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5by5 | The Critical Path #17: Working with Clay

Horace interviews James Allworth, author, Fellow at the Forum for Growth and Innovation at Harvard Business School, and a former Apple employee. James describes what it’s like working with Clayton Christensen and takes us on a journey through the latest academic and applied research being conducted on the theories of disruptive innovation.

via 5by5 | The Critical Path #17: Working with Clay.

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28 Comments so far. Leave a comment below.
  1. Anonymous,

    I think it’s interesting that you described Apple as an integrated player rather than a modular player, because it seems so obviously true, but when you actually stop to think about it – it actually isn’t.

    The idea that it’s hard to create a new product category when you’re dealing with a ton of partners all of whom are interacting through complex contractual terms misses the point which is that this is exactly how Apple operates.  Every component in an iPhone or iPad is made by somebody else, and eventually assembled by somebody else.  Everything from the SoC down is modular.

    Apple integrates in one important respect – that of hardware and software – but in every other way they are as modular or more modular than their peers. Where they excel is in the act of integration, rather than in being integrated.

    • Integration/modularity needs a clearer definition. I see Apple increasingly integrating. Consider the CapEx spending on process equipment, the acquisition of fabless chip makers and now most recently that of flash memory module designers. Then there is the ownership over retail and service. What you need to do to succeed is integrate that which is not good enough and compartmentalize that which is good enough. You can be very fine-grained in the selection process.

      • Anonymous,

        There are two aspects here. Do you require ownership to have control? Or can a legal document and business relationship suffice?

        Also this touches upon Ronald Coase transaction cost theory of the firm. In the past GM/Ford owned the rubber plantations for which their tyres were made all the way through to the manufacturing of the cars. However as legal frameworks and instiutions developed more of this work was ceded to suppliers and the GM/Ford moved up the so called value chain.

        More recently Acer from being a supplier to Dell of components eventually became a competior making PC and servers. Dell was logical in its steps to cede more and more component assembly to Asus until it became evident that Dell had squeezed itself into a corner so to speak with Asus coming from below.

        Coase theory in 1937 has had a massive impact in the way businesses consider the aspect of build or buy or how they organise themselves.

      • Control is for the purpose of improving what is not good enough rapidly. Legal documents or business relationships do not suffice. Ownership gives the best chance of increasing the slope of the trajectory of improvement. Of course, if what you are looking at is good enough, improving it is counter-productive. The industry shifts immediately to modularity so that what is improved is price or convenience vs. what was the old measure of performance. Being modular when products are not good enough is just as suboptimal as being integrated when the products are good enough.

      • Anonymous,

        “Control is for the purpose of improving what is not good enough rapidly”

        For me control is the ability to make decisions – improvements or not are an outcome.

        “Ownership gives the best chance of increasing the slope of the trajectory of improvement”

        What is the econmic underpinning of this? Expanding the PPF, economies of scope? economies of scale?

        “The industry shifts immediately to modularity so that what is improved is price or convenience vs. what was the old measure of performance.”

        What do you mean by modularity in terms of industry organisation? Is this macro theory you are referring to or micro theory? Perfect competion, oligoplost? The interaction of firms and markets?

        “Being modular when products are not good enough is just as suboptimal as being integrated when the products are good enough.”

        I don’t know what to make of the above.

      • Value chain evolution is part and parcel of the innovation theory put forward by Clayton Christensen and underpinning every post on this blog. Suggest reading The Innovator’s Dilemma and The Innovator’s Solution.

      • Anonymous,

        I have read Innovators dilemma and its not really an exceptonal book as he rehashes ideas from Schumpter work. He does make the ideas more palatable for the average person and writes well. However its a book aimed from a management perspective and lacks alot of the rigours of an economic text.

        I dont disagree with the central tenet of creative waves of destruction or innovation as being discrete but it seems the idea then gets lost in management speak.

        However you haven’t answered the questions I asked because in the end if we cannot tie it back to econmic principles then its no wonder you are saying there needs to be a better definition of modularity/integration.

      • Anonymous,

        This is my point – Apple makes use of commodity components or designs where it makes sense to do so, and thus gains most of the benefits to cost and performance that modularity provides.   Then Apple integrates selectively.

        The old Apple and the old truly integrated shops had a ‘not invented here’ attitude, which prevented that.

        The result is that Apple has a cost base that approaches or beats that of ‘modular’ firms but a product quality with all the benefits of integration.

        LG and Samsung are integrated in terms of component production, but it’s not clear that it’s helping them – certainly it isn’t helping LG.  Nokia is integrated in terms of assembly, and its not clear whether it’s helping – outside of a few markets where it may help manage tariffs.

        Apple isn’t more integrated than these firms, it’s more intelligently integrated.

      • Hoon,

        @asymco:disqus Does the fact that Apple’s select product offering and subsequently large orders of components allow them to function effectively as a bigger integrated entity than they are? If they are able to effectively lock up vendors and prevent competitors from matching production, do those vendors effectively act as integrated parts of Apple?

  2. You guys were discussing HBS effectively being replaced by the University of Phoenix and I immediately thought about the parallel with conferences.  Then Horace immediately mentions conferences too!  Yeah!  :-)

    Look at what just happened to me…  I actually “attended” this remarkable and valuable conversation between Dediu and Allworth at 5:30 am, in my pajamas, laying on my bed, drinking coffee and playing the podcast on the flat screen + Apple TV in the bedroom (and taking notes on a yellow pad).  

    I DID NOT have to pay at least a thousand dollars flying to another city, staying in a hotel and then dressing up in business attire to attend the same one-hour event in a university lecture hall.

    And perhaps I did miss out on meeting other people afterwards, but it was the information I was really after, not the networking. 

    The same for conferences.  There are many factors, but the TIME/LOCATION problem is huge.

    I feel like all these developer conferences like Cingleton, 360iDev, MacTech, Voices That Matter, CocoaConf, SecondConf, and others essentially flipping the bird at the 90% of the developer community who cannot physically be at the assigned place and time for a variety of good reasons.  

    The “iTunisification” and “teleconferencification” of conferences needs to happen.  It’s overdue.  WWDC is already iTunesified.   Education is being iTunesified.

    And thankfully Horace Dediu, et al, have been 5by5’d.  :-)  Thanks for that!  You have no idea how the success of my current endeavor has been significantly enhanced because I had realistic access to the information I want.

    • I was reading this and told my wife, “These are my people.”  Just finished listening and taking notes myself!  However, I will say that most of what great happens to me at conferences happens as the result of conversations that happen by surprise, over coffee, in the lobby, etc.  Kind of the same thing with the most influential professors of my life.

      • I agree 100%.  I’d rather be there in person no question about it.  I’d add that there’s a way to have both.  One of these days I’ll have to make a list of the tradeoffs because we humans keep forgetting about some of them, just like the Apple TV debate has many interacting elements that get forgotten in discussions.

        But even people who attend lectures in person miss what’s being said because their mind went off and was thinking about what was said before.  Or suddenly everyone is laughing and you realize you missed the joke.  That’s the beauty of pause and rewind, of course.  And some conferences have parallel tracks which is upsetting to the attendees as well.  

        Conference session videos are for the attendees too.  Apple’s developer conference is a perfect example.  Even though I was there, I ended up replaying parts of the videos at least 5 times and pause and look at something, ponder it and try to see what’s behind it because the information goes by so quickly.

        Human contact, information, tradeoffs, the second decade of the 21st century. :-)

      • Anonymous,

        @WilliamTorgerson:disqus @InformationWorkshop:disqus ,
        This is a very interesting point, and what you’re talking about is the one thing that should give hope to the conference organizers, and also the business schools. There is still value to being there in person. The thing is, they need to start focusing on *exactly* that. Because that’s the only dimension on which they can compete and which there is no way that the online players can really disrupt them.

        How does that look? For example, you give the talk (class) online before people arrive, and for those that want to workshop it etc that’s what you do in person. The 1:many type stuff is often a waste of time in the digital world; it’s the many:many type stuff that online cannot yet facilitate.

        Make sense?

        Hope you enjoyed the podcast. Thanks for the great comments!

        — james

  3. Martin R. Schulke,

    Wow, nice work.  

    You called Chompsky to the table. 
    I listened to 17 and 18 back to back

    Corporations manufacturing consent in dying eddies of feudal merchant comfort, tassled with boxed fashion and gala economics (Godin). 

    Google as wier and drain, quicksand classism. 

    Apple delivering  vines with shiny handles  for the tarzan in all of us… 

    social ungriding our minds yet taxing our worth

    Thank you Horace for the  white space. Very Zinn-esk. Clear, humble, open, insightful, authentic sharing… very disruptive… Adventurous
    exciting… I’m in

  4. Academic publishing is missing it when they don’t often do the eBook.  I spent 20 minutes today looking for a line in a text.  Argggg!  I need Smile software’s pdf pen pro.  I’m already planning on using my podcast coupon code for text expander.  Just in time.

    There is probably a role for education via modules on a computer in some way, but you can’t replace writing/thinking in a community.  Just look at this blog as evidence.  Horace, what would have you learned writing alone or working on modules without this conversation? 

    This episode was an incredibly great argument versus standardized testing.  And that mode of accountability for schools here in U.S. is only getting more stringent, even creeping up into my little corner of higher ed.  

    I’m considering setting up a writing class that designs the curriculum for a digital media class.  Each student or groups of students would decide on their contribution to the project.  There grade would be tied to that. This episode gave me more confidence for trying it out. 

  5. MOD,

    Ha ha ha. Harvard Business School is itself being disrupted, and management is not paying attention.

    • That should not be a surprise. The theory is very clear on this matter.

      • MOD,

        Indeed, the theory predicts it. Still, it is a wonder that it would happen to the organization of the theory’s author.

        I have not read his book, but I would imagine a corollary that knowing the theory, one should do something when presented with the demise of one’s organization or business.

        I cannot accept a deterministic conclusion. There are organizations that have remodeled themselves and have survived.

      • Nothing is written in stone.

        However, for a variety of reasons, it’s normally very difficult for an organization to fight against the dilemma – even if they know about it. They can move downmarket, serving less prestigious/profitable customers… but there are a whole host of things that stop them.A few organizations have managed to do it (in fact, I’ve written on it on the case of Apple – http://blogs.hbr.org/cs/2011/10/steve_jobs_solved_the_innovato.html ) and another that comes to mind is Dayton Dry Goods with Target. But usually, most can’t bring themselves to do it – even when they know it’s happening!

        Cheers

        — james

  6. Nivlac Yelpat,

    Horace, i am curious to hear your thoughts about the smartphone replacement cycle. in particular, there is some early evidence that the iPhone 4S has unlocked a new wave of upgrades in the USA, and is not delivering significant volumes of voice-to-data upgrades for the US carriers. From the perspective of Christensen’s theory (Innovator’s Solution), new innovations should be directed to areas of “non-consumption”. It seems that with the iPhone 4S, it is being positioned into a segment of the market that is already being served (whether on older iPhones, or other Smartphones).  How does this fit with the theory, in your opinion.

    • I agree. The iPhone as currently defined is not very successful at addressing smartphone non-consumption. Four years ago it was, especially in the markets it was launched in. The most frequently cited replaced phone for the original iPhone was the RAZR. Now it’s likely to be either another iPhone or a BlackBerry (and it may soon come to replace some Android). Partly this is because in those original markets the iPhone and Android are nearing saturation (penetration of smartphones is nearing 50% and within that segment, iPhone and Android are becoming a duopoly.)
      I believe that Apple needs to address non-consumption with either a brand extension or with a new category of product. In fact, I believe that the current non-consumtion market is probably a different market altogether than the consuming market. There are different jobs to be done. The iPhone brand may not stretch to this new market.

      • Nivlac Yelpat,

        might this be the role for the iPod Touch? A wifi communication device that offers apps, browsing, messaging, as well as voice and video communication via voip and facetime. With the near ubiquity of wifi in major urban markets, it does a “good enough” job for those who want a nomadic (not completely mobile) device.  
        Or is something more disruptive needed in your opinion.

      • That’s my best guess right now. I believe the iPod touch is the foundation if not the actual brand that will be used to address mobile data non-consumption. It is just a guess however. I have reason to believe it’s plausible but don’t know all the constraints that are faced by such a product.

  7. berult,

    A fundamental question underlies Apple’s future development:

    Is the compact biosphere/ecosphere heading inexorably towards a ‘modular’ evolution …as the unfolding reality seems to suggest?

    More specifically:

    is Apple the ever contracting locale of diminishing artistic entropy in a ‘universe’ of ever increasing knowledge commoditization?

    Integrated evolution has made the earth viable and sustainable, a condition arguably essential for consciousness to emerge. But it seems that consciousness itself tends to harness modularity to ride out ‘later stage’ structural development. The very pace of creativity accretion dictates its rate of contextual isolation. How can one embed simplicity, durability, elegance and functionality into a dynamically atomizing …commoditizing reality, and counteract the consciousness-bearing force of repulsion in one sweep of virtuous happenstance?  

    Apple’s creative streak, its continuum of geniality, could very well shrink into a dot com-like bubble along with its increasingly timeless windows of opportunity. Free expression requires time to partake fully in the act of creation, …and time is just as exposed to value destruction as the brush stroke of the artist, the penmanship of the author, the nature-blending curvature of an iPhone…

    Is life ultimately a broken-into-its-parts, timeless, assimilative, non-zero priced commodity? Or is life an infinitely differentiable, integrative, time-stamped, priceless expression of identity?

    The future of Apple ties in with the future of identity-stamped creativity. And vice-versa. Beyond any objective market analysis, any market prognosis, any projection into the future, lies the imponderable of humanity’s nature-interrogating, and first derivative decision-making process.

  8. Your discussion of teaching, conferences, and entertainment made me think of some work some friends of mine are doing putting teaching Latin into a game context. They’re not just taking traditional instruction and sprinkling game trappings on it: instead, they’re enclosing learning Latin in a role-playing game where students approach the subject in a cultural context and where succeeding at the assessment provided by the game requires being able to read and write Latin in a way that actually works within the broader situation that students are trying to understand.

    The subject matter they are teaching isn’t particularly closely to what either of you are teaching in schools / discussing in conferences, but I’m pretty sure that the approach is more broadly applicable; I figured I should mention it in case it spurs any ideas. Their main web site is at http://www.practomime.com/ with blogs at http://kevinbal.blogspot.com/ http://livingepic.blogspot.com/ and http://www.playthepast.org/

    (Very interesting podcast, by the way – I like regular Critical Path podcasts, but these interviews have been excellent as well.)

    • David,

      That sounds like they’re really rethinking the delivery of the material. Sounds excellent.

      The wonderful thing about Clay’s theories is that they are broadly applicable – they don’t just apply to business schools or conferences, but also to latin and primary schools and health care. Clay – and by extension, all of us – are able to pick up the theories and apply them to other areas to generate real insight.

      I’m glad you enjoyed the podcast – thanks for the kind comment :)

      — james

  9. Interested in hearing more about disrupting education…
    For the record, I’ve been teaching ethnographic disciplines in diverse universities and thinking about similar issues.

    Are you aware of Cathy Davidson’s work? At least on CBC Spark, she was talking about the industrial era model of formal education. More insightful than the Prenskys and Tapscotts of this world, if you ask me. In fact, some of my students (in “cyberspace sociology”) have been coming up with similar insight on the need for disruption in educational models, not exclusively based on technology.

    Something which gives me pause in your approach is the (recurring) statement about entertainment (in both education and presentations). Now, the idea stands on its own and it’s often been made. But is it possible that there’s a broader set of values, of which “entertainment” is merely the easiest member to grasp? It’s nice to entertain, but “fun” may not always be that useful a standard when assessing the value of a presentation or a course of training. Clearly, some students use it in their evaluation of specific courses (especially if they only care about a grade). But it tends to be a tricky factor to use when choosing paths in a learning journey. After all, even the most entertaining courses may offer less entertainment value than something built purely for entertainment.
    [Again for the record, my courses are fairly popular and have often been called “entertaining”.]
    Engagement is quite different. It’s quite possible to be engaged in something which isn’t particularly entertaining, especially if one has intrinsic motivation related to the activity. In fact, the most deeply-engaged students tend not to be the ones who are most-consistently entertained. Not that the entertained ones are lost, as they may become very engaged in the learning process long after a course has ended. But entertainment and engagement tend to occur independently. At least, in my experience.

    Of course, there’s the issue of popularity and business model. But, like pageviews not working in all contexts, only some educational approaches (such as the one behind the University of Phoenix) can work well as the basis for a popularity-centric business model. Many institutions are trying to emulate that approach, but it doesn’t mean that it’s working for most of them.

    Besides, “edutainment” isn’t very disruptive, in a Christensen sense. It’s a position along a well-known axis. Not much asymmetry or orthogonality, here.

    No?

    [Originally posted this on 5by5, which may not be the best of ideas… Since then, I started listening to Davidson’s audiobook. Sounds like there are several connections to Christensen. More importantly, she’s able to go beyond the usual comments about educational reform. And though she has a significant section on gamification, it’s less about entertainment than about the way learning works. Wishing she were talking more about playfulness, to be honest.]

  10. Maarten,

    Interesting interview, like most of the Critical Path episodes. Good food for thought.

    When you were talking about cycles of disruption/innovation the thought jumped into my mind that the wrong word is being used here: Cycles

    Cycles imply a circular movement where it is natural to assume that one cycle must be completed before the next can begin. I see absolutely no reason she the next innovation has to wait of the previous one to reach some sort of ‘completion’.

    Instead it might be better to talk about Waves, which can naturally overlap. One wave may still be on the rise in the first quarter of its total expected lifespan, and the next wave may already be starting to climb up right behind it. If this next wave climbs fast enough, it may even overtake and swallow the first wave before that one reaches its peak.

    In a wave view waves can continue to arise faster and faster, especially if you don’t focus on a single company but look at the entire industry, including startups that may be bought by bigger players for their ideas. There is no lower bound being set on the time until the next wave by the time it takes to scale the manufacturing. That applies only to the growth curve of an individual wave.

    The only limit here is in how fast new ideas can mature in response to newly launches products, concepts, or even rumors. And this evolution of ideas is hugely sensitive to the effects of fast spreading knowledge though the internet.

    In the spread of ideas the renowned secrecy of Apple product development is an advantage to them, since it slows down the development of ideas outside the company and gives them a larger window on the market. But that only works as long as their own ideas remain good enough to outscore independent development outside of the company.

    Even within a single company there is no need to complete one wave before launching the next. Apple launched the iPad 3 years into the iPhone era, and it does compete with the iPhone to some extend. Someone who’s carrying around an iPad has much less need of the increased capabilities of the newer iPhones, since nearly anything you could do on the phone can also be done on the tablet.

    In my case, I carry an original iPad with 3G nearly everywhere. My phone is an iPhone, but its still the original 3G model from 2008 and is running iOS 3. While I have my iPad for more demanding tasks, there is no need to update the phone as long as it doesn’t break down.

    One can make a case that both these devices are part of the same wave of innovation, but they are still very different categories of device and they do compete with each other to some extend.

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