WILLIAM R. AND ERLYN J.

GOULD DISTINGUISHED LECTURE

ON

TECHNOLOGY AND THE QUALITY OF LIFE

Fourteenth Annual Address

Using Disruptive Innovation to Create

New Growth
by

Clayton

Christensen

Robert 8c Jane Cizik Professor of Business Administration

Harvard Business School

DUMKE FINE ARTS AUDITORIUM

SPONSORED BY: THE J. WILLARD MARRIOTT LIBRARY
UNIVERSITY OF UTAH

2005-06

Using Disruptive Innovation to Create

New Growth

Clayton W . Christensen
Robert 8c Jane Cizik Professor of Business Administration
Harvard Business School

Dumke Fine Arts Auditorium

Marcia 8c John Price Museum Building
410 Campus Center Drive
Sponsor: J. Willard Marriott Library
University of Utah
March 29, 2006
Noon

Program

Welcome
Joyce L. O g b u r n
Director, J. Willard Marriott Library

Introduction
Michael K. Young
President, University of Utah

2005-06 Gould Lecturer

Clayton M . Christensen
Robert 8c Jane Cizik Professor of Business Administration
Harvard Business School

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About the Gould Endowment

"T* T" T"illiam R. and Erlyn J. Gould
1 / 1 / established an endowment
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in their names in 1992 in
support of the activities
conducted within the Utah Science,
Engineering, and Medical Archives of
the J. Willard Marriott Library.
In addition to supporting the
archives, the endowment also funds
the annual William R. and Erlyn J.
Gould Distinguished Lecture on
Technology and the Quality of Life.
These annual lectures focus on
technical and environmental topics,
and how they relate to society as a
whole.

f*
hi
f4^

JR

fc

Erlyn and William Gould

William R. Gould, one of the world's leading engineers,

businessmen, and entrepreneurs, has named the Marriott Library as
repository of record for his professional and personal papers spanning
more than forty years. As with many of the donors of collections housed
in the Utah Science Archives, extensive oral history interviews have been
conducted with Mr. Gould, as a supplement to his collection.
Through support by the Gould Endowment of the Gould
Distinguished Lecture series, William and Erlyn have expressed their
desire to share with the public their hope for the future: that through a
more complete understanding of technology and its application, perhaps
the humanity of which we are all a part may find a stronger path to
greater social potential.
In their support of the Marriott Library, the Utah Science Archives,
and the Gould Distinguished Lecture series, William and Erlyn Gould
have established a durable marker by which we may more easily find our
way.

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GOULD DISTINGUISHED LECTURE

on

TECHNOLOGY AND THE

QUALITY OF LIFE
Mission Statement
The William R. and Erlyn J. Gould Distinguished Lecture on
Technology and the Quality of Life was inaugurated in October,
1992, at the University of Utah J. Willard Marriott Library.
In establishing the lecture series, William and Erlyn Gould
both recognized the critical need for continuing public education
about issues regarding modern technology and its impact on our
daily lives.
Inherent to the advantage of technology is the importance of
understanding the ramifications and responsibilities that
accompany modern scientific discovery. Only through continuing
public education can scientific fact and social philosophv be
successfully merged.
This lecture series is intended to provide a forum for the
discussion of problems, issues, experiences, and successful case
histories of the regeneration and preservation of our communities
through the application of modern technology.
It is hoped that an increased awareness of obligation in the
public trust will emerge among practitioners of technology as they
address the very important environmental and life-deteriorating
problems facing society today.

Through interaction between technologists and opinion leaders

in communities that are the benefactors of their efforts, a synergism
can develop through which society may see great benefit in the
long-term future.
W i t h this lecture series, it is intended that a dialogue be opened
between the technologist, the philosopher, the humanist, the
private citizen, and all who may wish to assert an active voice in our
collective future.
In such an atmosphere of mutual interest and understanding,
no one group will be singled out for exclusion or be blamed for
society's ills; rather, through understanding, discourse, and public
education the positive direction of our future may be shaped.
The Marriott Library's mission is to provide information
resources that support the scholarship, teaching, and research
programs the University of Utah offers to students, faculty, and
citizens of the state.
In this light, this annual lecture will strive toward providing a
greater public understanding of technology and the social potential
that can be cultivated.
In conjunction with the Utah Science, Engineering, and
Medical Archives program of the Marriott Library, this lecture
series will provide the means of bridging the many disciplines of
technology while meeting the needs of the public in understanding
its rich and diverse technological heritage.

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Clayton M. Christensen
Robert 8c Jane Cizik Professor of Business Administration
Harvard Business School

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Clayton M . Christensen
Clayton M . Christensen is the Robert and Jane Cizik Professor
of Business Administration at the Harvard Business School, with a
joint appointment in the Technology 8c Operations Management
and General Management faculty groups. His research and
teaching interests center on the management of technological
innovation, developing organizational capabilities, and finding new
markets for new technologies. Prior to joining the HBS faculty,
Christensen served as chairman and president of CPS Corporation,
a firm which he co-founded with several M I T professors in 1984
which is now a publicly traded company. CPS is a leading
developer of products and manufacturing processes using advanced
materials.
Christensen holds a B.A. in economics from Brigham Young
University and an M.Phil, in economics from Oxford University,
where he studied as a Rhodes Scholar. Christensen received an
MBA from the Harvard Business School in 1979, graduating as a
George F. Baker Scholar. He was awarded a DBA from the
Harvard Business School in 1992. Christensen won the Production
and Operations Management Society's 1991 William Abernathy
Award, presented to the author of the best paper in the
management of technology; the Newcomen Society's award for the
best paper in business history in 1993; and the 1995 McKinsey
Award for the best article published in the Harvard Business
Review.
Professor Christensen is the author of four books: The
Innovator's Dilemma, which received the Global Business Book
Award for the best business book published in 1997; Innovation and
the General Manager, a casebook; The Innovator's Solution, coauthored by Michael E. Raynor; and Seeing What's Next, coauthored by Scott D. Anthony and Erik A. Roth. Professor
Christensen's writings have been featured in a variety of
publications, and have won a number of awards over the years.

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Using Disruptive Innovation to

Create New Growth
The theory of disruptive innovation is grounded in research
that has revealed how simpler, cheaper, and "good enough"
innovations can find application in low-end market tiers and nonconsuming customer groups. These innovations inevitably
improve, march up-market and "disrupt" incumbents by gradually
pushing them out of ever more complex and margin-rich product
segments. This presentation introduces the core concepts related to
disruptive innovations, showing how they can be both threats and
opportunities and what companies can do to encourage disruptive
growth. Professor Christensen draws on examples from a vast array
of industries to illustrate key concepts throughout the presentation.
Notable examples come from industries including steel, personal
computers, consumer goods, health care, electronics, software,
education, telecommunications and semiconductors.
Professor Christensen discusses the following topics, described
in more detail below:
1. Tackling the Innovator's Dilemma: Disruptive innovation
basics
2. Assessing Capabilities: Resources, processes and values
3. Understanding the drivers of commoditization
4. Connecting with customer jobs to be done
5. Deploying the right kind of strategy at the right time
6. Creating a growth engine
7. Disruptive innovation applied to country strategy
1. Tackling the Innovators
basics

Dilemma: Disruptive

innovation

There is a simple, important principle at the core of the

disruptive innovation theory: companies innovate faster than
customers' lives change. Because of this, most organizations end up
producing products that are too good, too expensive, and too
inconvenient for many customers. By only pursuing these

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"sustaining innovations," companies unwittingly open the door to

entrants that can offer simpler, more convenient and lower-cost
products to those customers who have no need to keep up with the
accelerated pace of innovative change.
This phenomenon happens for a good reason: good managers
are trained to seek higher profits by bringing better products to the
most demanding customers in the marketplace. But in that pursuit
of profits, companies end up "overshooting" less-demanding
customers who are perfectly willing to take the basics at reasonable
prices. And they ignore "nonconsumers" who may have a desire to
get a job done, but who lack the skills, wealth or ability to consume
existing solutions in order to satisfy that desire.
There are two types of disruptive innovations: low-end and
new-market. Low-end disruptive innovations can occur when
existing products and services are "too good" and hence overpriced
relative to the value existing customers can use. Low-end disruptive
innovators create business models that provide adequate quality to
these "overshot" customers. T h e second type, new-market
disruptive innovations, can occur when characteristics of existing
products limit the number of potential consumers. Limiting factors
might include the need to consume in inconvenient, centralized
settings or the need to have expert training. The Kodak camera,
Bell telephone, Sony transistor radio, Xerox photocopier, Apple
personal computer, and eBay online marketplace were all newmarket disruptive innovations. They all created new growth by
making it easier for people to do something that historically
required deep expertise or great wealth.
2. Assessing Capabilities: Resources, processes and
values/priorities
The resources, processes, and values (RPV) theory explains why
existing companies tend to have such difficulty grappling with
disruptive innovations. The RPV theory holds that resources (what
a firm has), processes (how a firm does its work), and values (what
a firm wants to do) collectively define an organization's strengths as
well as its weaknesses and blind spots.

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The RPV theory argues that organizations successfully tackle

opportunities when they have the resources to succeed, when their
processes facilitate what needs to get done, and when their values
allow them to give adequate priority to that particular opportunity
in the face of all other demands that compete for the company s
resources. Incumbent firms master sustaining innovations because
their values prioritize them and their processes and resources are
designed to tackle precisely those types of innovations. Incumbent
firms fail in the face of disruptive innovations because their values
will not prioritize disruptive innovations and the firm's existing
processes do not help them do what they need to get done.
3. Understanding

the drivers of

commoditization

Industries tend to evolve from states of interdependence, where

individual firms are vertically integrated, to modularity, in which
specialist firms that are responsible for critical pieces of the value
chain and produce key product components can earn a disproportionate share of value in an industry.
Before a product or service is good enough to meet mainstream
customer needs, integrated firms that control the entire production
and delivery process are best suited to coordinate the complexities
developers will confront when trying to improve the product.
Companies that solve these problems are rewarded with a disproportionate share of industry profit. To improve products, companies
often must use new and unproven technologies or put existing
technologies together in new ways, creating new patterns of
interaction and new problems. Pushing the frontier of what is
possible requires proprietary, interdependent architectures, and in
this circumstance, integration gives firms a full platform to run
engineering experiments to wring out continued improvements.
As companies overshoot their customers' needs, companies no
longer need the benefits that integration brings. Instead, they
increasingly compete based on speed, flexibility, or convenience. In
an effort to develop products or services more quickly, companies
tend to standardize interlaces between various parts of the product

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or service. These standards eventually morph into industry-wide

standards and allow product architecture to become modular.
Modular products or services allow companies to get to market
more quickly because they can replace individual components
without redesigning an entire product. Modularity also enables the
creation of specialist firms capable of developing products that fit
these interfaces. This change allows previously integrated firms to
out source pieces of their product to vendors that meet their specifications and allows specialist firms to earn a significant share of
the profits.
4. Connecting with customer jobs to be done
The jobs-to-be-done theory holds that products are successful
when they connect with a circumstance - with a job that customers
find themselves needing to get done. Products that successfully
match a job or circumstance end up being the real "killer
applications." They make it easier for consumers to do something
they were already trying to accomplish.
By identifying what jobs people really care about and
developing products that make it easier to achieve these jobs,
companies can identify new markets that they were previously
unaware of and that could not be uncovered via traditional market
segmentation schemes. Understanding those jobs that are not
adequately satisfied by current products provides deep insight into
what are and what will be the truly innovative products that delight
existing customers and attract new customers from the sidelines of
nonconsumption.
5. Deploying the right kind of strategy at the right time
W h e n pursuing new growth opportunities, companies have
two different ways to set strategy. They can follow a deliberate
strategy, where they set a goal, define a set of steps to reach that
goal, and then methodically act on each step. This process is very
conscious and typically quite analytical. It involves assessment of
market structure, competitive analysis, and detailed market
research to determine customer needs.

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Companies that take the other approach - following an

emergent strategy - try to retain flexibility and gather feedback
from the marketplace on what works and what doesn't. They try to
change their strategies on the fly to adapt to new information that
emerges from the marketplace.
Emergent strategies work in highly uncertain situations, such as
those that surround the pursuit of disruptive innovations. In these
situations, operating managers tend to encounter problems that
business planners didn't anticipate. Actions lead to unanticipated
results. In such circumstances, following a rigorous deliberate
strategy can lead companies to ignore market signals and not adapt
their strategies. In other words, they can continue to stick to a
strategy that clearly isn't working. Emergent strategies encourage
managers to respond to problems in the most appropriate way, even
if it results in deviating significantly from the deliberate course.
6. Creating a growth

engine

If a company launches a sequence of growth businesses, if its

leaders repeatedly use the disruptive innovation principles for
shaping ideas or acquiring nascent disruptions, and if thev
repeatedly use sound theories to make other key business-building
decisions well, a predictable, repeatable process for identifying,
shaping and launching successful growth can coalesce. A companv
that embeds the ability to do this in a process would own a valuable
growth engine.
Such an engine would have four critical components. First, it
needs to operate rhythmically and by policy, rather than in response
to financial developments. This would ensure that new businesses
get launched while the corporation is still growing, and that new
businesses would not be pressured to grow too big too fast. Second,
the C E O or another senior executive who has the confidence and
the authority to lead from the top when necessary must lead the
effort. This is particularly important in the early years, when
success still depends more on resources than on processes. Third, it
would establish a small, corporate-level group - movers and shapers

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- whose members develop a practiced, repeatable system for

shaping ideas into disruptive business plans that are funded and
launched. Fourth, it would include a system for training and
retraining people throughout the organization to identify disruptive
opportunities and to take them to the movers and shapers.
7. Disruptive

innovation

applied to country

strategy

The principles described above can be useful not only for a

companys strategy, but for a country?, macroeconomic strategy as
well. The "wheel' of disruption - firms establishing disruptive
footholds, growing, seeing growth stall, squashing internal ideas
and having managers leave or entrepreneurs coalesce to get funding
and form new businesses to establish new disruptive footholds - is
a core microeconomic engine of macroeconomic growth. Many
writers who have suggested that American management was the
way of the past and Japanese management the way of the future in
the 1980s ascribed much of the United States' subsequent growth
to American management. However, we cannot credit the
economic success of the United States to the ascendance of
American management any more than we can credit the economic
struggles of Japan to the descent of Japanese management. The
United States has not been able to continue moving along the
wheel of disruption.
There are six factors that encourage the wheel of disruption: A
market for talent that encourages entrepreneurialism and risk
taking; Capital markets that help new firms start and grow while
targeting disruptive opportunities; Unconstrained product markets
that provide ample motivation and ability; a supporting infrastructure that has appropriate tax policies and encourages company
formation; Vibrant industry dynamics with market-based
interactions and competition to spur new business models; and, a
research and development environment that protects intellectual
property. Countries that nurture a wheel of disruption can find
great success.

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T h e Utah Science, Engineering, and Medical Archives

The Utah Science, Engineering, and Medical Archives was
established in 1985 as a part of the Special Collections Department of
the J. Willard Marriott Library.
Many individuals associated with Utah have made distinguished
contributions to science and its application to business and industry.
These advances cover a broad spectrum of creative theoretical contributions, important experimental work, and innovative technological
applications ranging from chemical reactions to cosmic rays,
commercial explosives to artificial organs, computer graphics to fossil
fuels, sound reproduction to space engineering, laser technology to
applied ecology, and more.
The Utah Science Archives provides a rich resource for researchers
exploring diverse topics in science, medicine, and technology. These
include the individual contributions of distinguished scientists and
entrepreneurs to group and institutional research of development
projects. The complex interactions of science, technology, government,
and industry are well documented.
An on-going search is being conducted to identify materials
appropriate for inclusion in the archives. Many prominent Utah-related
scientists and entrepreneurs have been contacted and encouraged to
deposit their personal and professional papers with the program. The
response has been positive, and the archives presendy holds over 60
major collections, with additional collections committed.
As the archives and its funding base grows through generous
private contributions, it will sponsor more special lectures, university
courses, seminars, conferences, and major exhibitions. These
educational programs will provide the means of bridging the many
disciplines of a university campus while meeting the needs of the public
in understanding its rich and diverse scientific and technological
heritage.

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T h e Library and the University

The University of Utah Libraries include the J. Willard Marriott
Library, the Spencer S. Eccles Health Sciences Library, and the S. J.
Quinney Law Library. These libraries collectively constitute one of the
foremost research centers in the intermountain area. The Marriott
Library has over two and one-half million volumes and approximately
14,000 serial subscriptions.
The Marriott Library participates in the learning and teaching
ventures of the university by building collections, establishing links to
an increasingly global body of knowledge, and providing users with
guidance in accessing a wide range of resources. The library is a shared
asset of the academic community dedicated to teaching users how to
find, evaluate, and incorporate knowledge in scholarly and research
endeavors. With a welcoming environment, the library ties the
academic community to varied cultural and scholarly traditions.

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NOTES

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NOTES

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Advisory Board 2005-06

William R. Gould, Chairman Emeritus, Southern California
Edison Co., Rosemead, California
Floyd A. O'Neil, Advisory Board Chairperson, Director
Emeritus, American West Center, University of Utah
Wayne R. Gould, Director, Natural Gas Resources,
Puget Sound Energy
Gilbert R. Gould, Sr. Vice President, Underwriting, Aegis
Insurance Services, Jersey City, New Jersey
David W. Pershing, Sr. Vice Presidentfor Academic Affairs,
University of Utah
Michael K. Young, President, University of Utah
David W. Eckhoff, Sr. Consultant PSOMAS, Chairman of the
Civil & Environmental Engineering Department Advisory
Board, University of Utah
Joyce L. Ogburn, Director, J. Willard Marriott Library,
University of Utah
Gregory C. Thompson, Assistant Director, Special Collections,
J. Willard Marriott Library, University of Utah

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