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Don’t believe everything you learn in business school, cautions Harvard Business School professor Clayton Christensen. “It’s the principles of good management we teach that cause successful companies to fail.” In this meaty lecture, Christensen distills several books’ worth of research describing how business leaders sometimes metamorphose into losers when confronted with market-rocking innovations. He also reveals how we may harness his insights in such socially significant and complex industries as health care.
Christensen distinguishes between the kind of sustained and incremental technological improvements that help a market leader retain its edge, and “disruptive technology,” where a simple and affordable idea takes root in “an undemanding application at the bottom of the market, then improves from that foothold.” Christensen, looking at lots of industries “found almost invariably that an entrant company came in and killed the leaders” by way of a simplifying technology. He offers a case study of apparently marginal mini-steel mills that over a few decades toppled big U.S. steel mills. As the little guys pursued the lowest profit segment of the steel market with their more efficient, lower-cost methods, the big mills fled to where they imagined higher profits lay. Says Christensen, “You’re a little boy and want to win a fight against the giant. The best way to win is to pick a fight where the giant is motivated to flee rather than to fight.”
This has happened in the computer industry (mainframes to PCs), and with autos (Ford to Toyota). Department stores yielded to Walmarts, and JP Morgan to Fidelity, says Christensen. In each case, three enablers come into play: the transformation of a basic technology problem in the industry into “something that’s foolproof and idiot simple;” and the embedding of that solution into a cost-effective business model, which itself falls within a “complete vertical commercial system.”
Christensen spies symptoms of such disruptions bubbling up in the health care industry, such as molecular diagnostics, imaging technologies and high bandwidth telecom, and business model innovations. Integrated health systems like Kaiser Permanente have a leg up in deploying and optimizing these disruptive technologies.
The push for widespread health care reform must come from employers, who in spite of their declared intent to cut health care costs also know “they profit when their employees are healthy and productive.” Affordable health care, he concludes, “doesn’t come by expecting high end, expensive institutions or expensive caregivers to become cheap, but by bringing technology to lower cost providers and venues of care, so they can become more capable.”