Clayton Christensen: “Disruptive Innovations Create Jobs, Efficiency Innovations Destroy Them”

If you get the opportunity to hear Clayton Christensen hold court, seize it. Christensen is a Harvard Business School professor and renowned author and innovation expert, perhaps best known for his book “The Innovator’s Dilemma,” which had a profound influence on many thinkers and business leaders, including Steve Jobs. Speaking at BoxWorks in San Francisco today, Christensen was characteristically soft-spoken, self-deprecating and good-humored, even prompting Ron Miller to describe him as “the Steven Wright of business research” and the anti-Aaron Levie.

His talk ranged across the board, touching on theories of disruptive innovation, effective management, product development and customer interaction. Some of the highlights and most memorable pieces of wisdom centered around the fundamental but often confusing relationship businesses have with their customers. Naturally, when building a growth product, businesses commit tons of time, energy and resources to getting to know their customers better and building something that solves their problem.

But Christensen said that many businesses and startups often make a mistake here, one that may, at first glance, appear counterintuitive. “Understanding the customer is the wrong thing to do — it’s confusing,” he said, before citing Peter Drucker’s assertion that customers rarely buy what companies think they are selling.

Instead, what’s really important is understanding the job that customers are trying to accomplish, and only once an entrepreneur truly understands the need that a product or service fulfills for the buyer can they optimize their business or product. He used IKEA as an example of a company that has been around for 30-odd years and by now probably should have been disrupted. Yet no one has managed to copy them and improve on the model. That’s because, Christensen says, of its true understanding of the job that their customers want to do: “I want to furnish this place today.” Once they understood that, simple as it may be, they optimized their entire store flow, their shopping experience around that.

Most early-stage products overshoot eventual customer needs that emerge over time, he said, so entrepreneurs and developers should instead design for the mainstream rather than the ideal consumer or use cases. Only by touching the customer and interacting with them and studying their problems will design and product development be optimized. “Products that aren’t the best, but are affordable and usable, disrupt markets,” Christensen told the BoxWorks audience.

What’s more, every job that needs to be done (the reason for creating your product in the first place) has a social function that needs to be understood to provide the right experience. By nature, he said, products are easy to copy, but it’s much harder to copy the experience and social dimensions around the job.

One of the biggest problems with the cloud computing era is that the cloud provides such capacity that it can tempt people into developing apps and tools that no one actually needs. Instead, developers need to build for the jobs people are trying to accomplish. The real disruptive power of the cloud, he says, is that it makes it exceedingly easy for SMBs to accomplish their business tasks more affordably and efficiently. This is also the reason that he and many others anticipate modularity taking over the cloud and the industry.

The problem is that the current focus across tech on efficiency is succeeding in destroying jobs for many and creating capital for few: “Disruptive innovations create jobs, whereas efficiency innovations destroy them.” Metrics like IRR and RONA, in the end, funnel profits away from disruptive innovation and distract management from investing in what’s important.

Christensen also said that he fears for the future of Harvard Business School and others like it, as this year the number of people that applied to two-year business schools dropped 22 percent. The reason is that HBS and others are churning out graduates that can command high salaries, which is why they end up getting hired by private equity firms, hedge funds, etc. — those who can afford to pay it.

Operating companies don’t go to HBS to recruit, he said. Instead they’ve developed their own corporate universities to train future managers and executives, immersing them in everyday operations rather than classroom philosophizing. As a result, they are disrupting business schools because academia is focused on teaching theory, not how to get work done.

There are no doubt better ways to encourage disruption and innovation, and the trend seems to be one that’s moving away from Silicon Valley, as startups and accelerators are popping up across the U.S.

What do you think? Is disruptive innovation creating jobs, while efficiency innovations destroy them?

Photo from Jon Morris (@Jon_Morris)