The innovator's solution... and problem

After reading the first chapter of “The Innovator's Solution: Creating and Sustaining Successful Growth” by Clayton M. Christensen, I have a bit more respect for the execs walking through the halls of my job.  Clayton explains that the only way to increase share value is to exceed market expectations, simple enough of a concept.  Shari gives us a homework assignment with an expectation of our deliverable and a better grade would be awarded for exceeding that expectation…. Nothing new.  Clayton then explains that the expectations of innovation and growth in the technological world only increases with time, it does not become stabile or decline.  Now that’s a wrench in the works of things.

So in order to increase market value a company must exceed expectations, and then exceed the newly elevated expectations of the share holders.  This isn’t so fair.  Using the classroom example above, this concept would be the equivalent of handing in our book report, receiving an A as a grade and having to exceed Shari’s new expectation of you on the next paper to receive another A.  Handing in a paper equivalent to the first would yield a lower grade.

Sitting stagnant in the market and not surprising share holders (or your professor) with new innovations and creativity could ultimately decrease your value (or grade).   So how does one sustain exceeding expectations when the expectation is to exceed the exceeded expectation (if that makes any sense)? One doesn’t, it’s an impossibility over a long enough period of time.

 If you’re a company like UTC with so many subsidiaries, the solution becomes slightly more (only slightly) realistic.  UTC only needs maybe 1 solid innovation a year to boost share value (my observation), with 5 large subsidiaries that would mean only each company would only need 1 large innovation every 5 years.  Seems like a reasonable pace.

At the end of it all, share holders and Wall Street expect return and that’s all.  As technology advances, the more tools we have to advance technology further.  As an engineer, challenge accepted Wall Street.