Out of the many books I’ve read in different subjects, below is a list of some of my favorites with some brief commentary for some of them. There are a few other “Mental Model” categories (psychology, history, economics, ecology, etc.) that I left out — hopefull they’ll be the subject of another post.
- The Origin and Evolution of New Businesses, Amar Bhide — extensive study of startups of all kinds, how they grow, what makes them successful (this is not a “help” book it is mainly observational)
- Innovation & Entrepreneurship, Peter Drucker — how companies should systematically innovate — lots of good startup/innovation strategies (it’s not random)
- The Innovator’s Dilemma, Clayton Christensen — every businessperson or investor needs to read this (and the one below) — every industry’s value chain is disrupted at some point
- The Innovator’s Solution, Clayton Christensen — expands on “Dilemma” with better explanations and examples — I think the “jobs to be done” concept is one of the most important in business
- Competition Demystified, Greenwald + Kahn — how businesses capture value by building a moat, and what strategies to use if you have or don’t have one
- The Halo Effect, Phil Rosonzweig — the anti-business-book — but still has great insights on how businesses work and how best to run them
- Built to Last, Jim Collins — read this with The Halo Effect in mind — lots of good advice & stories (I like this much better than “Good to Great”)
- The Strategy Paradox, Michael Raynor — dense at times but a great theory on why strategy is so hard
- Hidden Champions, Hermann Simon
Continue reading “My favorite books on business, management, investing and design”
Apple is an incredibly creative, innovative company, and is usually at the top of people’s minds when it comes to new consumer technologies. So for the rest of this post, I’ll examine if and why Apple’s products are disruptive.
Disruptive Portable Music?
Before MP3 players, the only real option for portable music was a CD player. The first MP3 players were introduced in 1998, and had very low capacities. They could hold at most one or two CDs worth of music. In 2000, Creative released its NOMAD Jukebox, which had a capacity of around 1,200 songs. However, it was expensive and had limited usability.
The first generation iPod (5GB) was released in 2001 and could hold an average of 1,000 songs, or about 79 CDs at an equivalent quality. The cost of music (content) was low at first: consumers who already had a CD collection could transfer their songs to the iPod, or download them from the (usually illegal) filesharing programs on the internet.
The total cost per portable song for an iPod 1G was $1.48 or $0.39 if users converted old songs. This compares favorably to a CD player’s $1.95 cost per song (assuming someone can carry around a maximum of 10 CDs without it becoming too much of a burden – see notes for details). Despite this ability to carry more music for an incrementally cheaper cost, like earlier players the high total cost of the device—and the lack of convenience to use its capacity—confined sales to “fist adopters” and high-end users who were willing to convert their old music collection.
So at first, the iPod was a sustaining innovation relative to other portable music devices. Although it wasn’t made by a current industry leader, it was a breakthrough improvement upon other portable music devices and the performance metrics that customers valued (quality, capacity, cost per portable song, etc.).
Continue reading “The Innovations of Apple: Part I”
Although the phrase disruptive innovation is used often, it is best described by Clayton Christensen in his books “::amazon(“0060521996″,”The Innovator’s Dilemma”)::” and “::amazon(“1578518520″,”The Innovator’s Solution”)::.” Most new technologies are sustaining—they improve the performance of current products along dimensions that the market already values. Rarer disruptive innovations result in products that are worse than current offerings in the near-term, but offer a different value proposition and are directed toward a different set of customers.
There are two types of disruptive innovations: new-market and low-end. New-market disruptions create a new value network (the context in which customers and firms within an industry define what attributes are most important), with different performance attributes. They usually serve customers who would normally not be using the product at all (i.e. personal computers, Bloomberg terminals). Low-end disruptions attack the least-profitable and most overserved customers along attributes that the market currently values (i.e. discount retailing, steel minimills). Both types of disruption eventually end up overtaking or completely replacing current offerings as their performance improves.
There are also two types of sustaining innovations: incremental and breakthrough. Most sustaining innovations are simple, incremental year-to-year improvements. Others are dramatic, breakthrough advances that surpass all current offerings (i.e. contact lenses replacing glasses, airliners replacing other long-distance travel). Many people confuse the terms disruptive and breakthrough. Christensen further distinguishes them by pointing out that disruptive innovations usually do not entail technological breakthroughs. Instead, they package current technologies into a disruptive business model.
Just going through the book “The Innovator’s Dilemma” by Clayton Christensen. I have a few posts I’ll likely write that relate to the book — this is one of them.
::amazon(“0060521996”, “The Innovators Dilemma”):: talks a lot about a company’s culture, and why incumbent leaders of a certain technology are restrained from participating in a disruptive technology’s upside. Christensen names these attributes as the incumbent’s downfall: (1) Current customers aren’t served by new market; (2) New market is too small for large companies; (3) Use of new technology isn’t fully known yet; (4) Processes that help them with current business hurt them with new business; and (5) New technology isn’t good enough yet to meet higher-end market demand.
One solution to the above issues is to acquire another company that can take advantage of the disruptive technology. If done correctly, this can solve numbers 1, 2, 4, and 5 above.
Christensen breaks down the factors that affect what a company can and cannot do into Resources, Processes, and Values. Resources are people, equipment, brands, technology, customers, etc. Processes are how companies transform those resources into products or services of greater value. Values are standards by which employees make and prioritize decisions (think of a company’s “Core Values” of the Jim Collins variety).
Continue reading “Berkshire’s Intelligent Acquisitions”