Clay Christensen Speaks at Technology Alliance on Disruptive Innovations in Education, Health, VC

A roomful of 850 business leaders and policy makers got some serious food for thought at yesterday’s annual “State of Technology” Luncheon in Seattle, organized by the Technology Alliance. The guest of honor was Clayton Christensen, the Harvard Business School professor who coined the term “disruptive innovation” in a series of bestselling business books starting with The Innovator’s Dilemma. It was fascinating to hear Christensen’s ideas and research lessons applied to everything from the steel industry and mainframe computing to the contemporary concerns of healthcare and education.

Before diving into Christensen’s talk, I first need to cover a few Seattle-area concerns. Speaking of the steel industry, Seattle-based Modumetal, a nanotech and advanced materials startup, was named “2010 company of the year” by the Alliance of Angels at the lunch. Modumetal has been getting an increasing amount of attention as it wins contracts and forms partnerships to integrate its nanomaterials into more mainstream applications like cars, jet engines, buildings, and bridges. (There is some debate about whether Modumetal fits with Christensen’s “disruptive” model—it might hinge on how the company handles its partnerships with potential competitors.)

Technology Alliance chair Jeremy Jaech, the CEO of Verdiem (and the co-founder of Aldus and Visio), gave an impassioned talk on the impact of the tech sector on Washington state’s economy and employment stats. For example, there were more than 380,000 tech jobs in the state as of the first half of 2009, which account for 13 percent of all jobs in Washington. What’s more, he said, those tech jobs support a total of 1.2 million jobs in fields like construction, recreation, and service industries—a whopping 42 percent of all employees. Jaech urged state leaders to do more to support education and to “stop treating the technology industry like Mount Rainier”—noticing it on sunny days and taking it for granted the rest of the time.

Then it was time for the keynote. Christensen’s recent interests have been in how to manage innovation in education and healthcare more effectively, and he went into some depth on these topics. First, he gave an overview of his “disruption” theory, which says, in a nutshell, that across a wide range of industries, successful startups have won not by creating breakthrough innovations, but by going to market with “a product that was simple and affordable,” gaining market share at the low end of cost and performance, and then gradually working their way up-market, while decentralizing access to their products. Conversely, the big, centralized incumbents have trouble dealing with such new entrants, but will usually crush adversaries who come in trying to be better than them and selling to their mainstream customers.

One example is the familiar historical progression in computing from mainframes to mini-computers to personal computers to laptops and mobile devices, Christensen said. (Mainframes actually still exist, but they have been marginalized.) His discussion of the steel industry since the 1970s—how cheaper, simpler mini-mills gradually displaced billion-dollar integrated mills—was particularly captivating. And some ongoing case studies include low-end automakers Hyundai, Kia, and Chery threatening the long-term future of Toyota and other incumbents.

Turning his attention to healthcare, Christensen said, “I had thought competition drives cost down. It turns out that’s not true. Sustaining competition among similar business models generally … Next Page »

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