Business worships chaos.
That prophet was the late Clayton Christensen, who published The Innovator’s Dilemma in 1997, arguing that the inevitable fate of large, established organizations was to be cannibalized by smaller, upstarts. He argued that because smaller organizations don’t have to worry about satisfying the needs of an existing customer base and aren’t bound by the profitability standards required by mature industries, they are freer to innovate, find new ways to serve new customers, and then push upstream, eventually displacing incumbents. This process leads to the dilemma in the book’s title: executives at large, established organizations are paving the way for their own demise by doing exactly what is expected of them: paying attention to customers and profitability.
The remedy that Christensen offered these executives was to become instruments of great change themselves before anyone else could do it for them (or to them). They should create a small organization with a license to innovate, isolate it from the rest of the company and free it from corporate constraints, and then scale new products and markets as they emerge. They should turn disruptive forces to their advantage, not against them.
Christensen noticed patterns in the industries he studied and observed responses that seemed to work in many of the cases he studied. This is all well and good: his data could be accepted, his prescriptions could be accepted. But what happened next caused problems, because the patterns and responses became the mantra: “disrupt yourself.”
The concept proved very appealing, partly because, as is often the case, it was so catchy to boil it down to two words. Not only did it have a long intellectual tradition (as early as 1942, economist Joseph Schumpeter had argued that the essential mechanism of capitalism was the extinction of old, worn-out ways by new ones, calling this process “creative destruction”; Charles Darwin had shown that the essential mechanism of life itself was the extinction of less fit species by more fit ones), but it also offered business leaders a way to rethink what had previously been a threat as a source of competitive advantage. It seemed that the best self-disruptors would survive to the end. In time, what had appeared as a specific observation about new entrants into existing markets morphed into a universal prescription that applied to a wide swath of corporate life, and in the process, several related ideas (e.g., that fast is always good, that the first to scale in a new market will win, and the profits will follow) came together to form a new orthodoxy in business thinking. Change is inevitable. We can be instigators of change or victims, and if we choose to be instigators of change, we are almost automatically on the right path.
Christensen’s prescription has not been immune to criticism: Jill Lepore, for example, wrote in The New Yorker in 2014 that disruptive innovations are “products of history, ideas forged in time, creating moments of upheaval and tension.” [that] Christensen, who said he would be a “very poor prophet,” accurately portrays how widespread and deep the disruption is. But the rare voices of concern seem to have had little effect, as do the wealth of social science findings that reveal the detrimental human effects of widespread, ongoing instability. Whether Christensen was right about the death and life of big corporations, his work continues to produce a wave of disruption that has long since left the scope of his original observations and is now presented as a justification for sudden change, transformation, and reinvention everywhere in business. We are taught that we need this stuff. You can take courses on disruption at business schools like Stanford, Cornell, Columbia, and Harvard. And, in a lovely meta-irony, you can read about how these organizations themselves are disrupting (and no doubt trying to disrupt themselves in retaliation). The Harvard Business Review has articles on its cover, such as “Is Your Company Resilient to Change? You Can Adapt” and “Building a Leadership Team for Transformation: Your Organization’s Future Depends on It.” And if you want a doctrine of chaos, you can buy inspirational posters and chant slogans like, “Fail fast. Break or be broken. Move fast and break things.” It’s hard to remember a time when there was any other way to think about running a company.
But in the process, while we were all busy making disruptions here and there, somehow we lost sight of the fact that change and improvement are two different things. Before the disruptions, the usual logic was: “We need to solve this problem, therefore we need to change.” After the disruptions, this was reversed: “We need to change, because that will solve all our problems.” Before the disruptions, the job of leaders was to identify and solve the problems, and to identify and leave the things that were not problems as they were. After the disruptions, the job of leaders is always to change everything, because if we don’t change things, someone else will, with all sorts of unspecified negative consequences. Before the disruptions, the job was to move things upward and to the right. After the disruptions, the job is just to move things. Thus, the onset of disruptions was also an opportunity for a subtle shift in meaning. Before our very eyes, the words for change – innovate, disrupt, change, renew, transform, renew, reimagine, reinvent, refresh – all came to share one unquestionable meaning: for the better.
In reality, things are not that simple. Take mergers and acquisitions, for example. It is a long-established finding that most M&A activity destroys value. One study puts shareholder value destruction in 60 percent of cases, and another estimate puts the figure between 70 and 90 percent. Or take layoffs. Stanford professor Jeffrey Pfeffer has written extensively and persuasively about the impact of layoffs and whether they make sense not only from a human perspective (which he vividly shows is a very difficult claim to make) but also from a capitalist perspective with an obligation to maximize shareholder value (which might seem easy to make). On this second question of economic value, Pfeffer writes, “Layoffs often do not reduce costs…Layoffs do not increase productivity. Layoffs often do not solve underlying problems, such as ineffective strategies, lost market share, or low revenue.”
But even if this is not always the case – that is, even if a well-executed restructuring or organizational change can produce real benefits – it is clear that a better calculation of the associated human costs raises the question of whether and how often change makes an organization better, and leads to a more sophisticated understanding.
Excerpted with permission from The Problem With Change by Ashley Goodall. Copyright © 2024 Ashley Goodall. Used by permission of Little, Brown Spark, a publication of Little, Brown and Co.
