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G100 Network Notebook | June 2014

Was Clay Christensen Wrong About Disruption?

Clayton Christensen’s 1997 landmark study of disruptive markets, The Innovator’s Dilemma, continues to drive discussion about innovation and new competitors. But nearly twenty years later, are his conclusions about disruption still persuasive? Jill Lepore re-examines the book in the most recent New Yorker and concludes that he got the innovation story wrong. An excerpt:

Christensen argues that incumbents in the disk-drive industry were regularly destroyed by newcomers. But today, after much consolidation, the divisions that dominate the industry are divisions that led the market in the nineteen-eighties. … Victory in the disk-drive industry appears to have gone to the manufacturers that were good at incremental improvements, whether or not they were the first to market the disruptive new format.

Networks Are More Important Than Consultants

Once CEOs turned to consultants. Increasingly, they build networks – a pivotal yet underserved leadership skill for CEOs today, according to Brook Manville, author of Judgment Calls:

As Bill Joy, founderof Sun Microsystems, pointed out years ago, “No matter who you re, most of the smartest people don’t work for you.” … As a result, today’s leaders need to be good at building connections with a variety of outsiders beyond the usual value chains.

The article is worth reading, especially when Manville identifies the leadership qualities most effective in mobilizing outside networks.

The China Cyber Threat

Analyst Ian Bremmer predicts that pressure from Washington will have little impact on Chinese behavior, other than to worsen cyber relations: “The benefits of cyber-spying for Chinese companies and China’s economy far outweigh any costs that Washington can afford to impose.” For a more ominous take, consider this Computerworld article that frames the cyber threat as part of China’s larger effort to improve domestic technology and sideline US tech firms.

China’s IT spending increased more than 8% last year, nearly double the U.S., according to IDC, and has been forecast to do much better this year. … John Holdren, who heads the White House Office of Science and Technology Policy, recently warned that China’s R&D investments would surpass the U.S. “in a matter of years.”

How Cities Will Drive Economic Growth

Last week, Rick Caruso sent out an article published last fall in National Journal that made the case for why cities succeed — and fail. The article includes a good summary of how Research Triangle in North Carolina never kept up with recent changes:

Considered state-of-the-art thinking when it was built in 1959, the park helped to bring North Carolina into the Internet age. But its visionaries failed to keep pace with the new cachet of cities. IBM sold its computer business, and jobs moved out. Worst of all, it became uncool. The current generation of tech workers doesn’t want to toil in the soulless Office Space complexes surrounded by moats of parking that dot Research Triangle Park’s sprawling vastness.

A Memo on Merit

Medium.com has republished a 2012 email from Twitter co-founder and Square CEO Jack Dorsey urging his employees not to invoke his name — or anyone else’s — if they want to win support or kill an idea. Still relevant:

I’ve noticed a funny thing in the company. There’s been a high occurrence of folks using names, mine for instance, to push through an idea. “Jack really wants this to happen, Jack thinks this is an amazing idea, Jack said, etc.” This is obviously counter to the meritocracy/marketplace of ideas we want to build. … We want more passionate debates about bold and crazy ideas rethinking what we’ve taken for granted rather than discussions that end in “John wants this, this is how we’re supposed to do it.” The former will keep us agile and innovative, the latter will make us irrelevant.

How To Give Feedback

According to Stephen Miles, too many executives forget that the purpose of feedback to employees is to influence behavior:

When it comes time to deliver constructive feedback to their reports, many executives struggle. They tend to approach the task in one of two ways: fight or flight. In the former case, the leader (usually a hard-charging high performer) comes into the situation braced to criticize, offering up a laundry list of things the executive is doing wrong. In the latter instance, especially when dealing with an underperforming employee, the leader “heads to the stadium seats” – avoiding conflict and hoping against hope that the situation will just work itself out.

Watch the short interview with Miles to hear his advice on how to make feedback truly constructive.

Corporate Governance Reform Comes (Finally) to Japan

The Economist reports on groundbreaking reforms in Japan that may signal an end to faulty corporate governance:

In 2013 nearly 600 of the 1,400 or so largest listed Japanese firms still had no outside directors, whereas South Korea, China and India all require them. … The lack of supervision of Japanese top management contributes to chronic underperformance. The firms in the TOPIX 500 index had an average return on equity in 2012 of 7%, compared with over 15% for American and European companies.

Should HR Departments Exist?

Few CHROs have the operational or financial experience to provide the business insights CEOs crave from human resources, says advisor Ram Charan. His solution? A framework that restructures human resources and develops increased accountability to the business. An excerpt:

Eliminate the position of CHRO and split HR into two strands. One-we might call it HR-A (for administration)-would primarily manage compensation and benefits. It would report to the CFO, who would have to see compensation as a talent magnet, not just a major cost. The other, HR-LO (for leadership and organization), would focus on improving the people capabilities of the business and would report to the CEO.

Do Not Ignore Digital Currency

At our G100 Spring Meeting, eBay CEO John Donahoe suggested Bitcoin will pave the way for the future of digital currency. Less than a week later, Donahoe elaborated on this topic, revealing that PayPal will inevitably integrate Bitcoin into its payment system.

There’s no doubt digital currency is going to play an important role going forward. … You’ll see Bitcoin used in different use cases, whether it’s a peer-to-peer use case, a cross-border transaction, someone’s sending currency to someone else, and over time, you’ll start to see it with some merchants accepting Bitcoin.