I read Innovator's Solution over the Thanksgiving holidays and was impressed with the book.   It's a worthy successor to Innovator's Dilemma and picks up cleanly where the first left off.   Clayton Christensen (along with his new co-author Michael Raynor) has built himself quite a franchise and has pulled off the rare fete of creating a follow up work as good as the much heralded original. 

The authors quickly state the core problem they're trying to address [p 1..7]:

Roughly one company in ten is able to sustain the kind of growth that translates into an above-average increase in shareholder returns over more than a few years.

...Study after study, however, concludes that about 90 percent of all publicly traded companies have proved themselves unable to sustain for more than a few years a growth trajectory that creates above-average shareholder returns.

Pretty stark odds, he?  The book presents an excellent discussion of why this is the case and what mistakes managers systemically make.  One of my biggest criticisms of the model in Innovator's Dilemma was that it didn't present a good model for:

... figuring out when there is true displacement vs additive usage.   New technologies can arise which may appear to be disruptive to an existing market from the outset but end up carving out / creating their own niche.  

This distinction is crucial for managers planning actions in the face of new technology.   The authors address this issue rather satisfactorily using the framework that product boundaries are the result of "jobs to be done" rather than "technologies available" [p 85]:

..different jobs arise at different points in time and space in consumers' lives, we'd bet that for a very long time most consumers would opt to won each product individually rather than having a single, Swiss army knife-like device -- that is until a one-size-fits-all device can do all these jobs without compromising functionality, simplicity, and convenience.

So a new technology is additive if it's addressing a new job and disruptive if it eventually addresses the same old job as a previous technology.  Now, I know that when presented abstractly like this, a lot of business boils down to common sense and relatively simple observation.   And, folks who don't LIVE the tech biz world often read some of this stuff and say "that sounds pretty obvious".  

But the real contribution of Christensen / Raynor is the precise codification of something we may already intuitively know in limited circumstances.  We may recognize some of the phenomena under certain circumstances but until it's codified, there are many, often significant cases where we tend to miss it.  Industry adventures with Interactive TV, cell phone + PDA's, DVD + CD players, network computers, etc. are all obvious failures in hindsight but didn't seem so at the time.

Christensen / Raynor provide an excellent treatment of how architectures define the selection integrated and modular systems.   Most of my blog trends towards political rather than econ so I can't resist bringing in the politico-economic message.   Many activists (particularly of the Left Wing ilk) believe that the existence of monolithic architectures in the market is the result of some dark conspiracy by the entrenched power elite who are able to collectively block alternate architectures from entering the market (Microsoft vs. Linux,  Oil companies vs. "the hydrogen economy", Meat vs. Soy, etc.).

Christensen & Raynor provide an elegant theoretical model for when vertically integrated technical markets persist, how they become modularized and what mechanisms exist that cause the entire system to fall by the wayside (eventually).   The Politico in me loves the fact that they've articulated a rather comprehensive model where the only abject display of Power is that which is exercised by the consumer.   Producers beware! 

They authors somewhat expressly stay away from stating a direct opinion about the Microsoft anti-trust case (walking into that minefield would almost certainly detract from the primary mission of the book).  BUT an astute reader looking between the lies can get a good idea of where their sympathies lie [p 135]:

Microsoft's dominance did not arise from monopolistic malfeasance.  Rather, its integrated value chain under not-good-enough cnditions enasbled it to make products whose performance came closer to what customers needed than could nonintegrated competitors under those conditions.

The core strategy they recommend for the Microsoft's in various industries?   The need to be willing to experiment with corporate intrapreneurship BUT, as the "board" for a new venture, do NOT expect massive growth immediately but instead focus marginal profitability.   Be patient about growth but not about profits.

Growth patience is meant to encourage the new venture to seek emergent opportunities rather than attempting to "bat one out of the park" on every swing.  Being receptive to emergent strategy helps the venture managers stay open to serendipitous opportunities.   Being focused on immediate profitability helps ensure that they always mine them.  A great footnote captures a phenomena that Silicon Valley rank-and-file often see in our VC backers [p 234]:

We are concerned that as venture capital firms have gradually become populated by less-experienced analysts who learned only about deliberate strategy in their MBA courses, they are subtly demanding more and more rigor and data and evidence that the strategy of a business is right.   They then pressure the management teams of their portfolio companies to "execute."   They only revert to an emergent mode when the initial investment has been squandered and the founding managers sacked, and there is no alternative but to seek a viable strategy through emergent processes

(By the way, in stark contrast to most books where the footnotes are simply long lists of bibliographic citations, the notes in Innovator's Solution are illuminating and truly add substantial texture.   I HIGHLY recommend reading ALL of the chapter footnotes in detail). 

Overall, Innovator's Solution is one of the best business books I've read in a long time although perhaps a notch shy of the ground-breaking nature of it's predecessor.   Nevertheless, I suspect it will become a "new classic" oft-cited by technology managers and observors alike.

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