The Intersection of Theory and Practice
Faculty Response (11 December 2007)
Breaking the Business Model Straight jacket
Corporate innovators often see opportunities in the market that aren't a good fit with their employer's business model — and as a result, the system rejects the innovation. If the corporate entrepreneur is persistent in pursuing funding, typically he must morph his idea and its business plan to fit his company's business model, rather than fitting the need in the market. If these statements are true it means that companies are incapable of successfully innovating outside the boundaries of their current business models. How do you solve this problem?
Securing Funding for Innovative Products
Most companies' systems for approving funds for proposed innovations require that financial projections be made. Credible numbers often can be projected for incremental improvements to products that already are in the market. But financial projections for truly innovative products are almost always a complete guess. If innovators fabricate aggressive projections in order to win funding, and then fall short of their projections, their projects often get terminated. Is there a better way to win funding for innovations whose sales can't credibly be forecast?
"There is lots of statistical evidence that other than incremental improvements, successful innovation is almost a random process - a few succeed; most fail; and even the best managers and investors have a hard time picking the winners in advance. As a consequence, much of what has been written about managing innovation focuses on managing unpredictability. Fail fast. Let a thousand flowers bloom. Venture capitalists have structured their work to account for the reality that 80% of the ventures they fund will not be commercially successful."
Do you think that successful innovation really is intrinsically random? Or is the problem that management researchers and authors just haven't yet given us good theory that managers can draw upon to accurately predict what will succeed, and what will fail?
"The intersection of theory and practice is a turbulent zone to travel through. Theoreticians watch the behavior of corporate leaders and shake their heads at the continued failure to apply the lessons from the past. Practitioners look at the theorists and sing the refrain, "But you have never had to make the quarter." But in that turbulence lies the opportunity to improve theory with the close examination of practice, and to improve business outcomes with the discerning application of better theories."
How do you reconcile the challenges of context setting from the top of an organization with the discovery and learning processes that happen on the front lines at the bottom? Does this doom larger firms to inflexibility and a slowness to adapt that will hobble and disadvantage them?
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- Clayton M. Christensen
Robert and Jane Cizik Professor of Business Administration
- Willy C. Shih
HBS Working Knowledge, an online forum featuring new work from HBS faculty, offers more from Clay Christensen and articles about managing innovation. And, if you like The Conversation, you may also enjoy What Do YOU Think?, an ongoing dialogue between Harvard Business School professor Jim Heskett and the readers of HBS Working Knowledge.