Background: Summa cum laude graduate from Brigham Young, Rhodes Scholar at Oxford, MBA from Harvard with high distinction, professor, author of nine books, and involved in community work.
Purpose: Discuss theories of management, focusing on a potential new theory of growth.
Overview of the Lecture
Main Idea: Introducing a new theory of growth rooted in microeconomic perspectives.
Goal: Explain why economies stagnate and how nations in poverty can prosper.
Focus: The theory of disruption and its practical applications.
The Theory of Disruption
Origin of the Theory: Developed from Christensen's experience founding firms and questioning why successful companies fail to maintain growth.
Case Study: The steel industry - comparison of integrated steel companies and mini mills.
Integrated Steel Companies vs. Mini Mills
Integrated Mills: Massive companies requiring significant capital investment, making high-quality steel.
Mini Mills: Melt scrap using electric furnaces, producing steel at 20% lower costs.
Market Dynamics:
Integrated mills abandoned low-margin products (like rebar) for higher-margin products.
Mini mills captured lower-end markets initially but faced price collapse after eliminating high-cost competitors.
Cycle of profit improvement for both parties through strategic market exits and entries.
The Innovator's Dilemma
Concept: Companies pursue profit by moving upmarket, leading to their own stagnation.
Examples:
Toyota: Entered with affordable models before moving upmarket with Lexus.
Kia and Hyundai: Followed similar patterns, disrupting established markets.
Economic Observations
Job Creation and Economic Growth: Innovative disruptions have historically led to job creation, while sustaining innovations do not create new jobs.
Current Economic Trends:
U.S. economy has experienced increasingly prolonged recoveries from recessions since the 1990s.
Observations on stagnation suggest that the balance between disruptive and sustaining innovations has shifted.
Types of Innovation
Disruptive Innovation:
Transform complex, expensive products into affordable ones, creating jobs and enhancing accessibility.
Sustaining Innovation:
Improve existing products, important for market efficiency but typically do not create new jobs.
Efficiency Innovation:
Offer the same products at reduced costs, often eliminating jobs while freeing up capital for further investments.
Economic Stagnation Causes
Capital Misallocation:
The focus on efficiency innovations leads to reduced investment in disruptive innovations.
Short-term profit focus discourages long-term investments that could generate future growth.
Global Comparisons:
Japan’s economic stagnation post-1990 linked to a drop in disruptive innovations.
Emerging economies (Korea, China, India) that focus on disruption have seen rapid growth.
Conclusion and Future Directions
Need for New Economic Models: Exploration of how disruption can drive prosperity in nations.
Call to Action: Collaborate with interested individuals to develop models that analyze the impact of disruptive innovations on economic growth.
Discussion
Open Floor for Questions: Engaging the audience for thoughts and critiques on the presented theories.