Where does growth come from?

I received a YouTube video link via an email forwarded across multiple mailing lists praising its insight. It was Clay Christensen’s talk at Google titled “Where does growth come from?” I’ve read and seen many of Clay’s talks now and feel a certain familiarity with the material. However, I am a fan. In fact, I think it is a normal week on ALearningaDay when at least one post is directly or indirectly inspired by one of Stephen Covey, Clay Christensen, or Seth Godin. :-)

I thought I’d boil it down to the usual 3 things I took away. But, before doing that, let’s lay the groundwork. First, we must understand that companies invest in 4 kinds of innovations to drive growth –
1. Potential products: We don’t yet know what they are.
2. Sustaining innovations: These make the potential products better.
3. Disruptive innovations: These grow markets.
4. Efficiency innovations: These enable us to do existing things faster or better.

Getting terminology right is helpful in learning how to use them. I found this helpful as I found myself grasping this better despite having seen this a few times.

1. Disruptive innovations originate at the low end and are often business model innovations. For example, Uber disrupted the taxi industry with a business model built on variable costs. The iPhone disrupted the personal computer. And, so on. An interesting point he made was that disruptors often win with customers who were non consumers. Uber converted car owners into Uber users. And, his belief is that Android and Huawei are disrupting the iPhone on the low end. They are, in turn, bringing in non computer and non iPhone users into the smartphone market. Japan’s growth in the 1970s came from a series of disruptive innovations. They enabled non consumers to own cars, listen to music and consume electronics. However, they followed it up by focusing on increasing profits and efficiency/sustaining innovations. And, these only help with growth in the short run.

I thought of Amazon and Jeff Bezos as he insisted on the importance of the low end. Amazon Web Services or AWS struck me as a great example of this – a combination of low end and a fundamentally different business model of charging by usage has resulted in their stunning growth. So, the question that crossed my mind was – how do you ever disrupt an Amazon? Thanks to Jeff Bezos, they are so relentlessly focused on the low end that it is highly unlikely a competitor will ever catch them unawares.

2. The customer is the wrong unit of measurement. Forget the customer. Instead, focus on the job the customer hires you to do. This is such a simple and transformative idea. Yet, I haven’t completely internalized this and, thus, can’t say I have learned this yet. I need to keep working on applying this regularly and make it second nature.

3. Be careful what you measure. A Clay talk wouldn’t be complete without this message. The metrics we use can have many an unintended consequence – both at work and our lives. The metrics that are commonplace – stock prices, valuations, promotions and salaries – all tend to be short term. The most valuable things are the hardest to measure. So, take the time to understand how you will measure your business and your life.

A close friend watched this talk and pointed to Clay’s humility as one of the things that impacted him. Whenever someone asked a question, Clay always said – “Thank you for your question.” And, his presentation reeked of humility and thoughtfulness.

It doesn’t at all surprise me that Clay gets that right. After all, the small things are the big things. And, there are few who “get” that idea the way he does.

[embedyt] http://www.youtube.com/watch?v=rHdS_4GsKmg%5B/embedyt%5D