facilitate what needs to be done andwhose values can prioritize those activities. ■


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Disruptive Growth StartsAt the Top

Senior executives of companies that repeatedly seekto create disruptive growth have three jobs:

● They must personally stand astride the interfacebetween disruptive growth businesses and the main-stream businesses, to determine through judgmentwhich of the corporations’ resources and processesshould be imposed on the new business.

● They must shepherd the creation of a process thatcan be called a “disruptive growth engine,” whichcapably and repeatedly launches successful growthbusinesses.

● They must perpetually sense when the circum-stances are changing, and keep teaching others to recog-nize these signals. Senior executives need to look to thehorizon (the low end of the market, or in nonconsump-tion) for signs that the basis for competition is chang-ing. They must then initiate projects to ensure the com-pany properly responds to the circumstance as an oppor-tunity, not a threat.

To succeed in disruptive business endeavors, CEOsmust be intimately involved. Because the processes andvalues of mainstream business by their very nature aremeant to manage sustaining innovation, there is noalternative at the outset to the CEO or someone withcomparable power assuming oversight responsibility fordisruptive growth.

Disruption as Part of the ProcessLaunching a single successful disruptive business can

create years of profitable growth—just ask GeneralElectric (which launched GE Capital), Johnson &Johnson (for their medical devices and diagnosticsgroup), or Hewlett-Packard (whose disruptive ink-jetprinter is now the company’s primary profit driver).Launching a sequence of growth businesses requiresleaders to repeatedly use sound theories to make solidkey business-building decisions. From these activities, apredictable, repeatable process for identifying, shaping,and launching successful growth can coalesce. Such anengine would have four critical components.

Step 1: Start Before You Need ToThe best time to invest for growth is when the com-

pany is growing. To build what will be a respectablegrowth business in five years’ time, you must startnow, adding new units to your portfolio of growthbusinesses as dictated by the growth needs of the cor-poration five years hence. This gives your businessesthe opportunity to grow under the radar, away fromthe glare of Wall Street, giving each disruptive

endeavor the time it requires to achieve viability andtake off. Wal-Mart today is a $220 billion business,but it took 12 years for it to make its first billion—itwas a disruption that needed a longer runway before ittook off.

Step 2: Put a Senior Manager in ChargeCreating a successful disruptive growth engine

requires the careful coaching of the CEO or anothersenior manager with the confidence and power toexempt a venture from an established corporate process,to declare when different processes need to be created,and to ensure that the criteria being used in resourceallocation are appropriate to the circumstance of eachventure and the needs of the company. He or she mustbe well versed in disruptive innovation theory, capableof discerning ideas with disruptive potential from thosebest deployed as sustaining endeavors, and able to max-imize the success prospects of disruptive ideas by feed-ing them into a nurturing business process.

Step 3: Create an Expert Team of Movers andShapers

Ideas often lose their disruptive growth potential inthe shaping process that they go through in order to getfunded. The challenge here is to create a separatelyoperating process through which ideas can be shapedinto high-potential disruptions. Senior managementshould create a core team that is responsible for collect-ing disruptive innovation ideas and molding them intopropositions that have the greatest chance for success.This core shaping group cannot use the company’s stan-dard planning and budgeting processes when launchingdisruptive businesses, because they will not know, at theoutset, the full dimensions of growth strategy that willultimately prove successful.

Step 4: Train the TroopsSales, marketing, and engineering employees are best

positioned to encounter disruptive growth ideas, andthus should be among the first of the company’s“troops” to be trained in the language of sustaining anddisruptive innovation. It is crucial that they come toknow what kinds of ideas they should channel into thesustaining processes of established business units, andwhich should be directed into disruptive channels.These people have direct contact with markets and tech-nologies that can yield ideas for new-growth businesses;with training, they can develop intuition on these mat-ters that far outstrip any kind of analyst-laden corporatestrategy. ■

