Harvard professor Clayton Christensen is best known for his seminal work The Innovator’s Dilemma, which introduced the concept of disruptive innovation into the business lexicon.
By Michael Kelly
Named by The Economist as one of the six most important books about business ever written, it explored the inability of large established companies such as Digital Equipment and Xerox to successfully respond as new, unexpected competitors rose and took over their markets.
With three co-authors in this new book, he moves from how to respond to disruptive innovators to how to increase the prospects of innovating successfully.
Surveys have consistently shown improving innovation performance to be at the top of the CEO agenda. Yet, most chief executives would be forced to admit that they have little to show for the vast sums of money spent in this area.
Every year, companies spend hundreds of billions of dollars on R&D with little to show for it in terms of new products and services and new revenues. Indeed, research has continually demonstrated that there is no statistically significant relationship between a firm’s R&D spending and its financial performance. Yet, governments continue to exhort companies to invest more in R&D in the hope that it will generate new economic benefits.
The book’s authors view the current approach to innovation as largely a process of placing bets – in most cases, losing bets. Even the access that companies now have to masses of consumer, demographic and trend data has done little to improve innovation performance. It continues to be a hit-and-miss process.
The purpose of Competing Against Luck is to show that companies can go from being lucky to good when it comes to innovation. Drawing on two decades of research, the authors seek to provide CEOs with a concept and a process that will provide a reliable engine for innovation and growth.
Their approach is based on the theory of Jobs to be done. This theory looks at why your customers “hire” your product to do a specific job.
“Hire” is the operative word here. Uncovering and understanding the specific job that the customer is hiring your product or service to perform provides a reliable blueprint to guide the development of products and services that they need. This is then complemented by creating an associated set of experiences in how customers find, purchase and use your product. It also entails integrating all the corresponding business processes and metrics to ensure that those experiences are consistently delivered.
The authors believe that by understanding what causes customers to hire a product or service, any business can improve its innovation track record.
They provide a useful framework for understanding the theory, explaining why it is predictive and how it applies in the real world. Each of the major chapters ends with a series of questions to help executives put some of the ideas into practice. There are also dozens of examples of companies and organizations that have used elements of this approach to improve their innovation performance. These include Airbnb, Amazon, CVS Minute Clinics, Intuit and Uber.
A great example is General Motors’ OnStar subsidiary. OnStar didn’t take off until the division realized that the job the customers were actually hiring it for was not a high-end mobile concierge service but a 24/7 emergency response when they were on the road.
The authors do acknowledge there is no special method of uncovering jobs to be done. It sometimes requires working through a customer’s decision-making process. However, they do suggest several places to begin looking.
One of these is finding customers using products in ways never imagined. This was the case with Arm & Hammer. The orange box baking soda business now constitutes less than seven per cent of the company’s revenue. Understanding how customers actually used the product has spawned millions of dollars in new product creations.
Competing Against Luck is a welcome addition to the vast literature on innovation. It offers a practical guide that will help you understand what customers really want from you, thus providing a more reliable basis for creating products and services that you know in advance they will be eager to buy and for which they will be willing to pay a premium price.
Micheal Kelly is the Dean of The Lazaridis School of Business and Economics at Laurier University and the founder of the Lazaridis Institute for the Management of Technology Enterprises.
Competing Against Luck: The Story of Innovation and Customer Choice by Clayton M. Christensen, Taddy Hall, Karen Dillon, David S. Duncan. Harper Business, 2016.