37 pages • 1 hour read
Clayton M. Christensen, James Allworth, Karen DillonHow Will You Measure Your Life?
Nonfiction | Book | Adult | Published in 2012A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Index of Terms
Deliberate and Emergent Strategies
A deliberate strategy is a company’s initial strategy when tackling a specific market. For example, when Honda entered the US motorcycle market, the company wanted to directly compete with Harley Davidson and marketed large bikes. This deliberate strategy struggled because of unanticipated problems, including the high cost of bike maintenance. Honda then shifted gears and marketed their smaller bikes, built for confined, urban spaces—an emergent strategy. Clayton M. Christensen asserts that “strategy is not a discrete analytical event—something decided, say, in a meeting of top managers based on the best numbers and analysis available at the time. Rather, it is a continuous, diverse, and unruly process” (46). In order to succeed, companies must be able to adapt their deliberate strategies and be flexible to change.
Disruptive Innovation
Using the rise of Asus computers at the expense of Dell computers as an example, Christensen describes disruptive innovation as the following:
[It] happens when a competitor enters a market with a low-priced product or service that most established industry players view as inferior. But the new competitor uses technology and its business model to continually improve its offering until it is good enough to satisfy what customers need (10-11).
Innovator’s Dilemma
The innovator’s dilemma happens when an established, large company faces a disincentive to develop new innovations even though they should. As a case study, Christensen discusses Blockbuster, the former video rental chain. It had become so large that when a competitor, Netflix, emerged with a different model for video rental, Blockbuster could not invest in the same model without risking its own in-store traffic. While Netflix used postal delivery and a monthly subscription, Blockbuster relied on customers visiting their stores and paying a rental fee. Eventually, Blockbuster went bankrupt and disappeared from the market.
Marginal Versus Full Cost
According to Christensen, “Every time an executive in an established company needs to make an investment decision, there are two alternatives on the menu” (185): a marginal cost and a full cost. A marginal cost builds on what a company already has, so costs are kept minimal, while a full cost is the cost of developing something new. To illustrate both costs, Christensen uses the story of US Steel. When a smaller manufacturer called Nucor entered the steel market, it used mini-mills to produce cheap steel; even as Nucor grew, US Steel continued to use its current mills and went bankrupt (favoring a marginal cost over a full cost). Christensen uses US Steel’s marginal cost to warn against shortcuts and temporary solutions.
Two-Factor Theory (Motivation Theory)
Christensen introduces two-factor theory when discussing the nature of incentives in business. He argues that incentives do not have the same motivational power as other factors: “True motivation is getting people to do something because they want to do it” (32). Compared to hygiene factors—things like status, compensation, job security, work conditions, company policies, and supervisory practices (32)—one’s feeling of accomplishment is far more sustainable and effective. When a person is in a career where motivating factors are high, they are more likely to feel satisfaction from their work, even if hygiene factors are not at the same level.
