Friday, June 20. 2014
I read Jill Lepore's The Disruption Machine: What the Gospel of Innovation Gets Wrong with great interest and a little nostalgia. Her subject is Clayton M. Christensen, who became an instant business guru with his 1997 book The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business. From 1980 through 2000, I worked in a variety of businesses -- two large typesetting equipment manufacturers, a prepress software startup, and an operating systems spinoff -- as a software engineer and product manager. Almost from the beginning, I had unusually close access to top management, in part because I always tried to look at the big picture, at how the business worked and what it needed to survive and grow. In this I was often informed by reading business management books, although I often took them with a grain of salt.
The first big fad book I ran into was In Search of Excellence: Lessons from America's Best-Run Companies (1982), by Thomas J. Peters and Robert H. Waterman Jr. The executives at my company at the time, Varityper, were much taken with the book, taking great pains to list out all the areas where their own management could be rated excellent. There was, in fact, little evidence for their conceit. I spent a great deal of time trying to figure out how they even managed to stay in business, and eventually came up with an understanding of how a company with mediocre products and service could muddle through. But the relevant lesson here was realizing how fickle top management could be, how readily they could fall for the flattery of self-appointed business gurus.
Christensen's book had a similar impact when I was working for SCO much later. Like In Search of Excellence, The Innovator's Dilemma attempts to promulgate a set of general lessons from a handful of carefully selected case studies. Lepore goes back and reviews those cases, showing how arbitrarily they were selected and how systematically they were misanalyzed, effectively demolishing the book's research claims. But like Peters, who parlayed his fame into a lucrative consulting business (and continued to churn out increasingly ecstatic books, including: Thriving on Chaos, Liberation Management, The Pursuit of WOW!, and after Christensen came around, Re-Imagine! Business Excellence in a Disruptive Age), Christensen moved to cash in almost immediately.
The notion of "disruption" made a certain intuitive sense to anyone in the computer industry. The essential fact of electronics since the advent of integrated circuits has been radically falling costs and increasing capacity. The central challenge that high-tech companies faced was to find new markets for newly cost-effective technology, and often as not this was done by startup companies. By definition, their success was innovative, and that contrasted with the staid "cash cow" management strategies popular in "mature" industries. Christensen's innovation was to add the word "disrupt" to management vocabularies, which made him a big hit with managers flattered by this swashbuckling identity.
Christensen's book set off a great snark hunt for "disruption." SCO's business was selling UNIX operating systems ported to Intel microprocessors. They mostly sold OS licenses for about $1000 per machine through VARs, who would combine relatively inexpensive PC hardware, UNIX, and their own applications software into some kind of turnkey system which would be price/performance competitive against offerings from Sun and other UNIX-based "workstation" vendors. You could make an argument that SCO's business model was disruptive, and indeed companies like Sun would lose a good deal of business in the following decade. Moreover, SCO's business plan called for them to continue to profit as ever-faster-and-cheaper Intel chips powered larger-and-larger "enterprise" computers. SCO's management hired Christensen to speak at one of their gatherings, and sure enough he blessed their business plan as "disruptive."
However, when I read the book, I drew a different lesson. I saw that SCO was increasingly vulnerable to Linux, the "open source" UNIX-like operating system that anyone could use and work on for free. Companies that adopted it could add features that they needed. They just couldn't keep those features exclusively, but sharing the code reduced their costs and helped Linux grow rapidly for larger and more powerful computers. (At the time, I often quipped that SCO could sell UNIX to people who were too smart for Microsoft, or to people who were too dumb for Linux, but not both at the same time.) Needless to say, despite their endorsement from Christensen, SCO got disrupted before they could disrupt anyone. They enjoyed record revenues leading up to the Y2K drop dead rate, then collapsed and were effectively out of business a couple years later.
I don't really think that Christensen's original research and thesis were as bad as Lepore makes out. I did get several useful insights from the book: particularly, a reminder of how desperately managers cling to existing margin models. (Not really news to me: I recall Varityper's VP of Marketing explaining to me that he would like to sell a publishing front end based on Apple's $10k Lisa computer but couldn't afford to sell one based on Apple's then-forthcoming $1.5k Macintosh. The former turned out to be an overpriced stepping stone, while the latter turned out to be the desktop publishing platform that ate the entire typesetting industry. We were, by the way, fully aware of DTP start-ups like Aldus, but we were petrified by our business model.) But what I find indefensible about Christensen is how he turned his research into a business, and how easily he perverted that research into paid advertising.
My academic background was in sociology, and my focus there was in understanding how sociological research is perverted to reproduce the assumptions of its practitioners. Happens all the time, even when the researcher isn't the least bit corrupt or deceitful. But sociology at least aims at being a science. The same can't be said of whatever you call what business departments do: like, say, seminaries, they train people to fulfill a function (e.g., CEO) and to that end provide some common cultural information, scattered skills, and contacts. I don't know what all goes into the making of an MBA -- I imagine one popular course would be "Sports Clichés for Managers" but it could be that everyone in the program would test out of that -- but the essential insight MBA programs aim for seems to be that money is everything (at least all that matters). That's the environment that produces con men like Christensen.
Some other posts commenting on Lepore's piece:
Krugman makes the best point, which is that not only does the cult theory of disruptive innovation flatter rich high-tech entrepreneurs, it lets them be more insensitive to the plight of others (the people commonly known as losers. Krugman also recalls how Schumpeter's famous definition of capitalism as "creative destruction" has the same effect, hence its popularity among capitalists.
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