MMMoOOrrRee E ffr roformomm QQ QwWeWErtERyR TaTYt YK a Aat TtK K.APATHT.P.PHH (Continued from front flap) ManageMent c g d uS$29.95 h r y e r e i g r Are you “ Businesses worldwide have been guided and influenced by The Innovator’s Dilemma and s t e The Innovator’s Solution. Now The Innovator’s DNA shows where it all starts. This book e r the next n s gives you the fundamental building blocks for becoming more innovative and changing Jeff Dyer is the Horace s e Steve JobS? the world. One of the most important books to come out this year, and one that will e n Beesley Professor of Strategy at remain pivotal reading for years to come.” n the Marriott School, Brigham You can be as innovative and impactful— —mArC benioff, Chairman and CEO, salesforce.com; author, Behind the Cloud Young University. He is widely if you can change your behaviors to improve published in strategy and your creative impact. business journals and was the “ The Innovator’s DNA is the ‘how to’ manual to innovation, and to the fresh thinking that In The Innovator’s DNA, authors Jeff Dyer, fourth most cited management scholar from is the root of innovation. It has dozens of simple tricks that any person and any team t Hal Gregersen, and bestselling author Clayton 1996–2006. can use today to discover the new ideas that solve the important problems. Buy it now h M. Christensen (The Innovator’s Dilemma, The and read it tonight. Tomorrow you will learn more, create more, inspire more.” e Innovator’s Solution) build on what we know hAl GreGerSen is a —SCott D. Cook, Chairman of the Executive Committee, Intuit Inc. about disruptive innovation to show how professor of leadership i individuals can develop the skills necessary to at INSEAD. He consults n move progressively from idea to impact. “ The Innovator’s DNA sheds new light on the once-mysterious art of innovation by to organizations around n By identifying behaviors of the world’s showing that successful innovators exhibit common behavioral habits—habits that can the world on innovation, best innovators—from leaders at Amazon boost anyone’s creative capacity.” o globalization, and and Apple to those at Google, Skype, and —Stephen r. Covey, author, The 7 Habits of Highly Effective People and transformation and has published extensively v Virgin Group—the authors outline five The Leader in Me in leading academic and business journals. A discovery skills that distinguish innovative t entrepreneurs and executives from ordinary ClAyton m. ChriStenSen “ Having worked with Clayton Christensen on innovation for over a decade, I can see o managers: Associating, Questioning, Observing, is the Robert and Jane that The Innovator’s DNA continues to stretch our thinking with insights that challenge Networking, and Experimenting. Cizik Professor of Business convention and enable progress in the important cause of innovation . . . so critical to r Once you master these competencies Administration at Harvard competitiveness and growth.” ’S (the authors provide a self assessment for Business School and the —A.G. lAfley, retired Chairman of the Board and CEO, rating your own innovator’s DNA), the architect of and the world’s The Procter & Gamble Company D authors explain how you can generate ideas, foremost authority on disruptive innovation. collaborate with colleagues to implement them, n and build innovation skills throughout your A organization to sharpen its competitive edge. Also by Clayton M. Christensen: to learn More, Visit: innovAtorSDnA.Com That innovation advantage can translate into a premium in your company’s stock price—an innovation premium—that is possible only by building the code for innovation right into your organization’s people, processes, and guiding philosophies. Practical and provocative, The Innovator’s jacket design: faceout studio DNA is an essential resource for individuals author photos: Mark philbrick; kenneth linge; stuart cahill ISBN 978-1-4221-3481-8 90000 and teams who want to strengthen their get inspired. innovative prowess. stay inforMed. Bestselling Author of The Innovator’s Dilemma join the discussion. Visit www.hbr.orG/bookS www.hbr.orG/bookS 9781422 134818 (Continued on back flap) 100092 00 i-vi r1 rr.qxp 5/13/11 6:52 PM Page i QWERTY at KAT.PH THE INNOVATOR’S DNA 100092 00 i-vi r1 rr.qxp 5/13/11 6:52 PM Page ii 100092 00 i-vi r1 rr.qxp 5/13/11 6:52 PM Page iii THE INNOVATOR’S DNA MASTERING THE FIVE SKILLS OF DISRUPTIVE INNOVATORS Jeff Dyer Hal Gregersen Clayton M. Christensen HARVARD BUSINESS REVIEW PRESS BOSTON, MASSACHUSETTS 100092 00 i-vi r1 rr.qxp 5/13/11 6:52 PM Page iv Copyright 2011 JeffDyer,Hal Gregersen,and Clayton M.Christensen All rights reserved Printed in the United States ofAmerica 10 9 8 7 6 5 4 3 2 1 No part ofthis publication may be reproduced,stored in or introduced into aretrieval system,or transmitted,in any form,or by any means (electronic, mechanical,photocopying,recording,or otherwise),without the prior permission ofthe publisher.Requests for permission should be directed to [email protected],or mailed to Permissions,Harvard Business School Publishing,60 Harvard Way,Boston,Massachusetts 02163. Library ofCongress Cataloging-in-Publication Data Dyer,Jeff. The innovator’s DNA :mastering the five skills ofdisruptive innovators/ JeffDyer,Hal Gregersen,Clayton M.Christensen. p.cm. ISBN 978-1-4221-3481-8 (hardback) 1. Creative ability in business. 2. Technological innovations. 3. Entrepreneurship. I. Gregersen,Hal B.,1958– II. Christensen, Clayton M. III. Title. HD53.D94 2011 658.4'063—dc22 2011008440 The paper used in this publication meets the requirements ofthe American National Standard for Permanence ofPaper for Publications and Documents in Libraries and Archives Z39.48-1992. 100092 00 i-vi r1 rr.qxp 5/13/11 6:52 PM Page v Contents Introduction 1 Part One Disruptive Innovation Starts with You 1 The DNA ofDisruptive Innovators 17 2 Discovery Skill #1 41 Associating 3 Discovery Skill #2 65 Questioning 4 Discovery Skill #3 89 Observing 5 Discovery Skill #4 113 Networking 6 Discovery Skill #5 133 Experimenting Part Two The DNA of Disruptive Organizations and Teams 7 The DNA ofthe World’s Most Innovative Companies 157 100092 00 i-vi r1 rr.qxp 5/13/11 6:52 PM Page vi vi CONTENTS 8 Putting the Innovator’s DNA into Practice 175 People 9 Putting the Innovator’s DNA into Practice 193 Processes 10 Putting the Innovator’s DNA into Practice 215 Philosophies Conclusion:Act Different,Think Different, Make a Difference 235 Appendix A: Sample ofInnovators Interviewed 241 Appendix B: The Innovator’s DNA Research Methods 245 Appendix C: Developing Discovery Skills 249 Notes 261 Index 269 Acknowledgments 283 About the Authors 295 100092 00a 001-014 INT r1 go.qxp 5/13/11 9:53 AM Page 1 Introduction I NNOVATION. It’s the lifeblood of our global econ- omy and a strategic priority for virtually every CEO around the world.In fact,a recent IBM poll of fifteen hun- dred CEOs identified creativity as the number-one “leadership competency”ofthe future.1The power ofinnovative ideas to rev- olutionize industries and generate wealth is evident from history: Apple iPod outplays Sony Walkman, Starbucks’s beans and atmosphere drown traditional coffee shops,Skype uses a strategy of“free”to beat AT&T and British Telecom,eBay crushes classi- fied ads,and Southwest Airlines flies under the radar ofAmerican and Delta.In every case,the creative ideas ofinnovative entrepre- neurs produced powerful competitive advantages and tremen- dous wealth for the pioneering company. Of course, the retrospective $1 million question is,how did they do it? And per- haps the prospective $10 million question is,how could I do it? The Innovator’s DNA tackles these fundamental questions— and more.The genesis ofthis book centered on the question that we posed years ago to “disruptive technologies”guru and coau- thor Clayton Christensen: where do disruptive business models come from? Christensen’s best-selling books, The Innovator’s 1 100092 00a 001-014 INT r1 go.qxp 5/13/11 9:53 AM Page 2 2 INTRODUCTION Dilemma and The Innovator’s Solution, conveyed important in- sight into the characteristics of disruptive technologies,business models,and companies.The Innovator’s DNA emerged from an eight-year collaborative study in which we sought a richer under- standing ofdisruptive innovators—who they are and the innova- tive companies they create.Our project’s primary purpose was to uncover the origins of innovative—and often disruptive— business ideas. So we interviewed nearly a hundred inventors of revolutionary products and services, as well as founders and CEOs of game-changing companies built on innovative busi- ness ideas. These were people such as eBay’s Pierre Omidyar, Amazon’s Jeff Bezos, Research In Motion’s Mike Lazaridis, and Salesforce.com’s Marc Benioff.For a full list of innovators we interviewed whom we quote in this book, see appendix A; virtually all of the innovators we quote, with the exception of Steve Jobs (Apple),Richard Branson (Virgin),and Howard Schultz (Starbucks)—who have written autobiographies or have given numerous interviews about innovation—are from our interviews. We also studied CEOs who ignited innovation in existing companies,such as Procter & Gamble’s A.G.Lafley,eBay’s Meg Whitman,and Bain & Company’s Orit Gadiesh.Some entrepre- neurs’companies that we studied were successful and well known; some were not (for example, Movie Mouth, Cow-Pie Clocks, Terra Nova BioSystems).But all offered a surprising and unique value proposition relative to incumbents.For example,each of- fered new or different features,pricing,convenience,or customiz- ability compared to their competition. Our goal was less to investigate the companies’strategies than it was to dig into the thinking of the innovators themselves.We wanted to understand as much about these people as possible,including the moment (when and how) they came up with the creative ideas that launched new products or businesses.We asked them to tell us 100092 00a 001-014 INT r1 go.qxp 5/13/11 9:53 AM Page 3 3 Introduction about the most valuable and novel business idea that they had generated during their business careers,and to tell us where those ideas came from.Their stories were provocative and insightful, and surprisingly similar. As we reflected on the interviews,consistent patterns ofaction emerged.Innovative entrepreneurs and executives behaved simi- larly when discovering breakthrough ideas.Five primary discov- ery skills—skills that compose what we call the innovator’s DNA—surfaced from our conversations.We found that innova- tors “Think Different,”to use a well-known Apple slogan.Their minds excel at linking together ideas that aren’t obviously related to produce original ideas (we call this cognitive skill “associational thinking” or “associating”). But to think different, innovators had to “act different.” All were questioners, frequently asking questions that punctured the status quo. Some observed the world with intensity beyond the ordinary.Others networked with the most diverse people on the face ofthe earth.Still others placed experimentation at the center of their innovative activity.When engaged in consistently,these actions—questioning,observing, networking,and experimenting—triggered associational think- ing to deliver new businesses, products, services, and/or processes.Most ofus think creativity is an entirely cognitive skill; it all happens in the brain.A critical insight from our research is that one’s ability to generate innovative ideas is not merely a func- tion ofthe mind,but also a function ofbehaviors.This is good news for us all because it means that ifwe change our behaviors,we can improve our creative impact. After surfacing these patterns ofaction for famous innovative entrepreneurs and executives,we turned our research lens to the less famous but equally capable innovators around the world. We built a survey based on our interviews that taps into the discovery skills of innovative leaders: associating,questioning, observing, networking, and experimenting. To date, we have