Harvard’s Clay Christensen is today’s most influential modern management thinker. His 1997 book, “The Innovator’s Dilemma,” detailed his theory of “disruptive innovation” — explaining how smart incumbents are toppled by upstarts in an era of fast technological change. He has continued to apply his theory to other industries. Christensen’s concepts are widely cited in Silicon Valley and across a wide variety of fields, including education and journalism.
This summer, his theory was the subject of a highly critical analysis published in The New Yorker by Harvard historian Jill Lepore.
Christensen and I had a chance to sit down recently to discuss all this and more. The following is edited for clarity and length.
Henry Blodget: You have predicted — which is staggering — that half of universities will go bankrupt in the next 15 years.
Clay Christensen: Yes. Everybody else thinks that it’s absolutely crazy. But I think I’ll be right. I have made an observation that relates to this. It is as follows: Many of society’s most important and vexing problems were created by unnamed people in the past who decided unilaterally to combine things that should be separate and to separate things that should be together.
So, for example, there were three antagonistic ethnic groups, and somebody said, “Let’s put them all together in one country, and let’s call it Iraq.” And that created all kinds of problems for mankind, because they actually ought to be separate. And whoever decided that we should teach literature and history as separate topics? You could teach them together, and you would get so much more out of both. And in a bigger way, somebody decided that there is education and then there is employment.
In the universities, we teach you what we decide you need to know. And the employers find out when they hire people that students didn’t learn what we needed them to learn. Online learning offerings, like the University of Phoenix, have relationships with employers and teach what you need to know. So things that we thought were important, like having a degree, get supplanted by achievements because a degree per se doesn’t mean as much.
HB: But doesn’t everybody who goes to Harvard Business School think, “I’ve now been anointed. My future is secure. I know the 200 or 300 other people who are going to be running the world in 40 years.” That in itself is so valuable it justifies the entire investment.
CC: Yes. Effectively that’s “I need to get a brand.” And so there will be more people continuing to pay higher and higher prices to get a Harvard MBA. But over time, it loses its salience. Already we don’t teach management at the Harvard Business School. Where management is taught is when somebody at Wal-Mart tries to open a store in Accra, Ghana. That’s real management. And that kind of stuff is just gone from Harvard Business School. Selling is gone. So we have a lot of finance and a lot of strategy. Its value is for people who don’t leave the school to be managers, but they are people who become analysts and investors, buyers and sellers.
HB: So let’s talk about disruption a little. Like so many in business over the past 25 years, I was a huge devotee of “The Innovator’s Dilemma.” I was surprised when I picked up The New Yorker several months ago and read what to me was a very personal attack, not just on the theory, but seemingly on you for having advanced the theory and having it become so popular. And the author, Jill Lepore, seemed to be saying, “It’s just demonstrably wrong.” What was the story behind that?
CC: Yes. It’s interesting. I have a couple of thoughts. One is sociological and has to do with the English language. Michael Porter had this problem with the word “strategic.” Think of how may times somebody says,
What bothers me so much is that all of the points that she raised were not just wrong, but they were lies. Ours is the only theory in business that actually has been tested in the marketplace over and over again.
“This is a strategic investment,” meaning you’re not going to make any money in it but you want to do it anyway, so we’ll call it a “strategic investment.” And that has just destroyed the original meaning of the word “strategic.” How many times have you heard “This is a new paradigm”? None of them read Kuhn’s “Scientific Revolutions” book, but they used the word “paradigm” to give credibility to whatever crazy things they’re talking about. And so they use the word “disruption” in a similar way. [Lepore] didn’t point out that this is something that happens over and over again, where an important idea is bastardized.
So it was an important idea in the article that didn’t get developed. But through the rest, as it became personal, what bothers me so much is that all of the points that she raised were not just wrong, but they were lies. Ours is the only theory in business that actually has been tested in the marketplace over and over again. Porter’s theories haven’t been tested in the marketplace, but ours has. And for her to take that on, to take me on and the theory on — I don’t know where the meanness came from.
HB: In responding to the article, you did say, “Now, having had another 20 years, there may be parts of the disruption theory that we should look at again.” Have you modified the theory over time?
CC: Absolutely. Thomas Kuhn said that a theory improves when you can find something that it can’t explain. He called them anomalies. So we ask the students, every class, to come prepared to show what the theory can’t explain. And we’ve learned enormous amounts from that.
So, for example, a student about five years ago came in and said that it doesn’t apply to the hotel industry. So a Holiday Inn comes in at the bottom of the market in the 1950s, but they have not gone up market. There wasn’t any core in the hotel industry that would allow you to go up market. But then Airbnb changed that, because they can now go up market by just changing the mix of the rooms available to them. And holy cow, they go up, and while they are going up, there is nothing that Marriott can do.
HB: You’ve been vocal for years on Apple having a not particularly desirable business model, because they have a closed system. It has surpassed lots of expectations. Why has the iPhone not failed?
CC: Well, A, they’re smart. B, their marketing was trying to find jobs to be done in people’s minds where there isn’t anything to get the job done. But the basis of that concern for Apple is another theory that we have, as spelled out in “The Innovator’s Solution.” And what it says is, in the early years of an industry’s life, almost always the dominant products are proprietary and interdependent in their architecture.
In the smartphone world, the first one was Nokia — excruciatingly interdependent architecture — then RIM, which was an even more excruciatingly interdependent architecture, and then Apple. And Apple was kind of halfway. Inside of the device, it’s proprietary, but it initiated the modularity in that you could develop apps and stick them in. But then just like IBM identified modularity with the PC, Google gave us Android. And now I think the Android operating system as a platform, modularity, accounts for about 90% of the units, even while Apple makes all of the profit.
So if Apple keeps its strategy of very high prices, their share of that market will diminish. And so ultimately they will make a lot of profit on 100 units. And Samsung, if they win, they will be making all of the units in the industry but no profit. Either way you’re screwed, but that’s the theory behind why I said Apple won’t succeed, because in the end modularity always wins.
That’s the theory behind why I said Apple won’t succeed. In the end, modularity always wins.
HB: And what the Apple believers will say is, “You don’t understand. This is like the car market. Apple is BMW. There will always be a market for those of us who like the nice things in life. And Apple brings them to us. And by the way, they’re going to sell 65 million iPhone 6’s in the first quarter, so could you be more wrong?” That’s what they will say.
CC: That’s right. And what Clay will say in response is that you can never predict where the technology will come from, but you can predict with perfect certainty that if Apple is having that extraordinary experience, the people with modularity are striving. You can predict that they are motivated to figure out how to emulate what they are offering, but with modularity. And so ultimately, unless there is no ceiling, at some point Apple hits the ceiling. So their options are hopefully they can come up with another product category or something that is proprietary because they really are good at developing products that are proprietary. Most companies have that insight into closed operating systems once, they hit the ceiling, and then they crash.
Starting at 19, Christensen spent two years serving as a missionary in South Korea. In the audio excerpt below, he discusses a period of self-doubt and what, for him, is the metric by which he will measure the value of his own life.
HB: Your most recent book is called “How Will You Measure Your Life?” You’ve talked about a lot of the people at Harvard Business School and elsewhere — just extraordinarily smart, Rhodes scholars, graduating with these incredible pedigrees — and how down the road they are embarrassed to come to reunions because their personal lives are in shambles. They’re divorced. They’re alienated from their children. And one of the things you pointed out is often we have this tough time with work-life balance. How do you excel and compete in an incredibly competitive world and also find time to make sure you take care of your family?
CC: Well, the first lesson or insight for that is you’ve got to understand why that’s happening. In our individual lives if we have a drive to achieve, and we have an extra ounce of energy or 30 minutes of time, we’ll spend our time and energy on whatever activity yields us the most immediate and tangible evidence of achievement. Our careers provide immediate evidence of achievement. Every day you can put your hands on your hips and look at something that you accomplished. But in raising family, on a day-to-day basis, the relationships with our spouses and relationships with our children don’t provide any immediate achievement. It takes 20 years to raise a child. It’s a very long investment.
Our careers provide immediate evidence of achievement. Every day you can put your hands on your hips and look at something you accomplished. But it takes 20 years to raise a child. It’s a very long investment.
And so people with a high need for achievement systematically under-invest in their families and overinvest in their careers. And the way that my wife, Christine, and I — the way we wrestled with that problem — we decided that Clay is an incorrigible driver of achievement, and he’s never going to change. And so let’s put a boundary around that. So we decided I would never work on Saturday. That’s for the family — and Sunday for God. And I wouldn’t work past 6 p.m. Those were kind of the rules that we made a commitment for. Then, when I worked for BCG, about a month after I started, the leader of my team came to me and said, “Clay, we’re going to meet on Sunday at 2 p.m. because we’ve got a big presentation on Monday, and this is what you’ve got to be ready for. So we’re going to do a dress rehearsal.” And I told Mike, “I can’t do this on Sunday,” and explained why.
And he just went bonkers, and he said, “Everybody works on Sunday.” And I said, “I just can’t. We made a commitment to spend that day for God.” And so he blustered away really mad. And he came back, and he said, “Look, I talked to the rest of the team. Let’s meet Saturday at 2 p.m.” And I said, “I can’t do that either. I’m sorry.” And, boy, he was mad at me. So then he came back, and he said, “Do you happen to work on Fridays?”
And it was a very important decision for me to make because the logic is just this once, in this particular extenuating circumstance, it’s OK if I do this. The problem with that logic is that your life is filled with an unending stream of extenuating circumstances. And that was just a little decision in a life of tens of thousands of moments of decisions like that. But if I had given in that once, then the next time it comes up it will be easier for me to get in again “just this once” until just this once isn’t once. And I decided that if you set a standard it easier to keep the standard 100% of the time than it is 98% of the time.
HB: And was it important to your overall career success, given that you transferred out of management consulting, which can be an incredibly all-consuming job, legendary work hours and so forth, into business academia, where you have much more control over your time?
CC: I think that’s the wrong category scheme. There’s a type of person, and you see them in the consulting firms for sure. You see them as investment bankers, private equity players, buyout shops. You see them on the trajectory for tenure at the Harvard Business School, at the Harvard Medical School. All of these people are just driven to achieve. And so that’s the category of people, and that’s not all people. These are the kind of people who end up driving their families into misery, divorce, and the kids hating their parents.
HB: But it is possible to drive and reach whatever goals you want without doing that if you set limits.
CC: If you set limits. Now I’d say just one other thing … I’ve done quite well. And especially when our kids were young, those rules were very important to me. So how could I be successful professionally as well? And this comes from my religious commitment. And what that means for me is if I do what matters to God, which is my family and my commitment to helping people be better people, I feel like God magnified my capabilities. I don’t think that if it was just plain old Clay Christensen, with a certain number of hours in a day, I could have done what I’ve done because the competition — how many jillion people who have the same amount of time in their life — that’s a tough game to win. But I felt like God blessed me, that my brain could be much more productive than it otherwise would be because I put first things first.
At age 30, Christensen was diagnosed with Type 1 diabetes, which he treats daily with blood-sugar tests and insulin shots. In 2007, he suffered a massive heart attack just as his book on heathcare, “The Innovator’s Prescription,” was about to be published. In 2009, he was treated for lymphoma. And in 2010, he had a stroke, requiring up to eight hours a day of therapy to regain his ability to speak. He discusses that last illness below:
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