Christensen’s conclusions are open to question. For me, Uber
is a real disruption, but one which does not fit into the profes-
sor’s established framework. Using his definition, the majority
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of recent well-known success stories, including Xiaomi, Alibaba,
Big Bazaar, Tesla, and Whole Foods, are not real disruptions.
The same goes for Apple. The greatest disruptor of the past 20
years never entered the market at the bottom. On the contrary,
the iMac, iPod, and iPad positioned themselves at the top of the
market from the outset. This is the risk most theories have to
face, however brilliant and solid they may seem. They end up
having to force-fit the facts into a predetermined framework.
In my view, Christensen’s theory has two notable shortcom-
ings. First of all, it does not help to resolve the famous dilemma
at the origin of his first book. On the one hand, companies need
to protect existing revenue streams, which are essential to their
short-term success but, on the other hand, they must support
new activities that will be vital to their future. How must orga-
nizations manage these competing priorities? How should they
allocate resources? Christensen sheds no light on these answers
and, yet, the decision is crucial.
Second, and contrary to what the theory implies, disruption
does not equal destruction—at least not systematically. It’s
true that many business commentators tend to agree with
Christensen that all disruptive innovations finish by upheaving
markets, and thus definitively destabilizing the established
order. Put otherwise, they are revealed as being resolutely
destructive. However, for me, this point of view is restricting.
It ignores an entire field of innovation, the one perhaps most
relevant for legacy companies: that of non-destructive disruptive
innovations.
There are a great many examples of such cases, including
Nespresso, Club Med, Ikea, Southwest Airlines, Haier, Toms,
Starbucks, Marriott, and Visa. These and a lot of other com-
panies have profoundly innovated without ever having been
destructive along the way.
Clayton Christensen
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Many business leaders, consciously or not, may have been too
influenced by Christensen’s work to recognize this. They have
accepted the idea that disruption necessarily leads to destruction,
and this impacts how they see innovation. They thus deprive
themselves of a great number of opportunities. Disruption can
help businesses gain sizeable market share, without destroying
the market.
Not all companies are obliged to be Uber or Airbnb.
Chapter 9
Jedidiah Yueh
ON THE BEHAVIORS OF COMPANIES OF
THE NEW ECONOMY
The Wall Street Journal ran in 2016 an article entitled, “The
Economy’s Hidden Problem: We’re Out of Big Ideas.”1
How can a journalist pose such a stark assertion when we all feel
we are living in a world full of innovation?
The preeminence of Apple, Facebook, Google, and Amazon;
the breakthrough of nanotechnology and biotechnology; the
start-up boom; and the growing power of artificial intelligence
and virtual reality give us the impression that innovation is
omnipresent. And yet, technology industries and others born of
the Internet represent only a fraction of the economy. They will
encompass much more in the future, but until then, the compa-
nies of the new economy cannot compensate for the insufficient
rate of innovation of the other so-called traditional companies.
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This is the case for companies in many sectors such as food, cos-
metics, pharmaceuticals, banking, and insurance.
American statistics show that in the past 10 years the rhythm
of innovation in these kinds of companies is greatly inferior
to that of the previous 10 years. It may seem counterintuitive
but, according to an MIT estimate, research productivity in the
United States has dropped by an average of 5.3 percent2 per year
over the past 10 years. The “Vitality Index,” which is the per-
centage of total revenues generated by new products and ser-
vices, is in net decline in the quasi-totality of sectors. The return
on investment coming from research and development is noth-
ing compared to what it was 20 or 30 years ago. A partner at
Accenture concludes unambiguously that corporate innovation
has become sterile.
Why this decline? I see several reasons. First, when com-
panies excel in what they do, it takes longer for them to detect
their loss of creativity. Research investment is directed toward
improving companies’ current strengths rather than discover-
ing something new. The role of R&D focuses more on protect-
ing existing market share than on expanding the market. The
second explanation, I believe, is that companies do not work
through the dilemma described by Christensen (see Chapter 8).
The strategic allocation of resources between incremental and
disruptive innovations has not been clearly defined. Currently,
incremental innovation is more prevalent than disruptive
innovation. Third, the decline in creativity happens in many
companies that have prioritized cost cutting. The all-powerful
purchasing department is hardly a guarantee of openness to new
ideas. Finally, many companies find themselves locked into old
habits, methods, and procedures, trapping themselves in a con-
ventional way of doing things. They do not innovate in the way
they innovate.
Jedidiah Yueh
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In 2015, these observations led me to write a book encour-
aging companies to look for new sources of inspiration, to open
themselves up, and to not be satisfied with incremental innova-
tion alone. Titled The Ways to New 3 , the book described differ-
ent types of innovation such as asset-based innovation, reverse
innovation, revival-based innovation, data-driven innovation,
usage-based innovation, and price-led innovation, to mention
just a few . Fifteen different paths to innovation were proposed.
Of the many companies I’ve known, very few ever follow more
than two or three.
Then, I also turned my attention to start-ups. A great many
traditional companies have partnered with or acquired some of
them, hoping to increase their own capacity to innovate. Specialist
investment funds, incubators, technopoles, and accelerators
are appearing everywhere but cultural differences make these
partnerships difficult, sometimes even hazardous. Not many new
ideas are emerging from these innovation platforms, think tanks,
and labs. If they were, the statistics on R&D productivity would
be different.
I looked more closely at start-ups to see how they could inspire
established companies and I ran up against a well-known fact. For
each successful start-up, there are hundr
eds that fail. This tiny
percentage is explained by the fact that success depends on so
many different external factors that are difficult to foresee. Luck
is a very random element of success, so it appeared perilous to try
to establish serious conclusions on the way start-ups function—
until I read Jedidiah Yueh’s book Disrupt or Die: What the World
Needs to Learn from Silicon Valley to Survive the Digital Era.
Founding CEO of Avamar, which pioneered the data dedu-
plication market, Yueh is now the chief executive officer of
Delphix, a dynamic data platform provider. In his book, Yueh
describes operating systems and Internet protocols, and explains
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how, today, “products are designed for software as the end user.”4
And over and above these purely technical aspects, he also gives
real insights into how start-ups work.
I have combined Yueh’s thoughts with those of Peter Thiel,
author of Zero to One, and Eric Ries, author of Lean Startup. My
conversations with other founders of start-ups have also influenced
my thinking. Getting such diverse opinions has allowed me to
develop a list of lessons about the new-economy operators that I
believe could be interesting for old-economy businesses too.
I have pooled these thoughts together under seven different
themes. They are very diverse, even disparate, and each should be
looked at on its own. There is no particular connection between
them, except my belief that they can be helpful to all kinds of
companies.
Lessons from an entrepreneur
1. “Don’t be dispirited by the magnitude of complexity ahead,”5
counsels Yueh.
He demystifies, at least in part, the fantastic innovations
coming out of Silicon Valley. The ideas behind Instagram,
LinkedIn, Uber, or Airbnb are not that far from being some-
what “mundane,” to use his own word. Even Google, as he
explains, was created from a simple observation:
In the world of academia, published papers are often
judged by their citations, how often they are cited, and the
importance of each citation. Two PhD students decided
to apply that concept to counting and weighing the value
of links on websites (instead of citations)—an automated
way to rank search results. Google is born.6
Jedidiah Yueh
79
Of course, this has required highly qualified engineers to
conceive and constantly upgrade the algorithms that make
Google the leader of Internet search. In the past, Internet
companies had to develop their own proprietary informa-
tion technologies, but today anybody can buy limitless in-
frastructure and software to scale across a huge number of
servers. The core infrastructures that allowed Amazon and
Google to come into existence are now mere commodities,
often available as a service, or even for free.
I would say that the essential point lies elsewhere. I have
distinguished what I believe are four major sources of inspi-
ration for starting a new business. An entrepreneur needs to
discover one of the following:
• Anunansweredneed
• Aresidualpointoffriction
• Amarketgapnotfilled
• Aninsightnotyetidentified
It can be very productive to clearly differentiate between
these four possible springboards. They are not simply alter-
native ways of talking about the same thing. They are each
really different.
Once you have identified one of these springboards, you
must advance step by step, stage by stage, and not allow
yourself to become submerged by the technology.
2. There is no start-up with a slow culture.
For start-ups, speed is everything. They seek to develop and
grow while knowing they have an infinitesimal chance of
surviving. In any case, to have the slightest chance, they have
to be faster than the competition.
In California, many start-ups practice weekly planning.
They separate the budget cycle from the rhythm of their
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company’s business life. The acceleration of time frames
makes annual planning counterproductive. They prefer to
start each new week with three questions that each work-
shop, department, or service asks itself:
• Whatdidwedorightlastweek?
• Whatistheobjectiveforthisweek?
• Whatdoweneedtoreachthisobjective?
Some go as far as giving themselves the day as a unit of
time. This may be natural for developers, who are look-
ing to build solutions in real time, but it is also the case
in some very big Chinese enterprises—for example Haier
and Alibaba—where workers see themselves given daily
objectives. Objectives are defined in the morning and the
output is evaluated against them at the end of the same
day.
Silicon Valley start-ups that behave this way think the
slowness with which legacy companies operate will be their
downfall. Whatever the sector, traditional companies would
be well advised to speed up their rhythm to allow themselves
to make decisions more swiftly and to accelerate their rate of
innovation. Speed is the very first thing traditional companies
should copy from start-ups.
3. You cannot conceive of a disruptive strategy or action plan
without “playing offense.”7
Yueh cites Predix, the industrial platform of GE as a counter
example. Jeff Immelt, the former CEO, declared that he
wanted to build “the world’s largest industrial Internet
of Things.”8 Four years later, success has been mixed, to
such an extent that GE is talking of selling Predix. There
are scientific and business reasons for this, but organiza-
tional ones as well. Management was unable to convince
other GE divisions to adopt the Predix platform, which is
Jedidiah Yueh
81
obviously the worst possible message you could send to po-
tential clients. A large, heavy division, Predix was bogged
down in GE bureaucracy—a very different scenario from
the nimble ways of operating of other software companies.
Yueh sees this as the primary explanation of what ended as
a setback for GE. However good your digital transforma-
tion program may be, you can’t expect to move an indus-
trial company into the top 10 software companies in just
a few years without deeply restructuring—without being
truly on the offensive.
Yueh sees this as the primary explanation of what ended
as a setback for GE. However good your digital transforma-
tion program may be, you can’t expect to move an industrial
company into the top 10 software companies in just a few
years without being truly on the offensive.
My own take on this is threefold.
First, digital transformation is often seen as a period of
transition: difficult and painful, but limited in time. I be-
lieve that
the opposite is true: Companies have to accept that
transformation will be perpetual. In order to succeed, they
will have to follow successive, never-ending steps.
This leads us to the second point: To consider that any
organizational system will only be provisional. Few compa-
nies force themselves to regularly question the way they op-
erate. The reality is that any organization must be sufficiently
fluid if it wants to succeed in periodic transformation. In
Chapter 5, I discussed Zhang Ruimin, CEO of Haier, who
has on several occasions shaken up his organization from
top to bottom. Recently, he transformed it into a kind of
platform, containing thousands of independently managed
units. Every time Zhang is questioned on the reasons behind
the success of Haier, he gives the regular transformations of
his company’s structure as the main one.
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Finally, I would add that evolving an organization is not
an end in itself but rather a means, a lever to render the com-
pany more innovative. I have already referred to the fact that
most traditional companies have an innovation deficit and
that, willingly or not, they tend to lean toward incremental,
rather than disruptive, innovation. By contrast, start-ups and
the most innovative traditional businesses demonstrate the
point to which organizational models can be the catalysts for
all kinds of innovation.
To reiterate, many companies engaged in digital trans-
formation are just looking for incremental improvement.
And this is where Yueh’s thinking is crucial. He believes
companies should embark upon radical change and look for
disruptive organizational models.
4. Whatever the product or service you’re offering, it may be
useful to consider if part of it can or should be offered for free.
Knowing how to distinguish between “users and buyers”9
is a key element for Yueh. Users of Google pay nothing;
only the advertisers, the buyers, are invoiced for the services
they receive. The ultimate aim is to make free services even
more valuable than those that are paid for. To expand on
this point of view, I suggest that companies think seriously
about what they could, or should, make free.
Spotify is an interesting example. This company offers
free access to the world’s biggest music catalogue; however,
it limits this access, in the hope of turning new listeners into
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