Business worships chaos.
That prophet was the late Clayton Christensen, who in 1997 The innovation dilemmaIn “The Big Bad News,” he argued, the inevitable fate of large, established organizations is to be cannibalized by smaller, upstart ones. Because smaller organizations don't have to worry about meeting the needs of an established customer base and aren't bound by the profitability standards available in mature industries, they are freer to innovate, find new ways to serve new customers, and then push upstream, suddenly displacing incumbents. This process leads to the dilemma in the book's title: executives at large, established organizations are paving the way for their own demise by doing exactly what is expected of them: paying attention to customers and profitability.
The remedy that Christensen offered these executives was to become instruments of great change themselves before anyone else could do it for them (or to them). They should create a small organization with a license to innovate, isolate it from the rest of the company and free it from corporate constraints, and then scale new products and markets as they emerge. They should turn disruptive forces to their advantage, not against them.
Christensen noticed patterns in the industries he studied and found remedies that seemed to work in many of the cases he studied. This was all fine: his data could be accepted, and his prescriptions could be accepted. But what happened next caused problems, because the patterns and remedies became mantras. Destroy yourself.
The concept proved very appealing, partly because, as is often the case, it was so catchy to boil it down to two words. Not only did it have a long intellectual tradition (as early as 1942, economist Joseph Schumpeter had argued that the essential mechanism of capitalism was the extinction of old, worn-out ways by new ones, calling this process “creative destruction”; Charles Darwin had shown that the essential mechanism of life itself was the extinction of less fit species by more fit ones), but it also offered business leaders a way to rethink what had previously been a threat as a source of competitive advantage. It seemed that the best self-disruptors would survive to the end. In time, what had appeared as a specific observation about new entrants into existing markets morphed into a universal prescription that applied to a wide swath of corporate life, and in the process, several related ideas (e.g., that fast is always good, that the first to scale in a new market will win, and the profits will follow) came together to form a new orthodoxy in business thinking. Change is inevitable. We can be instigators of change or victims, and if we choose to be instigators of change, we are almost automatically on the right path.
Christensen's prescription has not escaped criticism. For example, Jill Lepore writes: New Yorker In 2014, it was stated that disruptive innovations are “products of history, ideas forged in time, generating moments of upheaval and tension.” [that] “No prophet,” Christensen said, describing how widespread and deep the disruption is. But rare expressions of concern seem to have brought little change. Neither has a wealth of social science research uncovering the damaging human effects of widespread, ongoing instability. Whether Christensen was right about the death and life of big business, his work continues to generate a great wave of disruption that is now being presented as a justification for disruption, far beyond the scope of his original observations. Any Sudden changes, transformations, and reforms occur in every aspect of business. needYou can take any course on disruption at any business school, Stanford, Cornell, Columbia, Harvard, etc., and you'll read the great meta-irony of how these organizations themselves are in disruption (and are no doubt trying to create disruption in retaliation). Harvard Business Review“How adaptable is your company to change? You can improve your adaptability,” or “Building a leadership team for change: the future of your organization depends on it.” And if you're looking for a chaotic catechesis, you can buy inspirational posters and chant slogans. Let's fail fast; confuse or be confused; Move fast and break thingsIt's hard to remember a time when there were any other ideas about how to run a company.
But along the way, we were busy and confused here and there, and somehow, change and Improvement These are two different things. Before Disruption, the prevailing thinking was: To solve this problem, change is needed.After the confusion, this was reversed. We need to change, and all our problems will be solved.Before the disruption, the leader's job was to identify and solve problems and to identify and leave what wasn't a problem. After the disruption, the leader's job is always to change everything, because if we don't change things, someone else will, with all sorts of unclear negative consequences. Before the disruption, the job was to move things upward and to the right. After the disruption, the job is just to move things. Thus, the arrival of the disruption was also the catalyst for a gradual shift in meaning. Before our very eyes, words related to change, such as innovate, disrupt, change, renew, transform, renew, rethink, reinvent, refresh, etc., all took on one unquestioned meaning. Better!
In reality, things are not that simple. Take mergers and acquisitions, for example. It is a long-established finding that most M&A activity destroys value. One study puts shareholder value destruction in 60 percent of cases, and another estimate puts the figure between 70 and 90 percent. Or take layoffs. Stanford professor Jeffrey Pfeffer has written extensively and persuasively about the impact of layoffs and whether they make sense not only from a human perspective (which he vividly shows is a very difficult claim to make) but also from a capitalist perspective with an obligation to maximize shareholder value (which might seem easy to make). On this second question of economic value, Pfeffer writes, “Layoffs often do not reduce costs…Layoffs do not increase productivity. Layoffs often do not solve underlying problems, such as ineffective strategies, lost market share, or low revenue.”
But even if this is not always the case – that is, even if a well-executed restructuring or organizational change can produce real benefits – it is clear that a better calculation of the associated human costs raises the question of whether and how often change makes an organization better, and leads to a more sophisticated understanding.
Excerpted with permission Problems with change By Ashley Goodall. Copyright © 2024 Ashley Goodall. Used by permission from Little, Brown Spark, a print publication of Little, Brown and Company.
