How leaders can recast innovation’s toughest trade-offs—efficiency vs. flexibility, consistency vs. change, product vs purpose—as productive tensions.
Why is leading innovation in today’s dynamic business environment so distressingly hit-or-miss? More than 90 percent of high-potential ventures don’t reach their projected targets. Surveys show that 80 percent of executives consider innovation crucial to their growth strategy, but only 6 percent are satisfied with their innovation performance. Should leaders aim for Steve Jobs-level genius, shower their projects with resources, or lean in to luck and embrace uncertainty? None of the above, say Christopher Bingham and Rory McDonald.
Drawing on cutting-edge research and probing interviews with hundreds of leaders across three continents, in Productive Tensions Bingham and McDonald find that the most effective leaders and successful innovators embrace the tensions that arise from competing aims: efficiency or flexibility? consistency or change? product or purpose? Bingham and McDonald spotlight eight critical tensions that every innovator must master, and they spell out, with dozens of detailed examples of both success and failure, how to navigate them. How do you excite customers about a product they’ve never imagined? When is it wise to accept what the data is telling you, and when should you ignore the data and plow forward anyway? How can you maintain stakeholders’ trust and support during radical unforeseen course corrections? Bingham and McDonald guide readers through innovation’s thorniest tensions, using examples drawn from the experience of organizations as varied as P&G, Instagram, the US military, Honda, In-N-Out Burger, Slack, Under Armour, and the snowboarding company Burton.
Brand-new markets are like the wormholes of science fiction, where the usual rules of time and space do not apply. When a market has just been born, the forces of competition there are constantly in flux, it's unclear who your customers really are, and conventional strategies just don't make sense. How then can you navigate this constantly shifting terrain? Over the past few years, we have interviewed entrepreneurs and corporate innovators in new fields such as genomics, augmented reality, and fintech. We discovered that the most successful ones practice something called "parallel play," exploring and testing the world the way preschoolers do. Instead of trying to differentiate their businesses, they observe what others in the market are doing and borrow ideas. After relentless experimentation, they commit to a single template for creating value. But rather than quickly optimizing that template, they leave it partially undetermined and pause, watch, and wait. As they gather serendipitous insights and the market begins to settle, they refine their models bit by bit.
HBR: The New-Market Conundrum
Research: Parallel Play: Startups, Nascent Markets, and the Effective Design of a Business Model
Research: Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets
How to Sell Stakeholders on a New Strategy
To succeed, a new company must rally investors, staff, customers, and the media around a good story. But often that narrative turns out to be wrong, and entrepreneurs realize they need to change direction. How that shift is communicated can have a huge impact on a venture's future. Through extensive research with founders, innovation chiefs, analysts, and journalists, we have identified stratagems for maintaining stakeholder support during pivots. Early on, entrepreneurs should avoid a focus on overly specific solutions and instead present the big picture. When changing course, they can then signal continuity by explaining how the new plan fits with the original vision. Once the reboot has happened, it's critical to be conciliatory and empathetic to stakeholders who may feel abandoned. Employees and customers are far more willing to remain loyal if given guidance about how they'll be affected and if leaders seem to genuinely care about their situation.
HBR: When It’s Time to Pivot
Research: Pivoting Isn’t Enough? Managing Strategic Reorientation in New Ventures
Cold Call Podcast
Marcus by Goldman Sachs marked a dramatic shift for the 150-year-old financial institution, which historically had served only businesses and the wealthiest people. The fintech startup operated within Goldman Sachs, offering unsecured personal loans for the mass market, high-yield deposits, and a credit card in partnership with Apple. Harvard Business School professor Rory McDonald discusses the challenges of launching and operating a startup within an established company in his case, “Marcus by Goldman Sachs.”
Running a Customer Fintech Startup with Goldman Sachs
For the past 20 years, the theory of disruptive innovation has been enormously influential in business circles and a powerful tool for predicting which industry entrants will succeed. Unfortunately, the theory has also been widely misunderstood, and the "disruptive" label has been applied too carelessly anytime a market newcomer shakes up well-established incumbents. In this article, Clayton Christensen, Michael Raynor, and Rory McDonald correct some of the misinformation, describe how the thinking on the subject has evolved, and discuss the utility of the theory. They start by clarifying what classic disruption entails--a small enterprise targeting overlooked customers with a novel but modest offering and gradually moving upmarket to challenge the industry leaders. They point out that Uber, commonly hailed as a disrupter, doesn't actually fit the mold, and they explain that if managers don't understand the nuances of disruption theory or apply its tenets correctly, they may not make the right strategic choices. Common mistakes, the authors say, include failing to view disruption as a gradual process (which may lead incumbents to ignore significant threats) and blindly accepting the "Disrupt or be disrupted" mantra (which may lead incumbents to jeopardize their core business as they try to defend against disruptive competitors). The authors acknowledge that disruption theory has certain limitations. But they are confident that as research continues, the theory's explanatory and predictive powers will only improve.
HBR: What is Disruptive Innovation?
Rory McDonald is an Associate Professor of Business Administration in the Technology and Operations Management Unit. He teaches Building and Sustaining a Successful Enterprise (BSSE) in the MBA elective curriculum and previously taught the Technology and Operations Management course in the MBA required curriculum. In 2016, he was named one of the world’s top 40 business school professors under 40 by Poets and Quants.
Professor McDonald’s research focuses on how firms compete and innovate effectively in new technology-enabled markets. Drawing on a mix of in-depth fieldwork and archival data, he studies how executives develop viable strategies in these contexts and how they obtain resources that improve their chances of success. For his research on entrepreneurial firms, Professor McDonald received both the Kauffman Foundation Junior Faculty Fellowship in Entrepreneurship as well as the Kauffman Foundation Dissertation Fellowship. He was also a finalist for best dissertation award in business policy and strategy by the Academy of Management.
Professor McDonald received his PhD in Management Science and Engineering from the Stanford Technology Ventures Program. He also holds an MBA from the Stanford Graduate School of Business, an MA in economic sociology from Stanford University, as well as two engineering degrees from the University of South Florida. Before joining Harvard, he was on the faculty of the University of Texas at Austin where he received the CBA Foundation Teaching award. McDonald is on the board of YCG Funds, an Austin-based mutual fund company, and is an advisor to several startups.
Professor McDonald and his wife Anne live in Sudbury, MA with their four children. They are active in their church and enjoy a variety of family activities.
- Featured Work
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How leaders can recast innovation’s toughest trade-offs—efficiency vs. flexibility, consistency vs. change, product vs purpose—as productive tensions.
Why is leading innovation in today’s dynamic business environment so distressingly hit-or-miss? More than 90 percent of high-potential ventures don’t reach their projected targets. Surveys show that 80 percent of executives consider innovation crucial to their growth strategy, but only 6 percent are satisfied with their innovation performance. Should leaders aim for Steve Jobs-level genius, shower their projects with resources, or lean in to luck and embrace uncertainty? None of the above, say Christopher Bingham and Rory McDonald.
Drawing on cutting-edge research and probing interviews with hundreds of leaders across three continents, in Productive Tensions Bingham and McDonald find that the most effective leaders and successful innovators embrace the tensions that arise from competing aims: efficiency or flexibility? consistency or change? product or purpose? Bingham and McDonald spotlight eight critical tensions that every innovator must master, and they spell out, with dozens of detailed examples of both success and failure, how to navigate them. How do you excite customers about a product they’ve never imagined? When is it wise to accept what the data is telling you, and when should you ignore the data and plow forward anyway? How can you maintain stakeholders’ trust and support during radical unforeseen course corrections? Bingham and McDonald guide readers through innovation’s thorniest tensions, using examples drawn from the experience of organizations as varied as P&G, Instagram, the US military, Honda, In-N-Out Burger, Slack, Under Armour, and the snowboarding company Burton.
Brand-new markets are like the wormholes of science fiction, where the usual rules of time and space do not apply. When a market has just been born, the forces of competition there are constantly in flux, it's unclear who your customers really are, and conventional strategies just don't make sense. How then can you navigate this constantly shifting terrain? Over the past few years, we have interviewed entrepreneurs and corporate innovators in new fields such as genomics, augmented reality, and fintech. We discovered that the most successful ones practice something called "parallel play," exploring and testing the world the way preschoolers do. Instead of trying to differentiate their businesses, they observe what others in the market are doing and borrow ideas. After relentless experimentation, they commit to a single template for creating value. But rather than quickly optimizing that template, they leave it partially undetermined and pause, watch, and wait. As they gather serendipitous insights and the market begins to settle, they refine their models bit by bit.
HBR: The New-Market Conundrum
Research: Parallel Play: Startups, Nascent Markets, and the Effective Design of a Business Model
Research: Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets
How to Sell Stakeholders on a New Strategy
To succeed, a new company must rally investors, staff, customers, and the media around a good story. But often that narrative turns out to be wrong, and entrepreneurs realize they need to change direction. How that shift is communicated can have a huge impact on a venture's future. Through extensive research with founders, innovation chiefs, analysts, and journalists, we have identified stratagems for maintaining stakeholder support during pivots. Early on, entrepreneurs should avoid a focus on overly specific solutions and instead present the big picture. When changing course, they can then signal continuity by explaining how the new plan fits with the original vision. Once the reboot has happened, it's critical to be conciliatory and empathetic to stakeholders who may feel abandoned. Employees and customers are far more willing to remain loyal if given guidance about how they'll be affected and if leaders seem to genuinely care about their situation.
HBR: When It’s Time to Pivot
Research: Pivoting Isn’t Enough? Managing Strategic Reorientation in New Ventures
Cold Call Podcast
Marcus by Goldman Sachs marked a dramatic shift for the 150-year-old financial institution, which historically had served only businesses and the wealthiest people. The fintech startup operated within Goldman Sachs, offering unsecured personal loans for the mass market, high-yield deposits, and a credit card in partnership with Apple. Harvard Business School professor Rory McDonald discusses the challenges of launching and operating a startup within an established company in his case, “Marcus by Goldman Sachs.”
Running a Customer Fintech Startup with Goldman Sachs
For the past 20 years, the theory of disruptive innovation has been enormously influential in business circles and a powerful tool for predicting which industry entrants will succeed. Unfortunately, the theory has also been widely misunderstood, and the "disruptive" label has been applied too carelessly anytime a market newcomer shakes up well-established incumbents. In this article, Clayton Christensen, Michael Raynor, and Rory McDonald correct some of the misinformation, describe how the thinking on the subject has evolved, and discuss the utility of the theory. They start by clarifying what classic disruption entails--a small enterprise targeting overlooked customers with a novel but modest offering and gradually moving upmarket to challenge the industry leaders. They point out that Uber, commonly hailed as a disrupter, doesn't actually fit the mold, and they explain that if managers don't understand the nuances of disruption theory or apply its tenets correctly, they may not make the right strategic choices. Common mistakes, the authors say, include failing to view disruption as a gradual process (which may lead incumbents to ignore significant threats) and blindly accepting the "Disrupt or be disrupted" mantra (which may lead incumbents to jeopardize their core business as they try to defend against disruptive competitors). The authors acknowledge that disruption theory has certain limitations. But they are confident that as research continues, the theory's explanatory and predictive powers will only improve.
HBR: What is Disruptive Innovation?
- Books
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- Journal Articles
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- Bingham, Christopher B., and Rory M. McDonald. "Mastering Innovation's Toughest Trade-Offs." MIT Sloan Management Review 63, no. 4 (Summer 2022): 66–72. View Details
- Gao, Cheng, and Rory McDonald. "Shaping Nascent Industries: Innovation Strategy and Regulatory Uncertainty in Personal Genomics." Administrative Science Quarterly (forthcoming). (Pre-published online August 8, 2022.) View Details
- Raffaelli, Ryan, Rich DeJordy, and Rory M. McDonald. "How Leaders with Divergent Visions Generate Novel Strategy: Navigating the Paradox of Preservation and Modernization in Swiss Watchmaking." Academy of Management Journal (forthcoming). View Details
- McDonald, Rory, and Ryan T. Allen. "A Spanner in the Works: Category-Spanning Entrants and Audience Valuation of Incumbents." Strategy Science (forthcoming). View Details
- Wang, Dan, Emily Cox Pahnke, and Rory McDonald. "The Past Is Prologue? Venture-Capital Syndicates' Collaborative Experience and Start-Up Exits." Academy of Management Journal 65, no. 2 (April 2022): 371–402. View Details
- McDonald, Rory, and Keith Krach. "How Would-Be Category Kings Become Commoners." MIT Sloan Management Review 62, no. 2 (Winter 2021): 76–82. View Details
- McDonald, Rory, and Robert Bremner. "When It's Time to Pivot, What's Your Story?: How to Sell Stakeholders on a New Strategy." Harvard Business Review 98, no. 5 (September–October 2020): 98–105. View Details
- McDonald, Rory, and Kathleen M. Eisenhardt. "The New-Market Conundrum." Harvard Business Review 98, no. 3 (May–June 2020): 75–83. View Details
- McDonald, Rory, and Cheng Gao. "Pivoting Isn't Enough? Managing Strategic Reorientation in New Ventures." Organization Science 30, no. 6 (November–December 2019): 1289–1318. View Details
- McDonald, Rory, and Kathleen Eisenhardt. "Parallel Play: Startups, Nascent Markets, and the Effective Design of a Business Model." Administrative Science Quarterly 65, no. 2 (June 2020): 483–523. View Details
- Christensen, Clayton M., Rory McDonald, Elizabeth J. Altman, and Jonathan E. Palmer. "Disruptive Innovation: An Intellectual History and Directions for Future Research." Special Issue on Managing in the Age of Disruptions. Journal of Management Studies 55, no. 7 (November 2018): 1043–1078. View Details
- Bermiss, Y. Sekou, and Rory McDonald. "Managing Political Misfits." Special Issue on HBR Big Idea: Leadership in a Hot-Button World. Harvard Business Review (website) (March–April 2018). View Details
- Bermiss, Y. Sekou, and Rory McDonald. "Ideological Misfit? Political Affiliation and Employee Departure in the Private-Equity Industry." Academy of Management Journal 61, no. 6 (December 2018): 2182–2209. View Details
- McDonald, Rory, and Cheng Gao. "Entrepreneurship: Every Pivot Needs a Story." Harvard Business Review 95, no. 4 (July–August 2017): 24. (Summary of “Pivoting Isn’t Enough: Principled Pragmatism and Strategic Reorientation in New Ventures”.) View Details
- Plough, Avery C., Grace Galwin, Zhonghe Li, Stuart R. Lipsitz, Shehnaz Alidina, Natalie J. Henrich, Lisa R. Hirschhorn, William R. Berry, Atul A. Gawande, Doris Peter, Rory McDonald, Donna L. Caldwell, Janet H. Muri, Debra Bingham, Aaron B. Caughey, Eugene R. Declercq, and Neel T. Shah. "Relationship Between Labor and Delivery Unit Management Practices and Maternal Outcomes." Obstetrics & Gynecology 130, no. 2 (August 2017): 358–365. View Details
- Bermiss, Y. Sekou, Benjamin J. Hallen, Rory McDonald, and Emily Cox Pahnke. "Entrepreneurial Beacons: The Yale Endowment, Run-ups, and the Growth of Venture Capital." Strategic Management Journal 38, no. 3 (March 2017): 545–565. View Details
- Christensen, Clayton M., Michael Raynor, and Rory McDonald. "What Is Disruptive Innovation?" Harvard Business Review 93, no. 12 (December 2015): 44–53. View Details
- Pahnke, Emily Cox, Rory McDonald, Dan Wang, and Benjamin Hallen. "Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation." Academy of Management Journal 58, no. 5 (October 2015): 1334–1360. View Details
- Chen, Eric L., Riitta Katila, Rory McDonald, and Kathleen M. Eisenhardt. "Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets." Special Issue on The Age of Temporary Advantage. Strategic Management Journal 31, no. 13 (December 2010): 1527–1547. View Details
- Working Papers
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- McDonald, Rory. "Category Kings or Commoners? Marketing Shaping and Its Consequences in Nascent Categories." Harvard Business School Working Paper, No. 16-095, February 2016. (Revised January 2022.) View Details
- Hallen, Benjamin, and Rory McDonald. "The Right Mix: Angels, Venture Capitalists, and the Assembly of Entrepreneurial Resources." Harvard Business School Working Paper, No. 17-082, March 2017. View Details
- McDonald, Rory, and Cheng Gao. "Pivoting Isn't Enough: Principled Pragmatism and Strategic Reorientation in New Ventures." Harvard Business School Working Paper, No. 17-031, October 2016. View Details
- Cases and Teaching Materials
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- van Bever, Derek, Rory McDonald, and Anibha Singh. "Managing Innovation at Atrium Health: 'Never Let a Good Crisis Go To Waste'." Harvard Business School Case 322-049, March 2022. View Details
- McDonald, Rory, Timothy Buehn, Aditi Ghai, and James Heffelfinger. "Disrupting Defense at Anduril Industries." Harvard Business School Case 622-081, June 2022. (Revised August 2022.) View Details
- McDonald, Rory. "Navigating Nascent Industries and Product Categories." Harvard Business School Module Note 622-097, March 2022. View Details
- McDonald, Rory. "chotuKool (B)." Harvard Business School Supplement 622-096, March 2022. View Details
- McDonald, Rory, David Lane, and Mel Martin. "Apple Bets on Augmented Reality." Harvard Business School Case 621-007, September 2020. View Details
- McDonald, Rory, Anibha Singh, and Matt Higgins. "Parrot: Navigating the Nascent Drone Industry." Harvard Business School Teaching Note 621-024, July 2020. (Revised October 2020.) View Details
- McDonald, Rory, Allison Mnookin, and Iuliana Mogosanu. "The Walt Disney Company: Theme Parks." Harvard Business School Case 620-039, August 2019. (Revised January 2021.) View Details
- McDonald, Rory, Anibha Singh, and Matt A. Higgins. "Marcus by Goldman Sachs." Harvard Business School Teaching Note 620-107, February 2020. (Revised November 2020.) View Details
- McDonald, Rory, Samir Junnarkar, and David Lane. "Marcus by Goldman Sachs." Harvard Business School Case 620-005, November 2019. (Revised December 2019.) View Details
- McDonald, Rory, and Matt Higgins. "Under Armour." Harvard Business School Teaching Note 620-070, December 2019. (Revised April 2021.) View Details
- McDonald, Rory, Andy Wu, Emilie Billaud, and Ryan Bayer. "Evolution of the Drone Industry." Harvard Business School Background Note 620-053, October 2019. (Revised January 2020.) View Details
- McDonald, Rory M., Emilie Billaud, and Vincent Dessain. "Parrot: Navigating the Nascent Drone Industry." Harvard Business School Case 619-085, June 2019. (Revised September 2019.) View Details
- McDonald, Rory, Clayton M. Christensen, and Shaye Roseman. "Purpose Brands." Harvard Business School Module Note 619-075, June 2019. (Revised July 2020.) View Details
- McDonald, Rory, Sarah Mehta, and Shaye Roseman. "Amazon Acquires Whole Foods (B)." Harvard Business School Supplement 619-029, December 2018. View Details
- McDonald, Rory, Clayton M. Christensen, Daniel West, and Jonathan E. Palmer. "Under Armour." Harvard Business School Case 618-020, January 2018. View Details
- McDonald, Rory, Alix Burke, Emma Franking, and Nicole Tempest. "Floodgate: On the Hunt for Thunder Lizards." Harvard Business School Case 617-044, March 2017. (Revised November 2021.) View Details
- McDonald, Rory, and Helena Lyng-Olsen. "Floodgate: On the Hunt for Thunder Lizards." Harvard Business School Teaching Note 617-045, March 2017. (Revised September 2021.) View Details
- McDonald, Rory, Derek van Bever, and Efosa Ojomo. "chotuKool: 'Little Cool,' Big Opportunity." Harvard Business School Case 616-020, June 2016. (Revised November 2021.) View Details
- McDonald, Rory, and Matt Higgins. "chotuKool: 'Little Cool,' Big Opportunity." Harvard Business School Teaching Note 617-040, March 2017. (Revised August 2021.) View Details
- McDonald, Rory, Alan MacCormack, and Vanessa Ampelas. "America's Cup in 2013: Oracle Team USA vs. Emirates Team New Zealand (A)." Harvard Business School Case 616-045, February 2016. (Revised March 2016.) View Details
- Zhu, Feng, Rory McDonald, Marco Iansiti, and Aaron Smith. "Upwork: Reimagining the Future of Work." Harvard Business School Case 616-027, November 2015. View Details
- McDonald, Rory, and Suresh Kotha. "Boeing 787: Manufacturing a Dream." Harvard Business School Case 615-048, February 2015. (Revised May 2015.) View Details
- McDonald, Rory, Feng Zhu, and Cheng Gao. "HomeAway: Organizing the Vacation Rental Industry." Harvard Business School Case 615-036, December 2014. View Details
- McDonald, Rory, and Matt Higgins. "HomeAway: Organizing the Vacation Rental Industry." Harvard Business School Teaching Note 617-042, March 2017. (Revised August 2021.) View Details
- McDonald, Rory, Clayton Christensen, Robin Yang, and Ty Hollingsworth. "AmazonFresh: Rekindling the Online Grocery Market." Harvard Business School Case 615-013, July 2014. (Revised August 2014.) View Details
- McDonald, Rory. "AmazonFresh: Rekindling the Online Grocery Market." Harvard Business School Teaching Note 617-043, March 2017. View Details
- Research Summary
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Professor McDonald studies how firms successfully navigate new markets. He examines how widely accepted strategic prescriptions can actually undermine managers’ attempts to develop a viable business model or stake out a defining new market position, and considers the important role played by entrepreneurial resource providers in these processes. Empirically, he relies on a complementary range of methodologies – in some instances solving problems deductively through quantitative analysis of archival data, complemented by fieldwork while in other instances adopting an inductive approach that draws on structured interviews and field research to generate new insights.
Strategic advisors counsel managers to conduct a thorough competitive analysis emphasizing key points of differentiation. But for new markets, Professor McDonald’s research suggests that reports of the threat posed by similar rivals may be greatly exaggerated, and managers may be well-advised to focus on substitutes, using rivals as mere stepping stones to speed their own progression and keep costs low. Similarly, while popular media accounts laud market ‘evangelists’ who open up new market space through symbolic acts of persuasion, McDonalds’s research argues that successful innovation in new markets resembles problem-solving more than missionary work, and suggests that managers may be better off riding the coattails of these hardworking evangelists to establish a defining position in the new market.
Mounting evidence suggests that ventures’ early relationships are critical for their success by helping overcome initial resource constraints, improve internal operations, and gain access to diverse audiences such as potential investors, the media, and customers. But which providers should managers engage? In collaboration with researchers at London Business School, Columbia, and the University of Washington, Professor McDonald examines the value created (and sometimes destroyed) by venture capitalists, super angels, and other resource providers.
- Teaching
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This course enables students to develop the skills and concepts needed to ensure the ongoing contribution of a firm's operations to its competitive position. It helps them to understand the complex processes underlying the development and manufacture of products as well as the creation and delivery of services.
Technology and Operations – MBA Required Curriculum
This course enables students to develop the skills and concepts needed to ensure the ongoing contribution of a firm's operations to its competitive position. It helps them to understand the complex processes underlying the development and manufacture of products as well as the creation and delivery of services.
http://www.hbs.edu/faculty/units/tom/Pages/curriculum.aspx
- Awards & Honors
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Winner of the 2019 Past Chairs' Emerging Scholar Award from the Technology and Innovation Management (TIM) Division of the Academy of Management.
Won the 2017 Wyss Award for Excellence in Doctoral Student Mentoring.
Included as one of the “40 Under 40 Most Outstanding MBA Professors” by Poets & Quants in 2016.
Finalist for the 2016 Wyss Award for Excellence in Doctoral Student Mentoring.
Recipient of a 2014 Kauffman Foundation Junior Faculty Fellowship in Entrepreneurship Research.
Finalist for the 2013 Wiley Blackwell Outstanding Dissertation Award from the Academy of Management, Business Policy and Strategy Division for his dissertation entitled, “Competition and Strategic Interaction in New Markets” (Stanford University, 2012).
Winner of the 2013 Trammell/CBA Foundation Teaching Award for Assistant Professors at the University of Texas at Austin, McCombs School of Business.
Received a 2010-2011 Gerald J. Lieberman Fellowship from Stanford University.
Received a 2008-2010 National Defense Science & Engineering Graduate Fellowship.
Received a 2009-2010 Kauffman Foundation Dissertation Fellowship.
- Additional Information
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- In The News
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