Clayton Christensen interview at MIMC

Dan Bricklin writes about Scott Kirsner’s interview with Christensen:

Scott asked about not always following current customers. Clayton’s response: Any given customer can only lead you in a certain direction. So you need to listen to non-customers sometimes.

Another observation: A competitive strategy that uses lower cost only works if there is a high cost provider around. As soon as the high cost provider leaves the market, the prices collapse. So, you must constantly move upscale to attack the higher cost providers that have moved there. Dell needs to move up and up (as they are with servers and related hardware) and needs Sun to be there.

Scott asked about the low cost airlines. Clayton then discussed the two strategies for competing with disruptive technologies: A Low-Cost strategy and a New Market strategy (selling to people who are not buying in the category). He said that Southwest Airlines went after the type of people who used trains and buses and/or used out of the way airports. That was a New Market strategy. The other low cost airlines are mainly using a Low-Cost strategy. He feels that they can only last 5 years, because the incumbents must go after them on the cost front — the incumbents can’t go up market.

When asked about Linux and Google, he discussed how Linux is more modular than Windows and that you can fit it in an appliance or tailor it to an application better. What I realized is that the open source development model encourages a more modular design than many traditional development models, but the customizability of the source code eases application-specific tuning breaking the modularity barrier if you want. This model encourages platform designs that can be molded by small groups for their purposes. Modular architecture is an advantage for certain disruptive products and in mature industries. Interdependent architectures have advantages when you are pushing out every ounce of performance.

With regards to Google vs. Yahoo and others, he sees portals (like Yahoo and AOL) as vulnerable to specialist providers (seeing Google as a search specialist in this case). He gave the example of how department stores (like Sears) gave way to specialist stores (like Best Buy). He says things change once you know where to go for things. In the early days you go to the “have everything” place, but later go to the “best” place for each thing.

Clayton sees some of the industries that haven’t been disrupted recently as education, legal services, and healthcare. They have high cost, variable quality, and low satisfaction.

In 2004 there will be a new book he’s collaborating on: “Seeing What’s Next”. He says that traditional business school teaching has enshrined data driven decision making. But data is from the past. Seeing the future needs theory, not looking at the past. The book is about this.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.