Look Both Ways!

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We wouldn’t be talking this summer about a body of work known as “disruption theory” if its principal author, Clayton Christensen, of Harvard Business School, hadn’t turned up as the featured expert on coping with change at The New York Times and Harvard University, two  institutions much concerned with maintaining the continuity in American life – and if Christensen hadn’t been attacked, in The New Yorker, by Jill Lepore, a Harvard historian and public intellectual, as a purveyor of flawed and panicky views.

The Times’ infatuation with Christensen’s ideas is easy enough to understand:  its executives have had a soft spot for many years for various Harvard Business School professors, and, like other newspapers, the Times finds itself in a challenging situation.  Christensen’s thinking animated the newspaper’s recent “Innovation Report;” whose principal author, Arthur Gregg Sulzberger, son of the publisher and a fifth-generation member of the family that controls the Times, last week was named Senior Editor for Strategy.

But what about Harvard?  Christensen is on the cover of its alumni magazine, proclaimed in a reverent article to be a “disruptive genius.”  What does Harvard have to fear?

Former president Lawrence Summers, appearing with current president Drew Faust earlier this month at the Aspen Ideas Festival, said that he believes Harvard faces at least four challenges in the coming decade:  to compete successfully in the growing market for online leaning; to reform its governance in order to put younger, less status-conscious professors in charge of its curriculum; to persuade possessors of great new fortunes to donate as wisely as did John D. Rockefellers and Andrew Carnegie a century ago; and to stress the communication of useful skills as opposed to investing in extracurricular activities. In pursuing these various restructurings, he suggested, new entrants to higher education markets may be in the lead.  Summers hasn’t led the university since 2006, but policies he set in motion, including high-level interest in Christensen’s work, are beginning to produce concrete results.

Christensen’s fame as a strategist rests on a series of books, commencing in earnest in 1997, with Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. The book was a series of case studies – of computer disk drives, of hydraulic front-loaders and back-hoes, of steel mills of various sorts — that broadened out into a consideration of all manner of innovations: credit cards, general merchandise retailers, automobile manufacturers, digital camera-makers and film companies.  It was a hit, republished at the height of the dot.com boom as The Innovator’s Dilemma: The Revolutionary National Bestseller That Changed the Way We Do Business.

What is the dilemma?  Christensen argued that successful companies, having innovated their way to the top of their markets, face a choice in the presence of new technologies:  they can continue to satisfy their existing customers, creating relatively small improvements that he labeled “sustaining innovations”; or they can go into business against themselves, spinning out  small, independent, autonomous units staffed by acolytes of the new technology, capable of playing by different rules, either as whole new companies or as well-financed internal “skunk works” – the manner in which IBM Corp entered the market for personal computers.

Christensen has modified his views slightly from year to year, tackling such subjects as The Innovator’s Prescription: A Disruptive Solution for Health Care (2008) and The Innovative University: Changing the DNA of Higher Education from the Inside Out (2011).  But his gospel remains much the same as it was in 1997, when he wrote, “The problem that established firms seem unable to confront successfully is that of downward vision and mobility.”  Rendered complacent by their relationship with satisfied customers, they are toppled by new entrants whenever a new technology emerges.

Christensen’s success may be best understood as an attempt to follow-on the success of Michael Porter, another Harvard Business School guru, who rose to great prominence in the 1980s on the strength of three immensely successful books on competitive strategy. Porter was a PhD economist; his books translated new work on strategic behavior that was then sweeping the field of industrial organization into terms that were suitable for instruction in business schools.  Generally they emphasized the advantages of incumbency. Porter captured virtually every honor management education had to offer before running out of steam:  he suffered embarrassment as an adviser to Libyan dictator Muammar Gaddafi, and Monitor, the consulting firm he co-founded, went broke.

Christensen is now taught in many schools alongside Porter. Opinions are all over the map.  One business school professor, who asked not to be identified because he sees Christensen regularly at meetings, explained, “It is really hard to teach MBAs to be humble, to teach them to expect challenges from odd corners if they are in an established business, and if they are entrants, to teach them the tactical advantages to moving quickly after hiding their true aspirations. Clay’s writing is good for explaining how chaotic things can look on the ground, and, at least for my classroom, he usefully illustrates the mechanisms that betray MBAs at crucial moments – for instance, the flow charts and spread sheets that are interpreted without imagination. He helps characterize the issues, though not necessarily to resolve them.”  For an illuminating semi-defense of Christensen, see this discussion by Joshua Gans, of the University of Toronto.

I’ve had my doubts about Christensen ever since I read Showstopper: The Breakneck Race to Create Windows NT and the Next Generation at Microsoft (1994, 2014), by G. Pascal Zachary, which is about more or less the same thing as The Innovator’s Dilemma:  what happened to Digital Equipment Corp. and the rest of the minicomputer makers?  Once second only to IBM Corp. as a computer manufacturer, DEC all but disappeared in the 1990s, acquired by Compaq Computer, which was absorbed in turn by Hewlett Packard.

Christensen tells it as a story of quickly evolving storage technology, a giant brought low by disk manufacturers initially too small to be perceived as a threat:  DEC, in this version of the story, didn’t field a PC until too late in the game.  Zachary tells it as a revolution in software:  how a frustrated DEC engineer defected to Microsoft in order to oversee the construction of Windows NT, the operating system that enabled the computer interoperability that put DEC’s stand-alone “big iron” in the shade.  The rise of client/server systems is hardly the story of an unrecognized threat from below.

Its reading of the Innovator’s Dilemma has prompted the Times to create “The Upshot,” the hybrid web-based venture that was designed to replace statistical specialist  Nate Silver, who left the paper for his old website (FiveThirtyEight) at ESPN.  The Upshot now appears regularly throughout the paper.  Harvard, similarly, joined MIT, the University of California at Berkeley and the University of Texas system in creating EdX, an online learning venture with lavish funding that amounts to an attempt to create a world-wide extension school to compete with various for-profit ventures. It will be years before anyone knows whether the investment will pay off.

In each case, Christensen’s clients are in danger of failing to respond to serious threats from big competitors. The Times  must compete with well-staffed news-gathering agencies such as Bloomberg, Thomson Reuters, the Guardian and the British Broadcasting Corporation.  It can do so   by concentrating on its nearly insuperable advantage:  the carefully-edited and thoroughly convenient bundle of news that is the printed newspaper.

Harvard’s advantage will continue to be its selection of undergraduates, graduate students, and faculty:  their subsequent experience at each other’s hands, and the work they do afterwards. It’s long been a commonplace  that, especially in the presence of  good teachers, students teach each other.  Why expect that to change? Any more than expect that significant numbers of persons in cities with good jobs won’t continue to prefer printed papers, as long as they can afford them?

If Christensen is not exactly a reliable guide to the problems facing our most august institutions, then who is?  It turns out that the Innovator’s Dilemma has been under genteel attack in the management literature for more than fifteen years.  An anticipation of this criticism appeared even before Christensen wrote, in the form of a landmark article by the legendary James March, of Stanford University. In “Exploration and Exploitation in Organizational Learning” (1991), March described the tension between the exploration of new possibilities and the exploitation of old certainties. to good effect, counselling “an appropriate balance” between the two as the path to prosperity.

And, for more than a decade, Charles O’Reilly III, of Stanford’s Graduate School of Business, and Michael Tushman , of Harvard Business School, have advocated ambidexterity as the appropriate organizational stance in times of rapid change.  Look both ways, they say: down, for little start-ups; sideways, for powerful competitors; and remember, either or both may be cloaking their ultimate intentions.  Indeed, like Google, eventual competitors may not even yet have a concrete business plan.

Harvard Business School, never one to approach its possibilities single-handedly,  has, naturally enough, its own version of an online venture.  HBX is even said to have its first two online courses in the can.  You guessed it:  Michael Porter and Clay Christensen.  Pretty clearly, the dean ought to produce another, one by the ambidextrous Professor Tushman.