What Executives Can Do To Innovate
These examples suggest that Christensen's theory won't help managers over the long run. To make a profitable transition to electronic commerce, companies are likely to be self-reinventors like Schwab. Christensen's prescription of creating a separate subsidiary and freeing it to compete with the parent has a superficial appeal to managers who may not possess the same traits as Schwab.
The separate-subsidiary concept is a hedge for the manager who wants to appear to be following the latest trend. If the subsidiary fails, the manager can close it down without costing the core business too much money or embarrassment. If it succeeds, the manager looks like a genius.
The problem is that there are no slam-dunk success stories for Christensen's prescription. While Barnesandnoble.com was spun off from Barnes & Noble (dossier), it still pales in comparison to Amazon.com (AMZN) in terms of its online market share. For example, during the week of Dec. 5, Barnesandnoble.com ranked sixth in online traffic with 1.7 million visitors, according to Media Metrix, compared with Amazon, which took the No. 1 spot with no fewer than 6 million visitors. Furthermore, after climbing to $25 at its IPO, Barnesandnoble.com's stock has hovered around $17 a share for months.
So-called clicks-and-mortar strategies are not consistent with Christensen's prescription, nor are there any compelling success stories here. A typical example is old-line retailer Sears. Its Sears.com division has 50 people committed to making Sears the "definitive online source for the home." Sears.com just got started in May and its results are not publicly available.
Sears faces some serious challenges in its efforts to compete online. Its store sales have stagnated as competitors like Home Depot and discounters like Old Navy and Wal-Mart have gained market share. It is difficult to see how Sears.com helps address the challenges from these players.
It could cost millions and take years to integrate Sears' order-fulfillment systems with Sears.com. And without offering Sears.com people highly valued pre-IPO shares, attracting and retaining top Web talent could be tough (albeit less so than if Sears.com was located in Silicon Valley instead of in the Midwest).
To help managers cope with the Internet, there's better advice than Christensen offers. The simple reality is that different firms respond to change - be it disruptive technologies or shifting market conditions - differently. My research suggests that the success of e-commerce initiatives in creating change depends on two factors:
- The source of the e-commerce strategy. Is the e-commerce strategy coming from internal experimentation or as a response to an external threat?
- The extent to which the e-commerce strategy alters the firm's business model. Does the e-commerce strategy complement the existing business model or does it force the firm into an entirely new way of doing business?
