Review: Creating a Crystal Ball

Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change
By Clayton M. Christensen, Scott D. Anthony and Erik A. Roth
Harvard Business School Press
September 2004
352 pages

It seems counterintuitive to think you can propose a theory that will predict the future. By definition, the future is unknown. But best-selling author Clayton M. Christensen, assisted by two of his former Harvard Business School students, argues that it is precisely because the future is unknowable that you need a framework to help you think about it.

In his previous books, Christensen dealt with fundamental questions of business strategy. Why, for example, do established firms find it hard to change? His answer in The Innovator’s Dilemma was that their initial strategy worked so well that they became all but blind to any inherent problems, or rising competitors. In The Innovator’s Solution, he suggested that the way around this problem was to make sure your subsequent product introductions reshaped the marketplace.

In Hollywood-speak, what he has done here is create a prequel, à la Butch and Sundance: The Early Years.

Christensen and his two colleagues present a three-part strategy to help you predict what will happen next, in order to spot potential opportunities and to keep from being blindsided. They begin by looking for what they call “signals of change.” These signals could arrive in one of four ways.

First, a competitor introduces a product designed to serve potential customers who have been avoiding your industry because of cost, complexity, or because they don’t think they need what you are offering. The creation of low-cost airlines such as Southwest is a perfect example. Suddenly people who couldn’t afford to fly took to the skies.

A second possibility: Customer frustration with a current offering creates an opening. Think of all the people who left AT&T Wireless because of poor service.

The third opportunity? Someone is offering more bells and whistles than the market needs. America Online found itself undercut by firms offering stripped-down Internet access.

Option four: Market forces change. Industry deregulation is the classic example.

That brings us to Step 2: “competitive battles.” Once you figure out what’s changing, you have to determine how your competitors are likely to react to that change. To find out, study their resources—and their business model—to see if they are likely to think the marketplace change is significant to them. That way you know whether you are likely to have a fight on your hands.

That brings us to Step 3: Implementing your strategy based on what you have determined in Steps 1 and 2. Follow all three steps, say the authors, and you will have a better road map to follow in predicting the future.

This is not an easy book to read. It takes the authors a third of the book to explain their theory, and their habit of using jargon such as “undershot” and “overshot” customers doesn’t help matters. Still, they do provide helpful, specific questions you can ask in trying to figure out what is likely to happen next. And anything that makes predicting the future a bit easier is welcome.

Paul B. Brown is the author of numerous nonfiction books, including Publishing Confidential: The Insider’s Guide to What It Really Takes to Land a Nonfiction Book Deal, published by Amacom.

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