Innovation Expert: Use IT to Disrupt, or Be Disrupted

By CIOinsight  |  Posted 06-28-2006

Disruption in business is the focus of Harvard Business School professor Clayton Christensen, who has carried out groundbreaking research into how small, underestimated companies can disrupt and unseat established and seemingly invincible firms.

Christensen has raised flags of both warning and hope for big companies with books titled "The Innovator's Dilemma," "The Innovator's Solution" and "Seeing What's Next."

In addition, he is co-founder of Innosight, a management consulting and education company in Watertown, Mass. He also serves on the boards of directors of four companies, including India-based IT outsourcer Tata.

Consultancy Services and W.R. Hambrecht, which hosts online auctions of initial public offerings.

eWEEK Executive Editor Stan Gibson interviewed Christensen June 7 in Christensen's offices at Harvard Business School in Boston, where Christensen offered provocative insights on companies' use of IT to disrupt their competition.

Do you see any companies that are using IT to be disruptive?

That's how Wal-Mart has disrupted the full-service department stores. They manage the flow of inventory so that their turns are high.

In retailing, the way you make money is you have a gross margin, times inventory turns. So if the department stores turn their inventory over three times a year. In order to earn an adequate return, their gross margins have to be about 40 percent.

If you turn your inventory over six times per year, then your gross margins can be 20 percent and you'll earn an adequate return. It's key in the retail business to have that. I think they made very good investments that way.

Read the full story on eWEEK.com: Professor: Disrupt or Be Disrupted