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 / Fourth Quarter 2001 / Issue 25(originally published by Booz & Company)


Clayton M. Christensen, The Thought Leader Interview

S+B: Well, the same people blasting them for it now are the ones who lauded them for it last year.

CHRISTENSEN: For doctoral students or young faculty members, some of the lowest-hanging, richest fruit that they can pick is to take a management fad and ask categorization questions about it. Like, When does process reengineering not make sense? Or, Under what circumstances will outsourcing and the use of automated supply chain management software get you into trouble and under what circumstances is it the right way to manage things?

You can discover the root causes of problems only if you go through this cycle and pay attention to the categories. Corporate venturing is big now. So should everybody always do corporate venturing?

S+B: The returns on most corporate venturing historically have not been too good.

CHRISTENSEN: It’s a fad, and people will walk away from it, but that’s because no researcher has yet developed and articulated a sense of what the relevant circumstances or categories are. Under what circumstances is this kind of corporate venturing effective and under what circumstances should it be done differently? Without that kind of theory-building, most corporate-venture activities will fail because there are enough different circumstances out there that most companies aren’t in the circumstance where what they are doing will work.

I keep coming back to the value of management researchers building theories that are contingent upon specific circumstances. It’s because we’re not all ensconced within a single monolithic circumstance. For example, you can see the business press already coming down on the people who run Cisco, saying, “Their model has failed.” So they search for some other Holy Grail, as opposed to saying, “Wow, because we didn’t quite understand the categories, we didn’t know when Cisco’s model would and would not work.”

A lot has been written about the Internet bust. From my point of view, it’s quite clear the Internet isn’t a category; the Internet is a technological infrastructure that can be deployed to facilitate a disruptive business model or a sustaining business model.

S+B: I think it was generally assumed when biotechnology came on the scene that it would be a tremendously disruptive technology to the pharmaceuticals business, and yet, 25 years later, the established pharmaceutical companies are still doing just fine. Why hasn’t biotech disrupted pharmaceuticals?

CHRISTENSEN: I’m not sure I understand this issue either, but let me sharpen the question a bit. Remember the distinction between sustaining and disruptive technologies, and why it’s important. When a technology, regardless of how different and difficult it is, sustains the trajectory of performance improvement, my research asserts that the leaders in the prior generation of technology are likely to end up on top of their industry at the end of the transition.

If you remember from The Innovator’s Dilemma, quite often startups were first out of the gate with a sustaining technology. But somehow the leaders got the technology and stayed atop their industries. Sometimes they acquired the startup; sometimes they just developed the technology as a follower and used their muscle and mass to win. But they always won. If the technology is disruptive, on the other hand, the odds are that at the end of the transition, the leaders will have been toppled and new companies will be on top.

In most instances, biotechnology, though a radically different approach, is a sustaining technology: It’s a dramatically improved way of targeting problems that we hadn’t been able to solve with the conventional approach of mainstream pharmaceutical companies.

So our work would actually predict that although the startups may be the first out of the gate, in the end the mainstream pharma companies will end up on top. When an entrant is first to market with a sustaining technology, it occupies a piece of territory that the better-endowed leaders want to seize. So they’ll just go get it, either by designing around the entrant’s patent or by acquiring it.

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