Ideas for Innovation That Deserve More Attention in Philanthropy

Clayton M. Christensen, the Harvard Business School professor who died of cancer last month at age 67, had a large following among corporate leaders, including Silicon Valley giants such as Apple’s Steve Jobs and Intel’s Andrew Grove. His work on innovation generated a host of consultants, conferences, “innovation” offices, and much more, aimed at giving entrepreneurs and corporate executives an edge in developing change-making products or services.

Although his ideas are not as well known among philanthropists, as he suggested in a speech at the Manhattan Institute a decade ago, grant makers might benefit from paying more attention to them.

At the heart of Christensen’s thinking are two types of innovations: sustaining and disruptive. The first kind enables successful organizations to improve what they are already doing, providing higher-quality — and often costlier — products or services that offer greater value to those who can afford them. Disruptive innovations, on the other hand, allow upstart organizations to reach those not well served by existing providers with products or services that are initially lower in quality and less expensive, but still good enough. If they can acquire enough people to serve, these newer organizations may be able to improve and expand what they are doing, perhaps eventually displacing their longer-established competitors.

In Christensen’s view, disruptive innovations have led to the undoing of a number of once-profitable American businesses. The computer industry offers a classic example. When introduced in the 1970s, the first commercial desktop computers possessed far less capacity than the mainframes that dominated sales. But they were also much less expensive and more useful to people who wanted only to perform simple word-processing or calculating tasks. Eventually, the early desktop manufacturers, such as Apple, were able to build on their successes to improve their equipment, relegating mainframe computer makers to a small (though still important) segment of the market.

Christensen applied his analysis to organizations that advance the common good as well as to businesses. Elementary and secondary schools, he wrote in a 2008 book, Disrupting Class, had become increasingly good at teaching students who were ready to learn, offering them enriched curricula, better instructors, and a wider range of educational opportunities. But young people who came with less preparation or with particular obstacles to learning (for example, not knowing much English) were not being well served by (or even able to attend) such schools and often fell behind or dropped out. By using new technologies and organizational approaches (such as charter schools), educators could more effectively tailor their offerings to this sizable (and growing) population of students, Christensen argued, and perhaps even change the kind of instruction high-achieving children receive.

Higher education and medicine, in Christensen’s view, presented similar opportunities for “disruptive” innovation. Like the manufacturers of mainframe computers, the top American colleges and universities, as well as the best American hospitals, were unquestionably successful at what they were doing; with “sustaining” innovations, they could improve the quality of their services continuously and set lofty standards for their competitors. But as postsecondary education and medical care became more costly, straining the finances of many colleges and hospitals, a growing number of people who needed them had to settle for inferior services, or none at all. That, Christensen believed, created openings for upstart organizations, using high-quality online degree programs or neighborhood clinics linked to major medical centers, to provide “good enough” services at prices people could afford.

Christensen did not lack for critics. Perhaps the best known was the historian Jill Lepore. In an article for the New Yorker, she questioned Christensen’s selection of cases studies (“handpicked”), conclusions (“more striking, from the vantage of history, are the continuities”), and predictions (such as his 2007 forecast that the iPhone would fail). “Christensen’s sources are often dubious,” she wrote, “and his logic questionable.”

That is too harsh a judgment. To be sure, in his 2011 book on higher education, Christensen forecast that unless colleges and universities adopted a different model of education, half of those in the United States would be bankrupt within 10 to 15 years. As his critics like to point out, that has not occurred (nor has there been a massive surge in online degree programs). However, according to the scholars Susan Campbell Baldridge, Susan Shaman, and Robert Zemsky in The College Stress Test, a book released this week, perhaps as many as 40 percent of postsecondary schools are currently struggling with serious financial problems.

Further support for Christensen can be found in accounts of successful efforts at social entrepreneurship. In How to Change the World, for example, David Bornstein emphasized “the power of new ideas” to disrupt problematic social and health conditions. The best-known example is undoubtedly Muhammad Yunus’s Grameen Bank, which followed the Christensen playbook by offering lending services inferior to those provided by traditional banks, but which were more accessible to the low-income borrowers who needed money. Eventually, the organization’s success enabled it to become a major financial institution in its native Bangladesh (and won Yunus a Nobel Prize).

Other examples include the work of James P. Grant, long-time Unicef director, who recognized that the low-tech solution of adding rehydration salts to drinking water in developing countries could have a greater impact on childhood diseases and deaths than more sophisticated public health treatments. Likewise, the Aravind Eye-Care Systems, with low-cost lenses and factory-like hospitals, enabled millions of Indians to retain their sight. By adopting simpler and less demanding techniques, these “disruptive” innovators were able to serve people that organizations with bigger budgets were unable to help.

At a time when many leading philanthropists focus on what they call “collective impact” and place “big bet” commitments to achieve what they hope will be far-reaching changes, this lesson is worth keeping in mind. As he observed in his Manhattan Institute talk, the first step is to develop a theory about what kind of change will make a difference. By showing how well-designed small-scale efforts, whether in business or public service, can produce large-scale results, Christensen pointed grant makers toward another path, one that may be more suited to the inherently limited resources and influence they possess.