In the last few years, my students have put me further to the test. If a theory applies to nations, companies, and business units, they said, it should apply in their own lives as well. The way some of them framed that issue changed the way I saw it. “If I keep doing what I’m doing right now as an individual,” they said, “what will happen to me in 20 years? Will I become the kind of person that I want to become?” Or they would talk about wanting to become a particular type of leader in 20 years, and they’d say, “If I’m not doing what I need to do to get there, what do I need to change?”
This type of question was very useful for me. After these class sessions, I saw so much more in the research that I really hadn’t thought about before.
S+B: How prevalent is this interest in applying business theories more universally?
CHRISTENSEN: I actually think it’s not common in business research. In academia, many times, after someone gets a journal article published, they move on to something else and never think about whether they have a generalizable idea. I think that’s one reason business academia is in such trouble today.
S+B: You’ve said that metrics like the internal rate of return (IRR) and return on net assets (RONA) lead to shortsighted decisions. What would be better measures?
CHRISTENSEN: The answer probably depends on where you are in the cycle of a business. What you measure has a huge impact on what people prioritize—in fact, whatever you measure will put into place a way for people to game the system. Therefore, you’d better pick a measurement that causes people to do good things when they try to game the system.
For instance, integrated steel companies used net profit per ton to measure their performance in the 1980s. This led them to want to get out of the low, commodity-based end of steel production, because volume at the low end makes it harder to get dollars per ton up. That decision made them vulnerable to the mini-mills. It turns out that most managers don’t even think about where their measurements come from. You can ask executives, “Who decided to measure net profit per ton?” They’ll scratch their heads and say they don’t know. It’s as if somehow the measure came from the sky. And it causes them to do crazy things.
S+B: In the way they think about success, are senior executives and leaders of companies different from other people?
CHRISTENSEN: Yes. I’ve met two types of leaders. The first is like Tom West, the leader of the computer-building team at Data General in The Soul of a New Machine [by Tracy Kidder, Little, Brown, 1981]. West says in the book that success is like pinball. If you win with one project, you get to play again. I think a lot of senior executives are just that kind of person: They like to play. They don’t care that much about where they end up in a hierarchy. The second group is made up of people who have a need to be in charge and who care a lot about their hierarchical position.
If I were recruiting a leader, I’d look for people in the first group—people who like to play.
S+B: In How Will You Measure Your Life?, you talk about personal measures of long-term success—for example, making life decisions based on full value rather than marginal value. What do you mean?
CHRISTENSEN: When you make a decision based on expediency—because you think you can get away with paying only a smaller, marginal cost—you always pay the full cost in the end. This goes on in your personal life just as much as it does when you invest in setting up a sales force. One example I give in the book is parents who do their kids’ homework for them. They are helping their kids get ahead in the short run, which is expedient. But one of the most important roles of a parent is to create small challenges, to really take a hand in their children’s development and set them up for bigger challenges. Doing their homework for them undermines that and leads to greater costs in the long run.