The Innovator's DNA. Clayton M. Christensen
Our process inventor category includes folks like A. G. Lafley, who initiated a set of innovative processes at Procter & Gamble that sparked numerous new product innovations. In all cases, the original idea for the new business, product, or process must be the innovator’s idea. While these different types of innovators have numerous similarities, they also have some differences, as we will show in the chapters that follow.
a. This is evident in the conclusions of numerous studies on entrepreneurs, including the following:
“After a great deal of research, it is now often concluded that most of the psychological differences between entrepreneurs and managers in large organizations are small or non-existent” (L. W. Busenitz and J. B. Barney, “Differences Between Entrepreneurs and Managers in Large Organizations,” Journal of Business Venturing 12, 1997).
“There appears to be no discoverable pattern of personality characteristics that distinguish between successful entrepreneurs and non-entrepreneurs” (W. Guth, “Director’s Corner: Research in Entrepreneurship,” The Entrepreneurship Forum, winter 1991).
“Most of the attempts to distinguish between entrepreneurs and small business owners or managers have discovered no differentiating features” (R. H. Brockhaus and P. S. Horwitz, “The Psychology of the Entrepreneur” in The Art and Science of Entrepreneurship, 1986).
We then turned to see what we could learn about the DNA of innovative organizations and teams. We started by looking at BusinessWeek’s annual ranking of innovative companies. This ranking, based on votes from executives, identified companies with a reputation for being innovative. A quick look at the BusinessWeek lists from 2005 to 2009 shows Apple as number one and Google, number two. OK, intuitively that sounds right. But we felt that the BusinessWeek methodology (executives voting on which companies are innovative) produces a list that is largely a popularity contest based on past performance. Indeed, do General Electric, Sony, Toyota, and BMW deserve to be on the list of most innovative companies today? Or are they simply there because they have been successful in the past?
To answer these questions, we developed our own list of innovative companies based on current innovation prowess (and expectations of future innovations). How did we do this? We thought the best way was to see whether investors—voting with their wallets—could give us insight into which companies they thought most likely to produce future innovations: new products, services, or markets. We teamed up with HOLT (a division of Credit Suisse Boston that had done a similar analysis for The Innovator’s Solution) to develop a methodology for determining what percentage of a firm’s market value could be attributed to its existing businesses (products, services, markets). If the firm’s market value was higher than the cash flows that could be attributed to its existing businesses, then the company would have a growth and innovation premium (for our purposes, we’ll just call it an innovation premium). An innovation premium is the proportion of a company’s market value that cannot be accounted for from cash flows of its current products or businesses in its current markets. It is the premium the market gives these companies because investors expect them to come up with new products or markets—and they expect the companies to be able to generate high profits from them (see chapter 7 for details on how the premium is calculated). It is a premium that every executive, and every company, would like to have.
We unveil our list of the most innovative companies—ranked by innovation premium—in chapter 7. Not surprisingly, we found that our top twenty-five companies include some on the BusinessWeek list—such as Apple, Google, Amazon, and Procter & Gamble. These companies averaged at least a 35 percent innovation premium over the past five years. But we also learned that companies such as Salesforce.com (software), Intuitive Surgical (health care equipment), Hindustan Lever (household products), Alstom (electrical equipment), and Monsanto (chemicals) have similar premiums. And as we studied these firms in greater detail, we learned that they are also very innovative. As we examined both our list and the BusinessWeek list of innovative companies, we saw several patterns.
First, we noticed that compared to typical companies they were far more likely to be led by an innovative founder or a leader who scored extremely high on the five discovery skills that compose the innovator’s DNA (their average discovery quotient was in the eighty-eighth percentile, which meant they scored higher than 88 percent of people taking our discovery skills assessment). Innovative companies are almost always led by innovative leaders. Let us say this again: Innovative companies are almost always led by innovative leaders. The bottom line: if you want innovation, you need creativity skills within the top management team of your company. We saw how innovative founders often imprinted their organizations with their behaviors. For example, Jeff Bezos personally excels at experimenting, so he helped create institutionalized processes within Amazon to push others to experiment. Similarly, Intuit’s Scott Cook shines at observing, so he pushes observation at Intuit. Perhaps not surprisingly, we discovered that the DNA of innovative organizations mirrored the DNA of innovative individuals. In other words, innovative people systematically engage in questioning, observing, networking, and experimenting behaviors to spark new ideas. Similarly, innovative organizations systematically develop processes that encourage questioning, observing, networking, and experimenting by employees. Our chapters on building the innovator’s DNA in your organization and team describe how you too can actively encourage and support others’ innovation efforts.
Why the Ideas in This Book Should Matter to You
Over the last decade, many books on the topic of innovation and creativity have been written. Some books focus on disruptive innovation, such as Clayton Christensen’s The Innovator’s Dilemma and The Innovator’s Solution. Others, such as Ten Rules for Strategic Innovators (Govindarajan and Trimble), Game Changer (A. G. Lafley and Ram Charan), and The Entrepreneurial Mindset (Rita McGrath and Ian MacMillan), examine how organizations, and organizational leaders, encourage and support innovation. Others look more specifically at product development and innovation processes within and across firms, such as How Breakthroughs Happen (Andrew Hargadon) and The Sources of Innovation (Eric von Hippel). Other books on innovation look at the roles individuals play in the innovation process within companies, such as The Ten Faces of Innovation and The Art of Innovation (both by Tom Kelley of IDEO), or A Whole New Mind (Daniel Pink). Finally, other books like Creativity in Context (Teresa Amabile) and Creativity (Mihaly Csikszentmihalyi) examine individual creativity and, more specifically, theories and research about creativity. Our book differs from the others in that it is focused squarely on individual creativity in the business context and is based on our study of a large sample of business innovators, including some big-name innovators such as Jeff Bezos (Amazon.com), Pierre Omidyar (eBay), Michael Lazaridis (Research In Motion/BlackBerry), Michael Dell (Dell), Marc Benioff (Salesforce.com), Niklas Zennström (Skype), Scott Cook (Intuit), Peter Thiel (PayPal), David Neeleman (JetBlue and Azul airlines), and so on. The premise of our book is that we explain how these big names got their “big ideas” and describe a process that readers can emulate. We describe in detail five skills that anyone can master to improve his or her own ability to be an innovative thinker.
A Disclaimer . . . Sort of
We think it is important to remember three significant points as you read The Innovator’s DNA. First, engaging in the discovery skills doesn’t ensure financial success. Throughout the book, we tell stories of people who were manifestly successful at innovating. We focus on the success stories because we are all more naturally drawn to success than failure. However, in our sample of five hundred innovators, only two-thirds launched ventures or products that met our criteria of success. Many were not successful. The innovators developed the right skills—questioning, observing, networking, and experimenting—that produced an innovative venture or product, but the result was not always a financial success. The point is that the discovery skills we describe are necessary, indeed critical, for generating innovative business ideas, but they don’t guarantee success.
Second, failure (in a financial