We paid tribute to Clayton Christensen as a Memorable Mentor in this episode. Buckle up because his contributions were vast and made a big impact.
Clayton Christensen, R.I.P. [April 6, 1952 – January 23, 2020 (67)]
From Wikipedia:
After graduating from high school in 1970, Christensen matriculated at Brigham Young University (BYU). While at BYU, he took a two-year leave of absence from 1971 to 1973 to serve as a volunteer full-time missionary for the LDS Church. He was assigned to serve in South Korea and became a fluent speaker of Korean. Christensen returned to BYU after completing his missionary service, and in 1975 graduated with an Honors B.A. summa cum laude in economics. Upon graduating, he won a Rhodes Scholarship and spent two years studying applied econometrics at Oxford, receiving an M.Phil. in 1977. Christensen then returned to the United States and moved to Harvard University to pursue an MBA at HBS, which he earned with high distinction in 1979. He was a professor since 1992 at HBS. He’s survived by his wife, Christine, and 5 children.
His eldest son, stands 6 ft 10 in tall and played college basketball at Duke University, where he was a member of Duke's 2001 National Championship team.
He wrote: Why I Belong, and Why I believe, about his Latter-day Saint faith, and also: The Power of Everyday Missionaries: The What and How of Sharing the Gospel.
In the spring 2010 he had been diagnosed with follicular lymphoma, a cancer similar to that which had killed my father. Immediately after starting to write his book, How Will You Measure Your Life?, with his cancer in remission, he suffered a stroke, and had to learn to speak again, one word at a time.
Here are some of Ron’s favorite concepts from Clayton:
“You should not have an opinion, the theory should have an opinion.”
“A good theory doesn’t change its mind. It allows you to categorize, explain, and predict Trying to predict the future by collecting data is like driving a car only looking in the rear-view mirror.”
“Conclusive data is available only about the past. If you want to peer into the future, you need a theory.”
The appeal of easy answers—strapping on wings and feathers—is incredibly alluring. Ostriches have wings and feathers, can’t fly. Bats have wings, no feathers, great fliers. Flying squirrels have neither.
Look for the anomalies in your theories.
Investors need to be patient for growth but impatient for profit. Capital that seeks growth before profits is bad capital. Both types occur. When a good strategy has been found, investors need to change: impatient for growth and patient for profit.
Culture in any organization is formed through repetition—it’s like an autopilot, you have to program it.
Here are the books by Clayton we discussed:
The Innovators Dilemma, 1997
Andy Grove stood up with a copy at COMDEX “most important he’d read in a decade.”
A true disruptive innovation, appealed only to a niche market, appeared less attractive to the incumbent it eventually usurped.
Steve Jobs regularly quoted the book, so did George Gilder.
The Economist named it one of the six best business books ever published.
Competing Against Luck, 2016
This is all about the "Jobs to be Done" theory of creating value.
I'm still processing it for professional knowledge firms, as it seems to be more focused on products than knowledge work.
I think it's a useful framework, and I'm trying to reconcile with Pine and Gilmore's The Experience Economy value curve, where the top is transformations.
Given Christensen definition of a "job" is customer progress, I think they might be talking about the same things. In summary, a job is defined as:
A progress that an individual seeks in the given circumstance.
Provides a solution where there are formerly inadequate or non-existent solutions;
It is more than simply being functional – there are important/emotional dimensions that are often more important than the functional aspects.
The cure in the flow of daily life. This is the key aspect – it is not about the characteristic of the customer, product attributes or new technology or trends.
Ongoing – it is not about a selling event.
The question then becomes, which language is more persuasive. I like transformations (or legacy) rather than jobs, at least for knowledge work.
The Prosperity Paradox, 2019
Alleviating poverty is not the same as creating prosperity. We can’t end poverty by focusing on poverty. I was bit surprised by how this book never just says that wealth is the only known antidote to poverty, and how poverty needs no explanation, it’s the natural condition of mankind. What needs explaining is wealth.
This book does explain how to create that wealth, by creating market-creating innovations that are sustainable. I believe Deirdre McCloskey, George Gilder, Michael Novak, among others, offer a better theory of how and why innovation occurs (McCloskey’s focus on rhetoric and Gilder’s on an information theory of capitalism, which is the most innovative theory I’ve ever read), at the macro level.
This book is more at the micro level, but it’s still a worthwhile contribution. I only wish it would have built a stronger moral and ethical case for free markets.
Extreme poverty has decreased from 35.3% in 1990 to 9.6% 2015, 730 million from China alone, 66.6% in 1990 to less than 2%. Yet in Sub-Saharan Africa poverty actually increased, from 1990, 282 million (55% of population), to 2013, 401 million (42% of population).
Since 1960, $4.3 trillion spent on developmental assistance in poor countries. Name one that’s developed because of aid? Not one, which I was also surprised the author’s never delved into.
I’ve always appreciated Clayton Christensen’s attachment to the importance of theory—there’s nothing more practical than a good theory! He’s also very precise in the words he uses, and in defining his terms, such as:
Prosperity: The process by which more and more people in a region improve their economic, social, and political well-being. A country can be rich, but not prosperous (e.g., the resource curse).
Innovation: A change in the processes by which an organization transforms labor, capital, materials, and information into products and services of greater value. They create jobs, profits, and change culture (innovation is not the same as invention, something new. Innovations are usually borrowed country to country).
Three types of innovation: Sustaining, efficiency, and market-creating
1. Sustaining: improvements to existing solutions on the market. Substitutive in character (Lipton Tea flavors, Camry best-selling Toyota), but don’t represent major growth in economy. Most innovations are sustaining in nature.
2. Efficiency: Do more with fewer resources, usually process innovations. Tend not to create jobs (resource extraction, fracking, fewer inputs, greater output). Both Sustaining and Efficiency free up cash for future investments.
3. Market-creating: create new markets that serve people for whom either no products existed or existing products were neither affordable nor accessible for a variety of reasons.
There’s not just one strategy (theory) for development. Japan, South Korea ($200 per capita income 1950s, $27,000 today; high suicide rate, 2.5 times OECD average; highest hospitalization for mental illness), Singapore (60 years ago, 1/5 GDP of sub-Saharan Africa’s), Taiwan, Hong Kong, all developed in different paths, but the common denominator was market-creating innovation.
The authors point out that Mexico has been mostly efficiency and sustaining innovations, but a serious lack of market-creating innovations.
There are a lot of examples of entrepreneurs who are making a dent in these poor countries with market-creating, from mobile phone networks, electronic payments and banking, health care, food, flooring, and many others.
Ultimately, market creating innovators Identify opportunities where there seemed to be no customers. It is difficult to run your ruler over things you can't see. Often, you will not be competing with any existing product, rather you are competing against apathy or nonconsumption.
They also deal with infrastructure, which is more a medium for moving value rather than creating it, and corruption. Corruption, like poverty, needs no explanation. What needs to be explained is why some countries have less of it than others.
Entrepreneurs are good at identifying nonconsumption, which is the authors’ theory for market-creating innovations. They conclude that “We can solve this problem. Not because we’re eternal optimists, but because we have done it before.”
I agree, there’s simply no excuse since we have a much better understanding of how wealth is created. But the focus on the “root causes of poverty” persist, which has always amazed me. What would we do if we learned the “root causes” of poverty? Create more of it?
Ultimately, the book recommends a reframing of the problem for developing countries focused on the following five principles, namely:
Every nation has a potential for extraordinary growth within it – this is referred to as nonconsumption.
Most products on the market today have the potential to creating growth markets when they make them more affordable.
A market creating innovation is more than just a product or service. It is a whole system that often pulls in new infrastructure and regulations and it has the capability of creating jobs.
Focus on pulling, not pushing to solve problems.
With nonconsumption, scaling becomes inexpensive. Once the opportunity is identified in nonconsumption, a business model can be conceived to make a product or service available to a large population of non-consumers, and from there scaling is relatively inexpensive.
But the poverty bureaucracy is entrenched, as the great movie Poverty, Inc. explains. Perhaps this book will get more entrepreneurs to innovate rather than simply providing charity. I hope so.
How Will You Measure Your Life?, 2012, Clayton Christensen, James Allworth, Karen Dillon
How can I be sure that I will be successful and happy in my career? My relationships with my spouse, my children, and my extended family and close friends become an enduring source of happiness? I live a life of integrity—and stay out of jail? (Jeffrey Skilling I knew of from our years at HBS was a good man).
“There are no quick fixes for the fundamental problems of life. I can offer you tools that I’ll call theories in this book. If I had tried to tell Andy Grove what he should think about the microprocessor business, he would have eviscerated my argument. Instead of telling him what to think, I taught him how to think.”
Incentives are not the same as motivation.
“Is this work meaningful to me? Is this job going to give me a chance to develop? Am I going to learn new things? Will I have an opportunity for recognition and achievement? Am I going to be given responsibility? These are the things that will truly motivate you.”
“You have to balance the pursuit of aspirations and goals with taking advantage of unanticipated opportunities. An emergent strategy.”
“I’ve had three careers: first as a consultant, then as an entrepreneur and manager, and now as an academic—none of which I planned.”
In his Staying out of jail chapter he quotes C.S. Lewis
“The safest road to Hell is the gradual one—the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts. “
“God, in contrast to us, doesn’t need tools of statisticians and accountants. No need to aggregate. His only measure of achievement is the individual.
“The only metrics that truly matter to my life are the individuals whom I have been able to help, one by one.”
Here are a few other resources regarding Christensen:
Podcast: tribute to Clayton, with James Allworth, co-author of How Will You Measure Your Life? https://stratechery.com/2020/exponent-podcast-its-been-a-week/
Article in Deseret News on Clayton, January 24, 2020.
Bonus Content is Available As Well
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Here are some of the topics and links Ron and Ed discussed during the bonus episode this past week: