This is a great lecture from Professor Clayton Christensen at Business of Software 2011. He is a lecturer and professor at Harvard Business School and has some brilliant insights, something all entrepreneurs should understand. In this talk he describes disruption (referencing disruptive innovation) as the art of killing rather than being killed. How do you take on the incumbents in the marketplace? You can’t outspend them, and you probably can’t out innovate with new features and added benefits onto already existing products and services.
He implies that if you can focus on the job required to be done and the causal mechanism behind a customers decision then you can retain the ‘bleeding edge’ high ground and ensure continued profitability. Becoming a purpose brand is vital, i.e. one that states what job it tackles so as to become that brand people go to when thinking of a task. This is the only way to ensure sustained profitability. An example here is ‘furnishing my house’ and IKEA.
Drucker has a great quote:
“A customer rarely buys what the company thinks they are selling him (/her)”
Investigate what job people are using your product for, and improve on it. Companies are often wrong about how people are really using their services. People use chairs to change lightbulbs and not to sit on (all the time) so should chair companies make chairs that do both jobs better, or innovate with a new product for changing lightbulbs?
If you do the job well enough as a service (or product) then you don’t need a marketing budget. Sounds so simple hey? Too many companies compete on the same axis of performance and competition. Innovate on different axis, centered on the task only. Simple examples are Salesforce.com and Oracle, Toyota and Ford Motors.
Oddly he tells us not to listen to the customer but to be sure that the company makes the job easier and cheaper. A great example here is when Ford was the innovator in the market, and the famous line from Henry Ford himself:
“If we asked the customer what they wanted, they would have asked for a faster horse”.
Henry Ford understood that the problem was getting from A to B, and so simply innovated to make this task easier and quicker. He did not try to breed faster horses. People are willing to pay a premium for a product/service that provides a better solution.
Its true customers don’t know what they will need in a few years time, and companies do have to lead the way. However if they lose sight of the job being performed they lose track altogether. Jobs don’t change quickly. So don’t add features above customer requirements or capabilities. Yes it adds complexity, and makes it harder to copy, but sometimes you will get so far ahead of the customer that you become too complex and replaceable. Not a good place to be as a business. Christenson suggests rather than innovate on the same axis/market, look to create zero consumption markets with simple products.
He makes a point that refers to innovation as a culture, and investing in the services of the future before you need them. Because if you wait until you need the innovation persuading shareholders to move away from key business activities to invest in higher risk projects is difficult, if not impossible.
Finally he describes how companies are now competing on business models. This is something that i have mentioned before of how it is now ‘Battle of the Business Plans’. The three business models he describes are summarised below:
Solutions Shop Business
In this business model you define a problem and offer a solutions. Business consultants are perfect examples of this.
Value Adding Business
These business take something in at one end, add value, and sell it at a profit. Great examples are clothing manufacturers.
Facilitated Network Business
These are closer to customer company collaboration to find a better solution. Perhaps the sharing economy falls into this category also. There are many examples of this, but a couple are Lyft and Sharedesk. These companies will take revenue per transaction.
Lastly he talks of ‘stupid managers’. Be careful as a company that looks only at the Return on Net Assets (RONA) or Internal Rate of Return (IRR) as measures of profitability and a guide to decision-making. If you are not careful, you can easily outsource your core competency further down the supply chain even though we are taught in business school that this is the right framework within which to make decisions. Dell is a perfect example of this managerial oversight. He says the best way to make decisions, is on how many tonnes of cash you make.
Anyway, enough of my summary. Watch this, and let me know what you think.
……. Also since writing this post, i have been asked to share this link for the Business of Software blog post with Clayton’s talk, which also includes a transcript of the talk. Happy reading. Sorry i did not do this the first time around. I forgot.
[blip.tv http://blip.tv/play/AYLsphIC?p=1 width=”550″ height=”443″]
As i begin to write my fist assignments on Economic factors, both micro and macro, that are changing in this complex world i have stumbled across this great lecture from Professor Paul Krugman in October 2009, regarding the history and future of globalization. This was part of the Citigroup Foundation lecture at the Ford School of Public Policy and International Policy Centre.
In this video Krugman highlights that this is not a new phenomena, and walks us through the standard theory of comparative advantage and how this is perhaps not entirely relevant in todays world. He talks about a new Economic geography, including clustering and specialisation, and the demands that the complex value chain has on firms. He goes onto mention by products of globalization to include an integration of thought (ie all people thinking the same when faced with a crisis), and how perhaps globalisation needs policy coordination.
Have a listen to this, as i think it is well worth the hour and half.
The RSA Organisation is a true inspiration to myself, with many lectures and articles from some of the best intellectual minds on the planet. Jeremy Rifkin is one such mind, and is a bestselling author, political adviser and social and ethical prophet. In this lecture he explores the evolution and development of empathy and the ways in which this has profoundly shaped our development as a species and our social interaction within communities. Mr Rifkin calls for a more empathetic world, one where we can extend our empathy outside of our blood line, religion, and nation to include the entire population of the world, the animals within it, and the environment itself. He claims that the 6.8 Billion people of today (now actually over 7 Billion) are decendents from 2 individuals, ie we are all family. In the words of Rodney King;
“Why can’t we all just get along?”
As we have evolved our consciousness over time, from the early hunter gatherers, to the coffee drinking shoppers of today, we have expanded our levels of empathy to include people further and further afield. Taking Haiti as an example of the state of Global Empathy reached following the devastating earthquake there, Jeremy Rifkin suggest that we can evolve further using technology to communicate and spread the word. He believes we can evolve into a more empathetic species, called Homo-empathicus where we are concerned and feel for all people of this world and the world itself. Without this development, he states, we are doomed to self-destruction. Mr Rifkin calls for the beginning of a global debate to bring about empathic socialability and to begin to rethink the institutions (educational, political, commercial, societal) to promte a more empathetic world. And i suppose in short, this is what the RSA Organisation stands for.
I believe that unless the individuals within the business world begin to function with a higher level of morality and empathy towards others and with a better social vision that we will see a period of Global Destabilisation that will rock our species to the core, and will cost the Global Economy untold Trillions and set us back into the dark ages. Many people believe that Milton Friedman, the prophet of Free-Trade, to be an evil man but i feel this is a vast oversimplification. I am aware that he was involved in some dubious dealings and that his theories have caused hardship for many around the world, but i aim to look at his economical ideology rather than the results of such ideologies. But he once wrote;
‘our minds tells us, and history confirms, that the great threat to freedom is the concentration of power’.
Although in this he was talking about the centralised government, and the need to ensure a more de-centralised base for political and governmental power i believe this can be applied to a concentration of wealth, as it is easy to see that economic power can lead to political leaning and thus enable monopolies of power and self-interest. We, as business people, need to ensure that we are able to view anothers situation and seek empathy for that person so that we can share the resources of this world and promote freedom around the globe.
As ever, a truly enlightening and thought-provoking lecture from the RSA Organisation.
Please let me have any comments you have, so that we can aim to develop conversations and debate over this topic.
Stay Hungry, stay foolish… the words of a wise man?
Lets face it, Steve Jobs did great things for the human race, technology and creativity in general. He made computers accesible, and working flair part of the technological world. Even my mum can email, tweet, and continuously follow me and comment on all my goings on on Facebook due to the ease of Apple Mac’s products. Steve Jobs noticed how the aesthetics of what you use are integrally linked to how you use them, and how much you want to use them.
Making Apple Macs beautiful was a key element to the success of the iPhone, iMac, and iPad. And so seeing as it was Steve Jobs who seemed to be the pioneer of this transformation he will be sorely missed at Apple and across the world. He seemed to hold an unwavering belief that he would change something, and so below is his Stanford Commencement Speech of 2005.
Pretty inspirational to all those Entrepreneurs out there.. myself included.