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Pardon the Disruption

What is the extent to which people in the auto industry—at OEM and suppliers alike—have a concept of what innovations are?

What is the extent to which people in the auto industry—at OEM and suppliers alike—have a concept of what innovations are? It’s limited. No matter how much rhetoric is expended on it. That occurred to me while reading the latest book co-authored by the man, Clayton M. Christensen of the Harvard Business School, who literally wrote the book on innovation: The Innovator’s Dilemma: When New Technologies Cause Great Firms To Fail (1997). The book at hand is Seeing What’s Next: Using the Theories of Innovation To Predict Industry Change, which Christensen has penned along with Scott D. Anthony and Erik A. Roth. (Both published by the Harvard Business School Press—www.hbsp.harvard.edu)

As Christensen argued in his first book, there are essentially two types of innovation: sustaining and disruptive. The former is what many successful companies are good at: incremental improvements. Disruptive technology development is not nearly as pervasive. Nor as palatable. As is explained in Seeing What’s Next, sustaining innovations “are improvements to existing products on dimensions historically valued by customers. Airplanes that fly farther, computers that process faster, cellular phone batteries that last longer, and televisions with incrementally or dramatically clearer images are all sustaining innovations.” Not that there is anything wrong with those things. As for the other type: “Disruptive innovations introduce a new value proposition.” There are two types of disruptive innovations. One is a low-end disruption. In this case, a company provides consumers with what they really need, not what is otherwise being provided. Think of it as something without the proverbial “bells and whistles”—something that hasn’t undergone the incremental improvements of a sustained technology. The other type of disruption is called a “new market disruption,” which is providing customers with something that makes it easier to do something that they otherwise wouldn’t do. Arguably, when Henry Ford provided the means for people to go across town without all of the hassle of a horse, he was creating a “new market disruption.”

To explain how this could come about, the authors have developed the RPV theory: “The RPV theory holds that resources (what a firm has), processes (how a firm does its work), and values (what a firm wants to do) collectively define an organization’s strengths as well as its weaknesses and blind spots.” Based on a company’s collective RPV, managers determine what they’ll do with their assets; generally this is doing more (and perceptually better) of what they already do. The authors point out, “Incumbent firms master sustaining innovations because their values prioritize them, and their processes and resources are designed to tackle precisely those types of innovations. Incumbent firms fail in the face of disruptive innovations because their values will not prioritize disruptive innovations, and the firm’s existing processes do not help them get done what they need to get done.” People may talk about “obsoleting” their products; practice is something else entirely. They improve their product. Then someone comes along with a disruptive innovation that knocks the pegs out from under it. Remember: Disruptive technologies don’t necessarily have to be radically new: “Disruption is the fundamental mechanism that makes products and services inexpensive, convenient, and simple to use.” How many people in the industry are really applying their RPV to truly achieve that, versus trying to come up with the ways and means to simply make things “better,” which simply complicates matters, and less expensive, only because they need to reduce costs? You know the answer.

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