#EIE17: GENERAL SESSION - Competing Again Luck with Professor Clayton Christensen

good afternoon it's pretty good good afternoon all right all right there we go I have good news and bad news I'll start with the bad news the bad news is if you just arrived at the summit you have missed incredible speakers conversations about what's happening across our nation today if you didn't just arrive the bad news is you've had lunch probably a snack it's 3:00 in the afternoon and you're feeling it the really good news is I get to introduce our next speaker and I can say personally professionally dr. Christensen is one of the best world-renowned thinkers today I suppose his groundbreaking book the innovators dilemma is the standard starting point he wrote about the lumbering Goliath of the business world successful set in their ways and seemingly invincible but despite their size and armor they became easy prey for the David's and their Shepherds slings how quickly fortunes changed when confronted with the disruptive force of new approaches and new technology professor Christensen pointed out that the time to adapt as before the stone is even in the air at that point it is too late in the modern economy disruption is the new normal and to the anticipation and innovation is how you survive when professor Christensen laid all this out in 1997 Amazon was an embryo and the founders of Netflix were sending out a test DVD to see if that would survive the post office obviously he was a man ahead of his time those who listened include Steve Jobs Michael Bloomberg and Bill Gates Paul Steinberg the chief technology officer of Motorola Solutions said this about professor Christensen he scared the crap out of me The Economist named the innovators dilemma one of the six most important books ever written about business professor Kristensen followed that up with several other groundbreaking bestsellers becoming the nation's foremost authority of disruptive innovation in disrupting class how disruptive innovation will change the way the world learns he makes the compelling case for using technology to create a customized student-centered education system Forbes called professor Christensen one of the most influential business theorists of the late 50 years last excuse me last 50 years twice he was ranked number one in the thinker's 50 considered the world's most prestigious ranking of management thinkers I could go on and on as you can tell but let me conclude with words from his daughter Ann who in an interview with Forbes gives us insight into the passion he has for teaching and the joy he takes in knowledge she said my dad is a perpetual student he'd come home from work every day excited about some common a student had made or a paper they'd written he'd say you'll never believe what I learned today ladies and gentlemen please help me welcome professor clay Christensen [Applause] [Music] [Applause] [Music] [Applause] [Music] [Applause] [Music] gosh is just overwhelming to see people with so much substance amongst you to spend your time listening to me but I really hope that a few of the ideas that I offer might be helpful in the world that that you're taking on what I want to do is talk to you about what I've learned over the last 40 years of a student about how to make organizations change I decided that it didn't make any sense for me to tell you what I think you ought to know about changing our schools but I did think that when you find a program or evidence that you want to change how do you make it happen and I am afraid that in order to do this you're going to sit in the audience and wonder why he went that way instead of this way and then why did he but I hope that it'll in the end fall into place so a number of years ago I was just at work minding my own business and I got a call from secret Secretary of Defense William Cohen who was the Secretary of Defense when Clinton was our president and I'd never met him before but out of the blue he said clay I wonder if you had come to the Pentagon because we want to study what you've written in the first of my books the innovators dilemma to see what it means for us and jeez for me to have an opportunity to go to the Pentagon was a life-changing event so I said of course I'll come and he said we figured out a date and he said that he wants to present my research to his entire staff and when he said his staff what I had in mind was I had been hidden in his office before as a White House Fellow and I imagined that he'd have his staff of seven seven or eight lieutenants and and majors that he met me at the front door and ushered me into his conference room and there were about 50 people there and he took me to the to the front and introduced me to the chairman of the Joint Chiefs of Staff and then to the other chiefs and then behind them were the secretaries of the Army Navy Air Force come down to the marine corps behind them all of the under and deputy secretaries and behind them all of the assistance of everything else and he I started to get scared and I I said what do you want me to say and he said I'll just seriously he said just present your stuff and I had no idea what would into in in I had a stroke a number of years ago and a clot came from here and lodged itself above my mind above my head and it killed the place where I formulated speech and so under you'll notice as I give my talk I can't come up with the right words sometimes I apologize for them but he is secretary Cohen just said present your material and then he sat down and I described people there this theory of mine called disruption and I'll I'll describe it in terms of steel an industry of us making steel as if I come back here is an illustration of disruption and what I described was in the steel industry at the bottom of the market our simple products that we call concrete reinforcing bar or rebar you and I can make rebar this afternoon in this if we wanted to and then as you move up market there are more sophisticated higher performing products like iron and rod-and-reel above those are those structural steel products like H beams and eye beams and the final is sheet steel that we used to make appliances and cars and then I described in that industry how the ability to make steel improved over time and there were innovative companies that were making good products better as they went higher and higher in the market and I said that this is this describes the organization of almost every company the products begin at the middle and then they go up as you'll see why in a minute and in the history of steel there was something that made it even a little bit complicated and that was in the 1960s a new way of making steel emerged and it came down at the bottom of the market going after rebar and the reason why they came down at the bottom is they had figured out a different way to make steel that reduces the cost of steel by about twenty percent and the way they did it was they found scrap put it in a big container and hit it with electricity and a big explosion occurs and all of this scrap steel becomes liquid from which they then can make products the reason why the mini and the mini Mills came in at the bottom of the market however is that the quality that they could produce was really crummy and nobody would buy what the mini-meals made except the rebar people at the bottom of the market because there are almost no specs for rebar to begin with and then once you buried it in cement you couldn't verify whether they had Nets better or not and so rebar was a perfect product for crummy products and as they attacked the bottom of the market interesting the reaction of the big integrated steel companies was to get out of that business and the reason why is it wasn't good enough for what their customers needed and the economics were crummy so their gross margins the mini-meals at the bottom of the market offered just 7% and the integrated steel companies looked at should we protect the bottom of the market or maybe we ought to move up to make higher profit products making angle iron and structural steel and so on so as the mini-meals expanded their ability to make rebar the integrated mills got out of the business or they focused on higher margin products because the margins in structural iron and rod and and bar offered 12 percent margins so they moved aggressively up there and as the integrated mills looked down at the mini mills coming up they thought you know we could make 12% in those products but if we could just make even better steel in structural steel up there the gross margins are 80 our 18% and so as they got out of the I am not I angle iron and barn rod markets for the integrated steel companies their profits improved by getting out and as the mini mills came in their profits improved by getting in and it really fit with each other but what happened Ted to the prices of rebar and angle iron and steel as they got out and moved up market and the integrated mills reacted by giving out both of their profits improved over time integrated mills by getting out and the mini mills by getting in and as soon as they had driven the last high cost integrated player out the prices of steel dropped by 20% and so the the the cost of rebar dropped by 20% in 1979 when the integrated mills got out and then this Deere the cost of a angle iron and barn rod again dropped by 20% when the integrated Mills got out and as the as they dropped at the prices dropped out the integrated Mills moved up and the integrated Mills moved in and so in 1979 they integrated in into structural steel the price dropped by 20% and the integrated Mills then moved up into structural steel and the integrated steel companies had to go up as soon as they could in order to make money and so that's the story I I haven't then a justice here though one of the things that we I would just say there are in this story there's no bad management involved the integrated steel companies now have declined to account for only twenty thirty percent of the total amount of steel made in America and the integrated are the new new course of the world now produce about seventy to eighty percent of all of the steel and nobody intended to have this happen it just happened in the pursuit of profit and so I described how this had worked in the industry at the steel industry in secretary a general Shelton who was the chairman of the Joint Chiefs Kyle had put his hand up and he said clay you're clueless about why we're interested in your study and I said I am clueless can you help me and he he said leave this chart on the board and and he he then had a marker and he went up to the top of the market where we saved a steel sheet steel and he said we don't call that sheet steel we call that the Russians and they have been the high end of our market they have been very complicated / capable opponents and he said what you call the integrated steel mills we call that the US Department of Defense and we tried to do everything for everybody and then at the bottom of the market he crossed out rebar and he said for us that's those are the Russians those are the 10 the terrorism the terrorists and they're just doing the simplest of the things but they're going up and what you call mini mills we call that non nation nations like al-qaeda and there isn't anything he said about the way we make the way these guys makes steel and the way were organized give us any hope at all that we can succeed in fighting terrorism and and and the non nation nations anyway when we finished the study the discussion and it was time for questions a lot of questions went up in the air and many of the questions were focused on do you have any examples of somebody an integrated steel company that was the core leader in the industry who got caught by coming at the bottom of the market by the mini mills is there any example of some that survived and it turned out that there were a few but in every case they had they had been successful by setting up a completely different business organization and giving them a charter at the bottom of the market to do simple products and then move up and I described there have been a few examples of people who have done that like IBM did it but there are only a few and and everybody who survived had to do this and then they had all kinds of questions about why this was and so on anyway for after about two hours we there was no time but we agreed that we would stay in touch about two months later secretary Cohen called me up again and he said you need to know that today we're announcing a fourth unit in the Department of Defense we have the Army Navy Air Force and the new one we call special forces command to go up to go after terrorism and I complimented him on what I thought was a very insightful decision and he said you know we have been probably have been wrestling with this problem for how to organize to go after terrorism we've been working on this for six years and we have never been able to make progress because we sit around and we talk past each other and we don't agree on anything and he said what this taught us is that there is no data about the future and we have been arguing about no data and then he said what you brought was a common language and a common way to frame the problem and by providing the language and the way to frame the problem and an understanding with this being a theory of what happened we were able to make substantial progress in a very short amount of time because of what you brought and I just thought that was brilliant on his part the insights that there is no data about the future and so why do we ever think that we'll be able to reach consensus when there's no data that we need and if we can only make sense on data and until it's available we will ever never make a we will never be able to take action and the idea that you resolve problems by having a common language also has been very helpful so that whenever somebody wants me to explain whether I think it's gonna be this way or that my policy has been to say you know I actually don't know the answer to your question but there's a theory that has an opinion about your question and if you wouldn't mind let me tell you what the theory says that look at what is what is the opinion that the theory has and that then might help us make a better decision faster and I'm grateful for that opportunity I had that day in the Pentagon and I think as I as you pray that our schools will improve and give us guidance about how to do that I wanted just to offer that a common language and a good theory is actually a more powerful tool for change than almost anything else that I found and so that's one of the things that I would like to offer to you the next theory that I'd like to offer is an assertion that we made a bit ago that the Harvard Business School and its compatriots have messed up the way people think in in this this way in business every time you launch a new product in order to get the the momentum behind a new product you've got to be very careful in putting the case together you study the market you talked to people you look at how does how does it distribute it and made competitive and made who are the competitors can we built them and so on you do your very best you then get the money that you need to launch it thinking that it will be successful turns out that only 20% of the all products launched in the world only 20% are successful the other 80% fail and the question was under if innovation is just a crapshoot you do your best but the best isn't good enough and you just have to try a bunch of things and a few will win and to lose and you got to figure out how to live with that and that's much of what is taught at the business schools but then more recently the the mantra has been you need to just understand the customer better because if you understand the customer then you can decide what they need and develop a product and you'll be successful it turns out that that doesn't help either and let me describe what we've decided instead about how to develop products that customers will buy almost all innovations focus on a job that people need to get done so as an example here I am on the stage clay Christensen unfortunately I just turned 65 unfortunately I spared my whole life at 6 feet 8 inches tall and so I've knocked my head off how many number of times when I go through doors I married a wonderful wife Christine fortunately and we have five kids thank goodness the fifth of our five kids Michael unfortunately went to Stanford and there are other characteristics and attributes about me but my characteristics and attributes have not yet caused me to buy the New York Times today there might be a correlation between the propensity I have to buy the times but they don't cause me to do that nor do our characteristics or attributes cause us to buy any products or services but what causes us to do things is our whole wives are just filled with problems jobs that arise in our lives needing to get done and when we find that we have a job that needs to get done we then get out of the house and go around and try to find something that will get the job done as well as possible and what causes us to buy products or services is we have jobs to do and therefore we realized that understanding the job is what's critical in being successful in innovation not the customer the customers the wrong unit of analysis so we came upon a prod project that had been initiated by McDonald's and McDonald's wanted to increase the sales of their milkshakes and as you know McDonald's is a very sophisticated company and they had thanked to a lot of data build a profile of the quintessential milkshake customer it turns out I fit the profile too perfectly and they would invite people like me into conference rooms and ask us can you help us to know how to improve our milkshakes so that you will buy more of them and McDonald's had all the data in the world and they said yes we can tell you and so we would give them the feedback and it had no impact on sales or profits whatsoever so we offered to them that you know we're just coming up with a new way of thinking that might help you and I said yeah what it essentially says is somewhere near here there's a job that people find themselves needing to get done on occasion and it's clear that there's a job out there that causes people on occasion to hire a milkshake to do that job we need to understand what the job is and so we stood outside of a restaurant I'm sorry we start we went into a milk ship into I'm sorry we stood in a McDonald's restaurant one evening for 18 hours and we took very careful notes on what time did they buy the milkshake what were they wearing were they alone what did they make other products with it did they eat it in the restaurant or did they get in the car and drove off with it and it turned out that about 80% of the products were sold before 8:30 in the morning it was the only thing they bought they were always alone and they always got in the car and drove off with it so we came back the next year and positioned ourselves outside the restaurant so that we could confront these people as they were coming in with their milkshake and in language that they could understand but ask him I got problems here what job were you trying to do that caused you to come here and hire this milkshake at 8:30 in the morning and as they would struggle to answer we respond by saying well can you think about the last time you're in the same situation needing to get the same job done but you didn't come here to hire a milkshake what did you hire to get the job done and it turned out that they all had the same job to do that is they had a long and boring drive to work and one hand had to be on the wheel but they had another hand and there wasn't anything in it and they just needed something to do while they were driving in order to get this job done they want to be engaged rather than fall asleep on this boring commute and that was the job they weren't hungry yet but they knew they'd be hungry by 10 o'clock so they also needed something that would just go funk and stay there for the morning so then we asked them well when you don't come here to hire a milkshake to do the job what do you hire one guy said you know I never thought about it this way but last Friday I hired adult a banana to do the job take my word for it never hire bananas you can eat it in less than a minute the taste is there's no taste one guy said yeah I do I do doughnuts but I have to do it without my wife knowing because she wants me to lose weight not gain and it gets on my fingers and that makes the the wheel get gooey so it doesn't do the job very well and other guys say D I do bagels but they're so dry and tasteless then I have to steer the car with my knees while they put on the cream cheese and then if the phone rings I got three problems and two hands one guy said I hired a Snickers bar to do the job done bit I felt so guilty I've never hired a nurse and Snickers again but let me tell you when I come here to McDonald's and hire this milkshake it is so viscous it takes me 23 minutes to suck it up that thin little straw who cares what the ingredients are all I know is I'm still full at 10 o'clock and it turned out that the milkshake does the job better than any of the competitors and the competitors are not Burger King milkshakes as much as as you compete against bended bananas and bagels and Snickers bars and coffee and so on and then it turns out that the people who hired the milkshakes in the afternoon hired it for a very different purpose and that is they just wanted to talk to people that they loved and they needed us something who we could just sit down and I could look at her and she could look at me and we could just help them know how much we care for them and that's a very different job to be done and it had to be felt formulated in very different ways it turns out that Peter Drucker was smarter than me because he said it early at first that the customer rarely buys what the company thinks that it's selling them and understanding what the job was was very helpful because they realized that they had been improving the milkshake on dimensions of performance that were irrelevant to the job to be done but once they understood what the what it was then they could understand how they could improve it in salient dimensions so that it would be successful every time turns out that the milkshake market is about seven times bigger than they thought it was and the reason why is they had been improving the product on dimensions of performance that were irrelevant to the job but once they realized that they are really competing against bananas it's and bagels and Snickers bars and coffee and so on gosh they were those were duck soup because they were none of them did the job well at all it turns out that jobs exist everywhere so there's a job somewhere near here which is I need to get this from here to there as fast as profitable as fast as possible with perfect certainty that's the job that arises in our lives on occasion some more than others it turns out that Julius Caesar had this job to do on occasion and when he had the job to do he could hire a horseman and a chariot to get the job done Queen Victoria had the same job to do but by that time he could she could hire a telegraph or a railroad to get it done [Music] Churchill found on occasion that he had the same job to do and so he could hire an airport airplane to do the job and she could hire DHL or the Internet it turned us you notice that the products sold in each generation were very different than the prior but the job to be done was very stable over time and that's a common characteristics of jobs is that on average they are very stable over time and therefore we don't have to try this this year and try that for next year as long as we were trying to get the job done there are a lot of people who have jobs in education that need to get done students have jobs teachers have JA parents do legislators do and many more and understanding who has what jobs to do is actually quite important because we like McDonald's in many times are improving our offerings on dimensions of performance that are irrelevant to the jobs that people are trying to do especially students we give them all of the characteristics and attributes we can think of and we back it up with new data but we don't understand the the fundamental jobs that they are trying to get done so I'd like to walk you through what we think might be called a architecture of a brand a architecture of the job to be done in every case jobs arise at the bottom of the fundamental of architecture the job has to be done given the situation that I'm in each job has a functional and emotional and a social dimension to the job and the weight of those mith varies by the job once we understand that then we have the opportunity to create the next level which is so if that's the job what are the experiences that we need to provide in purchase and use so that in some they will nail the job perfectly and if we understand those experiences we need to provide that allows us to make the next step which is what do we need to integrate and how do we need to integrate it so that we can provide the experience is required to nail the job perfectly and if we do that we can put a brand on our product that will help people find our product as soon as they realize that they had a job to do so what I would like now to do is just go back in in this architecture and talk up a little bit more about what I mean I'm what I'm trying to do is in the blue box there explode it a little bit to talk about some what we mean by experiences we have done a lot of work with southern New Hampshire University online and Western Governors University online you may know together they said they have about 200,000 students doing MBAs or master's and bachelor degrees as well as certificates and certifications and so on and we know them quite well one of the things that the architecture demands to them is to be able to say what are the experiences in purchase and use and so we distilled from that that in both cases there are three experiences that they need to provide and the first one is I need to learn when I'm I need to use it when I'm learning it and then I will use it again and again and again I can't keep in my head things that I don't use after I've learned it so that's an experience I use it use it and learn it another experience they need to have is I need to finish this every student has a job to do which is I need to be successful and many of the students the reason they're here at Western Governors in southern New Hampshire is on average their age is 20 says 36 years old they have children 70% of them do 70% of them want a better job 70% of them are there because they can't buy a home and the reason why they're there is because when they were in high school they didn't apply themselves and so they dropped out and the fundamental problem of that is they can concluded themselves that I can't finish this I've tried it before I've never done it again and so one of the experiences they needed to provide as a coach that helps students take them through tough times is almost always these students are in tough times and as I understood they're what they're they're thinking I said to them it's got to be costly to have a coach for each student to take them through these tough times and the presidents of both of these universities responded it's dirt cheap what's costly is a student drops out and it's been very helpful for me to see that how that happen last summer I was asked to speak at the graduation of Western Governors at their 20th anniversary and they had there was a very wonderful story in every student's face as they came across the and so I wanted to just offer that is we need to put experiences out there for our students to have available to them so that they will get the job done perfectly I'll just offer this one last one what we've studied as we've what we learned as we've studied about innovation is that there are two FIR forces that work against each other so every time I hire a new product I can't use it until I put put out the old one which is how I did it before and this idea that the new doesn't work unless the old changes or is gone is actually very important I was at Costco a bit ago and there was somebody waiting there waiting in the line to hire a mattress and one of my colleagues asked him how long did it take you to buy that mattress and they won't look back and they realized that it had taken him three years to buy this mattress because every time he was ready to buy they thought well we could just put on off for another year or I got a piece of plywood and I put it under the mattress so that wouldn't be as flimsy and my brother-in-law who sold us the last one told us they have a deal on a new one and there are just all kinds of things that happened which were the habits of the present and the anxiety about using a new thing to do the solution and these things blocked change the block change but then on the other force there is the push of the situation because these new things really are exciting and there are people pulling me into the future because that it seems to be a track and I think what I am I my conclusion of this is that many of the innovations that we attempt to achieve in higher education fail not because they're intrinsically wonderful ideas but we never have thought about what are the habits of the present and the anxieties about the future and all of the things that we're doing we have to in which we have to change our behavior this is the reason why change is so difficult so often and this is just another piece that we have been thinking about about how to manage change I think a better stop I have just one other thing that I wanted to say to you guys that is a number of years ago for reasons that I can't fully describe I realized that God doesn't ever hire milkshake he doesn't hire accountants in heaven which is an idea that I never thought about before but the language that got me in that direction came from a rare an insight that I have a finite mind and because I have a finite mind God I I have to be able to hire accountants because we have all of these inputs and invoices and outputs and so on and there are so many pieces of data around me and my company or in my school thank goodness we have accountants and they can aggregate all of these things up and tell me we've got revenue of this going at this rate and this is this is how much better it was than last year's and I compare this to that and because I have a finite mind I need somebody who can make sense of the world for me by aggregating things up and because of my finite mind I get a sense of hierarchy in my world if I preside over bigger companies that have bigger numbers I feel more successful than if I preside over smaller numbers and smaller organizations but then somehow I realized that with God the perspective is different because God has an infinite mind and what that means is he doesn't need to aggregate people up into numbers in order to have a perfect understanding of what's going on in the world because God has an infinite mind he doesn't need to a granade us up as numbers in order to have a perfect understanding of what goes on that then allowed me to stay oh my gosh what that means is when I have my interview with him he's not going to say oh my gosh Clayton Christensen the professor of the important professor at the Harvard Business School he's not even going to say that in my interview rather what God is going to say yes clay can we just talk for a minute about the people that I put you in your path what did you do to help them to become better people and then if you remember I put you in this situation let's just talk about the people that you helped to become better people and then clay don't remember don't rip don't forget that we gave you five children can we talk about what you did to help those five people become magnificent children and I realized that when God will measure my life there will be no numbers over which I presided but rather God is going to ask me the individual people that I helped to become better people and I just can't as I have as I come to the end of my life I realized that now I know how God will measure my life and I hope that I can say that everyday I did all that I could to help people in my path to become better people and I just wanted to close by thanking you guys I think that you have chosen a truly noble profession and I know that as god assesses how you've done it adds up in his mind not in numbers but as individual people in his mind that are important to him and I thank you for the noble profession that you have chosen thank you and God bless [Applause]

Channel: ExcelinEd

Views: 55,776

Keywords: EIE17, ExcelinEd, National Summit on Education Reform, Education Summit, Education Reform, Education Leaders, Education Policy, K-12 Education, K-12 Students, Clayton Christensen, Competing Against Luck, Innovation, Customer Choice, Harvard University, Kim B. Clark Professor of Business Administration at the Harvard Business School, Hanna Skandera

Id: V603pf9s5WA

Length: 51min 47sec (3107 seconds)

Published: Tue Dec 19 2017