Whitney Johnson, a partner at Clayton Christensen’s investment firm wrote a powerful piece in 2011 uniquely captured why pursuing a disruptive course is the best investment you can make.
Throw out the performance metrics you’ve always relied on
“A disruptive innovation must measure different attributes of performance than those in your current value networks,” writes Christensen. Nearly everyone hits a point in their life where they examine their trajectory and consider a pivot. We typically label this mid-life crisis, but isn’t it more often a re-thinking as to which performance attributes matter? Perhaps earlier in your career the metric was money or fame, but now you want more autonomy, flexibility, authority, or to make a positive dent in the world. These require different metrics of success. If, for example, after leaving Wall Street in 2005, I had continued to gauge my success based on money earned, I was nothing short of a failure. But if I measured success by the progress I made during the ensuing years — learning, developing, building something, doing good — I could judge my performance as successful. It’s still not easy to measure, but as social media expert Liz Strauss said, “It’s not possible for the world to hold a meeting to decide your value. That decision is all yours.”
Your odds of success will improve when you pursue a disruptive course
What Christensen found in his analysis of the disk drive industry (which is discussed in The Innovator’s Dilemma, and is foundational to our investing), is that firms seeking growth via new markets are 6x more likely to succeed than firms seeking growth by entering established markets, and the revenue opportunity is 20x greater. It’s counterintuitive, isn’t it? When we start in a place where no one else wants to play, where the scope of the opportunity appears limited, the odds of success actually improve.
One reason people avoiding doing this strategy of distinction is because they believe there can only be 1 winner in any market but as this article documents, there are many ways to be a winner. But no one wins by being #2 in a space. This applies to companies and to individuals, find your own point of distinction — something only YOU can do — and then DO It to it’s fullest edge.
If you don’t know what that is, you’re not doing your job.
In war, there can be only one winner. Not so in business, where companies like WalMart and Target can thrive and co-exist, each offering a different kind of value to its customers. In sports, there is just one contest with one set of rules. Not so in business, which is more complex and open-ended. Within an industry, there can be multiple contests, not just one, based on which needs are to be served. McDonald’s is a winner in fast food, specifically fast burgers. But In-N-Out Burger thrives on slow burgers. Its customers are happy to wait ten minutes or more (an eternity by McDonald’s stopwatch) for non-processed, fresh burgers cooked to order.
Here’s the problem: When rivals all pursue the “one best way” to compete, they find themselves on a collision course, trapped in a destructive, zero-sum competition that no one can win. Everyone in the industry follows the same advice. Companies benchmark each other’s practices and products. Customers, lacking meaningful choice, buy on price alone. Profitability deteriorates.
It will feel lonely,
perhaps, to go where others are not and you might look around and
wonder if you are on the right path. But every innovator / change agent /
kick-ass person who delivered value is also a person who marked their
own way. We know it. Now we need to do it.
Facing into this reality is ridiculously hard. Most of us don’t have to ever get really clear on anything. Fuzzy is enough most of the time. But when we get clear and decide to find that path that we need to find, then we get the rewards of not only knowing what we care about (key) but then having other people see that. We get to be a market of 1. So, go Your Own Way. (And now, look what has happened… I’ve gotta go find me some Fleetwood Mac to listen to.)