'Disruptive' qualities can point to future market leader

By DITA DE BONI

Throwing stacks of money into your company's market research will not guarantee you a competitive advantage in the marketplace, says a visiting Harvard Business School academic.

Towering, softly spoken Professor Clayton Christensen instead advises companies to look less closely at customers' current needs and focus on their unstated or future needs. In other words, to rely less on market research and more on management intuition.

The innovation flowering from this process can lead, he says, to the development of "disruptive" technologies - products which may not be profitable at first but come to generate whole market segments, in some cases displacing market leaders.

Examples include the telephone, which "disrupted" the telegraph, and the mobile phone, which was forecast to be used by only 1 per cent of land-line users.

The personal computer is another example, a technology so poorly performing at first that it was used only by children.

The stand-alone photocopier Machine also "disrupted" society's use of offset printers, he says.

But, in each case, the new product's appeal soon generated phenomenal growth.

Professor Christensen illustrates his theory with the example of Japanese electronics giant Sony.

Between 1955 and 1980, Sony introduced 12 "disruptive technologies" into the market - technologies which had no precedent, but which eventually earned a permanent place in the consumer landscape.

These products, including the portable TV and radio, the camcorder, video recorder and finally, in 1980, the Walkman, were developed when Sony founder Akio Morita was involved in every product launch.

Morita eschewed market research, instead trusting the intuition of his five senior management staff.

When he retired in the 1980s, "Sony started hiring MBA graduates who preferred to conduct analytical market research. The problem is, market research only analyses markets that already exist," says Professor Christensen.

"What we learn in marketing is to listen to consumers and be very analytical about strategies ... But in markets that don't exist the process is very different. You have to use much more intuitive, backward processes.

"It is market innovation, not technical innovation, that creates growth."

Professor Christensen is often called into companies to advise them how to move beyond simply incremental technological improvements.

This process he calls "disruptive innovation," and most companies he comes across are capable of it once established organisational patterns are overhauled.

"Most companies have more innovative people than they know what to do with, but [those people] are embedded within a process that [emphasises] working towards sustaining innovation in established markets."

But what happens when those innovative people break free from organisations into start-ups, only to flounder?

"Around 33 per cent of all [start-ups] that pursue disruptive technologies have success.

"Only 3 per cent of start-ups that enter established markets succeed," he counters.

Professor Christensen says the principles of disruptive innovation apply to companies of all sizes.

And the lessons hold true equally for the internet, which is neither a sustaining nor a disrupting technology, but rather an infrastructure that supports either a sustaining or disruptive business model.

"A lot of dotcoms tried to enter a market that the internet had a sustaining effect on - businesses like online consulting, where offline business had not yet overshot what customers needed.

"The more successful ones are disruptive - for example, online travel agencies, which have had a huge impact on retail travel agencies, offering something completely different."

Not only are his views of innovation shaking some entrenched beliefs about market analysis, but Professor Christensen - a high-profile member of the Mormon Church - says that his religious training has helped in the business world by giving him an understanding of and "deep respect" for people.