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In part 3 of my interview with Mark Johnson, co-author of The Innovator’s Guide to Growth, I ask him about the common misconceptions of disruptive innovation and particularly the way people confuse disruptive innovation with novel or radical technology.

As promised, here is the first snippet of my interview of Mark Johnson, co-author of The Innovator’s Guide To Growth. Here he discusses briefly what led to the book, and what it is really for. Please to enjoy…

I had the great pleasure of sitting down with my good friend (and all-around good egg) Mark Johnson last week to talk about his new book : The Innovator’s Guide To Growth: Putting Disruptive Innovation To Work (Harvard Business Press; with co-authors Scott Anthony, Joseph Sinfield, and Elizabeth Altman). I really wanted to speak to him about it because I feel that this is a very valuable book. I caught a lot of my conversation with Mark on video, and will be cutting it up and putting bits here over the next while because I thought a lot of it is really terrific and useful. But first, about the book…

I didn’t exactly know what to expect with this book. I know that I was hoping for a very practical “work book” kind of thing, with specific steps that real companies could take. I also wanted something that a person could start using on their own and then expand into their team or organization. I know that there is a real need for something that could be of value to people at different levels of organizations, and even to different kinds of organizations.

Now I am fully aware that this is a very tall order, and normally such high expectations inevitably lead to disappointment (Star Wars I: The Phantom Menace comes to mind). But I know that Mark and his co-authors know more than probably anybody in the world about how you actually make disruptive innovation work in real-world organizations. So if anyone could really nail it - they could. All of which explains why I began reading this book with an unsettling combination of eager anticipation laced with an ‘expect to be disappointed’ kind of feeling.

It is fair to say that the challenge the authors faced in writing this book was significant. They set out to make disruptive innovation practical. Their objective was to provide something that companies could actually act on. In my mind, there are a number of obstacles that must be overcome to achieve that, but perhaps the greatest is simply making sure that the reader really understands what disruptive innovation is (and isn’t).

I am convinced that Christensen’s ideas of disruptive innovation, while well known, are not widely understood. Part of the difficulty just lies in the words themselves, which I feel have taken on a kind of chameleon-like ability to mean a lot of different things to different people. I have noticed that when you say “disruptive innovation” what a lot of people are really hearing is “radical technological breakthrough”, or “superior technology”, or “direct competitive assault”. While any of these may be true in some cases of disruptive innovation, they are neither necessary nor sufficient. Of course, the best examples of disruptive innovation are none of these things (think: rebar and steel mini-mills).

The authors therefore, attempt to weave the basic concepts of disruptive innovation into the fabric of the book. They are helped-along by a foreword written by Clayton Christensen himself, and their own introduction to the book, which together attempt to be a kind of disruptive innovation refresher. I actually found them to be excellent in how crisply they define the domain. However, I am not sure if, on their own, they are enough for someone that has not been exposed to the ideas of disruptive innovation through Christensen’s other books. On the other hand, if you have time for only one book on the subject, I will argue that it must be this one. The reason is that this book goes the furthest in taking disruptive innovation theory and showing how it can be put into practice.

A common complaint that I have heard about Christensen’s books on disruptive innovation is that they are somewhat academic and theoretical. To be fair, he is an academic and theoretician after all. But he is also very interested in making things work in reality, as evidenced by his work with Innosight and also by his support of this book. What makes me so excited about this book is that it really delivers on the need for an eminently practical guide to the things that every company can do to leverage disruptive innovation. The work is based on the authors’ own experience in trying to implement disruptive concepts in dozens of organizations over the past decade.

Mark co-founded Innosight eight years ago with Clayton Christensen as a way to help companies apply the principles and insights that Christensen’s research had produced and which many had read about in his books including The Innovator’s Dilemma and The Innovator’s Solution. This book is exactly the kind of volume of accumulated learnings that I have been craving.

At its core, it is a methodology for embedding disruptive innovation principles in the culture and activities of an organization. It is broken-down into four parts that take the reader through the process. It is filled with actual examples and case studies of each step and principle with companies and products that are familiar to the reader including: iTunes, Swiffer, Wii, Skype, YouTube, Google Adwords, Metro newspapers, Whitestrips, eBay, and more. These cases were probably the most satisfying part for me, and I would recommend the book for these if nothing else.

Fortunately, there is a lot more on the menu. The book is very readable, moves quickly, and doesn’t ever get bogged-down in theoretical or vague “management speak”. In fact, it is a lot like a workbook and includes a variety of templates and forms that you can copy and use right away to organize your thinking. I found these to be extremely valuable as they provide simple frameworks that allow you to translate what you are learning directly on to your own business model and situation.

In short, I was very satisfied with the book, and am recommending it to everyone. I think this is absolutely the best business book of 2008. And, for what it’s worth, I am currently starting my second read-through as I am anxious to begin following the exercises in the book in detail with my own company. Please add your comments and let me know what you think of the book. I will also be posting some videos of the interesting bits of my interview with Mark Johnson here on the blog so check back often!

Are business, engineering, and law students learning anything about managing IP? This was the central question asked at a conference last week on Intellectual Property Management Education and Research hosted by WIPO. The answer to this questions appears to be “no”, and the consensus among participants is that this needs to change. Mr. Yo Takagi, in opening the conference said this, “Intellectual property management is the need of the hour and has a major role to play in transforming the vast development and competitive potential and value created by innovation and brand into concrete and tangible benefits for countries and companies.”

As a recent graduate of a major MBA Program, I can confirm that, not only is IP management not on the menu, it isn’t even understood among the faculty exactly what it is or why it is important to business. Naturally, there is an elective course on business law that contains a short segment (1 day I think) on patents and other IP. One of the innovation courses covered it in half a lecture. I know some schools even bring in a law professor to teach an entire course on IP. But obviously none of these has anything to do with teaching students about the importance of managing IP as a core business process.

I find it difficult to understand how IP management hasn’t become an integral part of every business strategy course, much less all of those courses on innovation and entrepreneurship that are now so popular at business schools and executive education programs. They should all be dealing with IP management as a central issue. In support of this modest proposal, I offer three very simple arguments:

1. IP is now the most valuable business asset class in the world

How is it possible that the world’s most valuable business assets receive virtually no attention in an entire MBA education?

It is astonishing that we are not talking to students about how to manage these assets, especially in light of the many, shall we say, more esoteric management subjects that receive in-depth treatment. I remember one experience in particular that illustrates this…  We were studying a specific drug market in a business economics course and the professor was engaging in his best statistical gymnastics to explain why successive waves of drugs had succeeded each other in dominating the market over a period of 40 years. Afterwards, I approached the professor and explained that specific patents and their invalidations and expirations was actually the true explanation. He was quite surprised at this as he was to learn that patents expire and that this can have a significant market impact.

2. IP is a strategic pillar of most of the companies that business students study

How can we study companies that rely on IP, and whose valuations are based mostly on IP, without ever mentioning IP?

Business students are required to delve into virtually every dark corner of dozens of different companies including their history, balance sheets, management, strategy, and finances. The goal is understanding what makes these companies succeed, fail, or otherwise. The irony is that, even though many or most of these companies have leveraged IP as a key part of their strategy or rely on it for their success, this fact never arises in business cases. It is easy to simply say that managing IP must be contained in Porter’s “five forces” - probably under “barriers to entry”. But, this is hardly the same thing as learning how to manage IP.

3. Managing IP is what’s next

Innovation, technology, and entrepreneurship have been the hot topics at business schools around the world for the past 10 years - minus the management of IP.

It would seem unlikely that the management of IP would not be among the most important subjects to address in an innovation and entrepreneurship curriculum. But, I took every possible course on these at what is arguably the best school in the world for these topics, and I can assure you that it is conspicuous in its absence. In theory at least, the top business schools are at the leading edge of management. These are the platforms on which you can gain a view of the road ahead - to see where business is going next. Unfortunately this is not the case for IP management. No only are they not making it a core part of their curriculum to prepare students to integrate IP management into their strategic and operational thinking, they were not  looking ahead five or ten years ago to the explosion of business investment and interest in IP that we are now experiencing.

Ultimately, the most important obstacle to integrating IP management into business curriculums is finding people who know something about it and can teach it. The worst thing that can happen would be for business schools to start putting IP management in the curriculum now - without any real expertise in the subject. This is of course normally what b-schools do. When entrepreneurship was hot - they added it (but not the people who knew anything about it). The result was that many existing professors suddenly became experts in the subject. The truth is that courses nominally about entrepreneurship are really about raising venture capital and worshiping sexy technology.

What the world’s universities need isn’t classes about managing IP. What is needed most are business professors in every subject who are aware of the importance and role of IP in business. Only then will students be exposed to the reality of IP as a key aspect of management and begin to see how it is integral to strategy, competition, financing, partnerships, employment, innovation and, well… business.

Managers tend to misunderstand the difference between what kinds of value patents can create (practice, license, litigate, and deter), and the kinds of business models and strategies that they can be used to support. In a previous post, I said that this is the difference between motivations and modes. In a recent article in the MIT Sloan Management Review, there is some research that demonstrates this. The author and colleagues conducted a survey asking managers to describe the “purposes that IP rights served for their business-area strategies.” What their analysis revealed was not purposes at all, but a series of 5 “IP strategy scopes” which really just described how far the company would go to pursue IP protection.

1. Full-fledged IP Protection
2. Patent and trademark control
3. Trade. IP is mainly to be licensed out or sold off.
4. Pure branding.
5. Support core R&D

What is interesting about this is that numbers 2 and 4 really don’t relate to patent strategy at all - but to trademarks and branding. Therefore, there really are just three distinct “scopes” for patent strategy here. The first basically refers to the method of trying to protect every possible thing in an effort to block entire spaces. Scopes 3 and 5 are coherent in that they clearly identify their motivations and the kinds of value they are trying to generate. For scope 3, it is Licensing, and for scope 5 it is Practicing.

So, I found all of this interesting for the way that it demonstrates how murky IP management remains, and just how rare it is for managers to think clearly about how to integrate IP into their business models and strategies. It’s also interesting that a major conclusion of the study is the strong shift toward scope 1 (trying to use IP to block entire spaces) as the new “dominant practice” in IP management.