Clayton Christensen: How Pursuit of Profits Kills Innovation and the U.S. Economy

In an interesting talk at the Gartner Symposium ITExpo 2011 on October 16-20, 2011, Clayton Christensen explains why the basic thinking taught in business schools and promulgated by consultants is killing innovation and the US economy. The talk is available here.

How whole sectors of the economy are dying

Christensen retells the story of how Dell progressively lopped off low-value segments of its PC operation to the Taiwan-based firm ASUSTek—the motherboard, the assembly of the computer, the management of the supply chain and finally the design of the computer. In each case Dell accepted the proposal because in each case its profitability improved: its costs declined and its revenues stayed the same. At the end of the process, however, Dell was little more than a brand, while ASUSTeK can—and does—now offer a cheaper, better computer to Best Buy at lower cost.

Christensen also describes the impact of foreign outsourcing on many other companies, including the steel companies, the automakers, the oil companies, the pharmaceuticals, and now even software development. These firms are steadily becoming primarily marketing agencies and brands: they are lopping off the expertise that is needed to make anything anymore. 

 [VIDEO]