What if, despite your best intentions with what you think you know at any given point in time, and despite doing everything right based upon your current knowledge, you still failed? It is highly likely you have faced this situation, or know somebody in your close circle of friends who has. Not convinced? How about these examples:
- Sports context – you laid out a strategy for an upcoming game, and executed on that strategy to what appears to be near perfection … but still lost the game.
- Driving context – you followed the speed limit and any other traffic rules … but still got in an accident.
- Health context – you followed a healthy diet, and worked out regularly … but still got sick.
I’m sure there are others from a non-work perspective, but what happens when this scenario presents itself at work? What happens when you capture a dominant market share because you solved a specific market problem; when you responded to customers’ needs in a timely fashion; when you proactively and re-actively reacted to competitive threats to neutralize them quickly; when you consistently delivered a positive P&L for the business year after year? Doesn’t this type of performance describe what good Product Management leaders should be doing? And wouldn’t these results equate to success?
The answer is not always!
I just finished a book that has been on my reading list for longer than it should have been (busy summer … but mostly procrastination) titled the Innovator’s Dilemma where the author, Harvard Professor Clayton Christensen, explores why situations like these do happen. Obviously, I would suggest you read the book yourself … but this 4 minute video does a good job of summarizing the overall context.
Essentially it comes down to sustaining vs. disruptive innovation. Sustaining technologies improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued. Disruptive technologies under-perform established products in mainstream markets, but they have other features a few fringe and generally new customers value … and while they under-perform today, they may be fully performance competitive in the same market tomorrow.
There are many case studies offered in the book from various markets, but the one that stood out most to me was the example of Bethlehem Steel and the disruption mini-mill technology represented. The mini-mills initially produced inferior quality products, so only represented low-margin opportunities in the smallest segments of the industry. Bethlehem Steel made the intentional decision to concede this part of the market to the mini-mills and focus on improving their production process and quality to better serve their existing customers and the high-margin, up-market opportunities.
On the face of it, Bethlehem Steel did things right and their profits soared for a time as they executed their strategy of going after high-margin customers with quality offerings! And yet they still failed because the quality of the mini-mills improved substantially enough to where they started moving up-market and Bethlehem Steel could no longer compete at the same margin levels.
Interestingly, the author makes the point managers who confront disruptive technological change must be leaders, not followers, in commercializing disruptive technologies. Why? Consider these points from the book …
- It is not crucial for managers pursuing growth and competitive advantage to be leaders in every element of their business. In sustaining technologies, in fact, evidence strongly suggests companies who focus on extending the performance of conventional technologies, and choose to be followers in adopting new ones, can remain strong and competitive.
- This is not the case with disruptive technologies. There are enormous returns and significant first-mover advantages associated with early entry into the emerging markets in which disruptive technologies are initially use.
What is true in most organizations I have worked for is a strength around pursuing sustaining innovation. They tend to be really good at focusing on technology enhancements that bring value to existing customers and therefore promise better revenue at higher margins. And this is a good thing. The book makes the point many leading companies have an advantage because of these strengths in resources, processes, and values which help to weed out low-value initiatives.
And yet these advantages are exactly what disadvantage the same companies when it comes to disruptive technologies. Lower-margins, less attractive markets, and many existing customers will not want/need it … so let’s not focus there. Or perhaps the company does take the disruption seriously, but is not able to adjust quickly enough to combat the situation.
This is the dilemma outlined in the book, and it is repeated over and over again in industry after industry. Consider these patterns described in the book.
- Disruptive technologies often are discovered within established firms
- Marketing seek input/reactions from top customers (and it often is not seen as a need)
- So established firms decide to focus and invest in sustaining technology development rather than the disruptive technology
- New companies emerge focusing on the disruptive technology (often with resources who came from the established firms)
- After succeeding a lower end, the newer companies being to move upmarket
- Established firms belatedly jump on the bandwagon to defend customer base
This is a complex challenge, and like I said earlier it plagues every company in every industry. As good Product Management leaders, we absolutely need to focus on the things that will help us win in our existing markets … but after reading this book (and having experienced situations similar to these in my career), I would suggest there is more to our role. Sometimes it may be right to not listen to the customer …
- to focus resources on technologies customers may initially reject
- on projects offering lower profits
- on opportunities that may under perform existing technologies
- on what may at first appear to be insignificant markets
The question is, do we have the courage to step up as this type of leader?