A few years ago I was struggling with a perplexing problem as a product manager. I wanted to understand what was happening in my market, why it was happening and what I could do about it with the new product I was working on. Throughout my search for answers I decided to dive deep into every credible innovation theory out there and see if it applied to my market. The first place I went to for answers was Clayton Christensen’s book “The Innovator’s Solution.” The things I learned were astonishing but they didn’t explain everything I was facing.
I Was Living the Innovator’s Dilemma: Facing A Low-End Threat
After doing a deep dive on the theory of disruptive innovation I discovered that the competitive entry threat I was facing was described perfectly by disruptive innovation theory. We were caught in a trap of meeting our most demanding customer’s needs while others came in with products that were “good enough” and which satisfied a basic set of customer needs. We were overserving the market and others were ready to come in with simpler, less expensive products that did one thing really well. That was the bad news. The good news was that Clayton Christensen had already figured out how to solve that problem and I went to work on implementing his suggested solutions as fast as possible. Fortunately I had figured out that part of the puzzle. But there was still something that was unexplained by Christensen’s theory.
I faced a high-end, vertically integrated threat as well
As I studied Christensen’s work more I learned about his theory of value chain evolution. It explained that industries go through cycles of modularity (which favors disruptive innovations) and interdependence, or vertical integration.
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I wrote a blog post on it here.
This was also a big ah-hah moment for me because I had never heard that pattern before but it made perfect sense. There was just one problem…Christensen’s theory of disruptive innovation was always talked about as the phenomenon that breaks up a vertically integrated, interdependent industry but did not explain what causes an industry to go from modular to vertically integrated. In other words, Christensen’s theory of disruptive innovation explained the difficult transition from vertical to horizontal but it did not explain the transition from horizontal to vertical. This was a big deal for me because I knew from my study of the iPhone that it was the type of innovation that only a vertically integrated company such as Apple could create and it totally “disrupted” other existing horizontal companies in the smartphone industry.
This led me to a much deeper dive into Apple’s string of innovations and when studying the development of the iPhone in-depth, I realized something profound.
In disruptive innovation all you need to do is target overserved customers with a simpler, less expensive, single purpose (or job) product in order to win against the big guys and their complicated products. But there was another major category of innovation that was essentially the opposite of disruptive, which I call integrative, where you combine multiple jobs to be done into one product in a simple and elegant way which causes a shift of an entire market upward allowing you to capture significant share. This is exactly what Apple did with both the iPod and the iPhone and it’s what they’re doing with the upcoming Apple Watch. Several other companies are also succeeding with this type of innovation such as Tesla with the Model X and Microsoft with the Surface Pro 3.
So that’s the background of the presentation I share below. Feel free to peruse the slides on SlideShare or view the YouTube video as well.
As always, I’d love to hear your thoughts on this!