Davos 2013 - An Insight, An Idea with Clayton Christensen

TL;DR

Harvard Business School Professor Kay Christensen discusses the capitalist dilemma, highlighting the importance of different types of innovation in driving job growth and economic prosperity.

Transcript

good afternoon welcome to an idea and insight a one-on-one conversation with Professor Kay Christenson I'm zany Minon BOS of The Economist Professor Christenson is the Kim Clark professor of business administration at Harvard Business School and he is one of the world's foremost experts on growth and Innovation he's the author of nine books and mor... Read More

Key Insights

• ❓ Misclassification of innovation categories contributes to the capitalist dilemma and job imbalance.
• ❓ Disruptive or empowering innovations are essential for job creation and economic growth.
• ❓ The focus on efficiency innovations results in reduced job growth.
• 🗾 Japan's experience provides a cautionary example of the consequences of neglecting empowering innovations.
• 👨‍🏫 Business schools and policymakers need to adopt a more contextual perspective on innovation to find solutions.
• 🖼️ Creating a common language and framing the problem differently can facilitate consensus in addressing the capitalist dilemma.
• 🚕 Changes in the tax system and increased investment in human capital can rebalance innovation and job creation.

Questions & Answers

Q: What is the capitalist dilemma?

The capitalist dilemma refers to the imbalance between job creation and financial returns in the economy. While the economy appears to be growing, job creation is lagging behind, indicating a misalignment in innovation and job growth.

Q: How does Professor Christensen categorize innovation?

Professor Christensen identifies three categories of innovation. Disruptive or empowering innovations create new job opportunities by making products more affordable and accessible. Sustaining innovations improve existing products but do not create jobs. Efficiency innovations aim to make existing products more efficient but often lead to reduced employment.

Q: Why has there been a shift towards investing in efficiency innovations?

The shift towards efficiency innovations can be attributed to the focus on short-term returns and the measures used to evaluate investment success. The metric of return on net assets often leads businesses to prioritize investments that yield quick returns, such as efficiency innovations.

Q: How can the imbalance between job creation and efficiency innovations be addressed?

Professor Christensen suggests adjusting the tax system to incentivize long-term investment and giving more importance to investments in human capital. By repurposing capital towards empowering innovations and investing in people, job growth can be stimulated.

Summary & Key Takeaways

• Professor Christensen explains that the capitalist dilemma arises from the misclassification of different types of innovation, leading to an imbalance in job creation.

• He identifies three broad categories of innovation: disruptive or empowering innovations that create jobs, sustaining innovations that do not create jobs but improve existing products, and efficiency innovations that reduce employment by making products more affordable.

• Over the past two decades, there has been a shift towards investing in efficiency innovations, resulting in less job growth and potential long-term economic stagnation.