Thursday, September 23, 2004

Clayton M. Christensen

This is a very good interview with Clayton Christensen on technology, innovation, and corporate performance. RTWT because it is loaded with insight.

CC said one thing that deserves far more attention than it usually gets.

If you look at any company that you would say has transformed itself over the last 30 years or so, it is GE. In every case, they achieved the transformation by setting up or acquiring new disruptive business units and selling off or shutting down ones that had reached the end of their lives. In no case did they transform the business model of an existing business unit to cause it to catch the disruptive wave.
Welch did not change GE's culture just by changing minds. The world-beating GE of today was created by purchase, pink slips and divestiture. In 1981 the firm employed over 400,000. Over the next decade, 150,000 new employees came in through businesses that were acquired. During the same period, 190,000 employees left via businesses that were sold, and 170,000 left through layoffs and headcount reduction. When allowance is made for individual employees who left and were replaced by new hires it becomes clear that the change at GE came from changing people and growing businesses with the "right stuff." Very little had to do with transforming the hearts and minds at laggard businesses.

In light of that, one has to wonder about all the change efforts in corporations that focus on changing minds in the hope of emulating GE or Microsoft.

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