When you look at innovation through Christensen's lens, you see ways in which entrepreneurs can create their own markets.
Nor is it only technology businesses that face daunting uncertainty. Take what may be the biggest new consumer market to come down the pike in some time, that created by the aging of the baby boom generation. "The over-50 population will represent 80% of all the growth in the United States," argues marketing guru Ken Dychtwald, of Age Wave Inc. "There will be double-digit growth for decades to come in this marketplace." Parts of the new market are highly predictable: more demand for homes in Arizona and Florida, more need for walkers and wheelchairs. The big companies in these industries are already gearing up. But wait! This is the baby boom, and those frisky boomers are apt to want things that past generations of elderly wouldn't have known what to do with. Adventure travel! Back-to-school learning opportunities! Bill-paying services! Some such niches may turn out to be huge--but until somebody finds out which ones, the large companies will hold back. "Dreaming up novel ideas, getting them launched, proving they can work--the Fortune 500 can't do that," says Dychtwald. "So they have respect for, and interest in, the entrepreneurs who can take the ideas and make them real."
Christensen also shows that real disruptive innovation typically occurs when an industry has overshot its mark: when its products or services offer more than most customers need, and when they are so costly that large portions of the market are excluded. If there is one industry that fits this description today, it is health care. Many people who visit a hospital don't need its expensive technology and services. Many who visit a doctor could make do with a nurse. The solution? Disrupt the health care system, of course. "You bring technology that enables people to do in their homes what they used to have to go to a doctor's office to do, and to do in a doctor's office what they used to do in a hospital," says Christensen. "You enable less expensive venues of care to become more capable, and less expensive caregivers to become more capable."
Medical-device upstarts have already created new business opportunities from such disruption. LifeScan Inc., now owned by Johnson & Johnson, developed portable blood glucose meters for diabetes, enabling patients to monitor their own glucose levels without relying on large-scale hospital labs. Sonosite, based in Bothell, Wash., developed an inexpensive handheld ultrasound device that for some applications can replace big cart-based ultrasound systems. Now disruptive innovation may be changing the delivery of health care services. A company called MinuteClinic, headquartered in Minneapolis, has placed a dozen health care kiosks in Target and Cub Food stores around its area. Staffed by nurses, the clinics offer diagnosis and treatment for a carefully circumscribed list of common conditions, including strep throat, ear infections, and sinus infections, plus screenings for such measures as cholesterol and blood pressure. They can't provide everything a doctor's office can, but they do offer convenient walk-in service (typically requiring 15 minutes or less), and they charge only $41 (or an insurance copay) per visit.
When you look at innovation through Christensen's lens, you see ways in which entrepreneurial companies can create their own markets. They can experiment and explore in terrain that big companies fear. They can introduce products or services that undercut the market by making something simpler, more convenient, cheaper, or more accessible. Entrepreneurs are natural-born disrupters: Look for more of them in the next five to 10 years.
Destination workplaces
Small companies, it was once thought, would always be at a disadvantage in the marketplace because large companies were, well, big. They had deeper pockets. They could build bigger factories and stores, hence take advantage of economies of scale. They had access to more capital. But consider how different things are now:
One, we live and work in a knowledge-based world, with human capital more important than physical or financial capital. The point is a cliche. But note that it extends well beyond the industries--high tech, professional services, entertainment, etc.--with which the idea is usually associated. Trucking companies don't just need trucks and drivers, they need software engineers who can develop economical route algorithms. Specialty retailers don't just need stores, they need knowledgeable salespeople who can answer questions and steer customers toward what they need. Even machine operators in factories aren't just tightening bolts anymore, they're programming and monitoring the computers that run things.
Two, this environment puts a premium on attracting and retaining good people. It isn't just the cost of hiring replacements that matters when valuable people leave, though those costs can add up. It's that their knowledge and experience leave with them. Though companies have grown complacent about keeping employees over the last few years--where were they going to go?--that situation is about to change. Baby boomers are aging. Younger workers are scarce. "We're looking at a shortage of over 10 million people by 2010," says Roger Herman, a consultant whose 2003 book Impending Crisis (co-authored with Tom Olivo and Joyce Gioia) documents the claim. Which companies will get and keep the people who are available? Time was, a job with a big corporation was out-and-out preferable to a job with a small one. It paid more. The benefits were better, as was the job security. Intangibles like reputation mattered too: You could tell your neighbors you worked for IBM or Xerox and they'd know you had a job with a respected company. But let's go back to our counting.
