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Michael E. Raynor—Strategy and Innovation

July 28, 2014 //

On April 24th, innovation and disruption expert Michael E. Raynor joined the Fox School to talk about:

  • The distinction between Strategy and Innovation
  • How to stop disruptors from stealing your lunch
  • Why your previous strengths might be your future weaknesses
  • How to respond to, and take advantage of, disruption in your market

Michael E. Raynor presented “Strategy and Innovation:  Where Differentiation Meets Disruption,” a talk that highlighted the differences between strategy and innovation by providing empirical evidence of how and why business models and enabling technologies can disrupt the market place. His thinking challenges how we view organizational constraints, and offers insights that can help managers make better decisions.

Prior to his visit to Fox School, Raynor shared his insight on the three rules with an intimate crowd gathered for the 8th Annual Frederic Fox Leadership Lecture and Innovation Leadership Speaker Series (ILSS) at the Ritz Carlton Philadelphia.

Over a five-year period, Raynor and co-author Mumtaz Ahmed analyzed 45 years of data on more than 25,000 publicly traded companies. Of those companies, Raynor and Ahmed found only 344 to be “miracle workers” with truly exceptional, long-term performance.The trick for those companies was fundamentally about creating value for customers, Raynor said. The miracles workers all produced better products before cheaper products. To capture value, the companies focused on increasing revenue before cutting costs.

The Three Rules became:

1. Better before cheaper

2. Revenue before costs

3. There are no other rules

Of course rules only work if you follow them.  “We all excuse ourselves from rules at one time or another,” Raynor said, but rules can work magic if you use them even when you are pulled in the other direction. This is especially useful when companies are looking to innovate in ways that push beyond today’s frontier of the possible. Where strategy is about making tradeoffs, innovation is about breaking tradeoffs to get more for less, Raynor said.

The three rules apply here and can help companies make the leap of faith that innovation often requires. “Rules allow you to do what’s right even when it doesn’t look or feel right,” Raynor said.  He sees a future where chief innovation officers manage innovation the way chief strategy officers manage strategy. “The companies that innovate best are the companies that take it seriously and treat it like a thing to be managed,” he said.  Those companies will succeed if they view all decisions through the lens of these hard and fast rules. “If you want to play house odds,” Raynor said, “you should bet on better before cheaper.”

Michael E. Raynor is co-author with Professor Clayton M. Christensen of The Innovator’s Solution, which was on The Wall Street Journal and The New York Timesbestseller lists, and sole author of The Innovator’s Manifesto, released in 2011, when the Financial Times called Raynor “one of the most articulate and interesting” thought leaders in the field. Raynor’s The Strategy Paradox was named by Strategy + Business as one of its top five picks in strategy, and BusinessWeek named it one of the 10 Best Business Books for 2007. Most recently, Raynor co-authored The Three Rules:  How Exceptional Companies Think, which was selected by The Globe and Mail as their #1 business book for 2013.

Raynor is a Director at Deloitte Services LP and the Innovation Theme Leader in the firm’s Eminence function. In addition, Raynor is an advisor to senior executives in many of the world’s leading corporations across a wide range of industries.

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