Clayton Christensen on the Arab Spring and the Next Wave of Emerging Markets

Disruptive innovation is best described as a process "by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves 'up market,' eventually displacing established competitors," according to the website of Harvard Business School professor Clayton Christensen. An experienced entrepreneur, Christensen has launched three successful companies and is the author of five bestselling books, including The Innovator's Dilemma and most recently The Innovator's Prescription, which examines healthcare systems. He is the founder of the consulting firm Innosight and the investment firm Rosa Park Advisors, which both build on disruptive innovation frameworks.

Considered the world's foremost authority on the process of disruptive innovation, Christensen discusses his reaction to the Arab Spring, how India and China are developing their economies, and where the next wave of disruptive innovation will come from. Corruption remains a concern for India and China, Christensen notes, but adds the greater economic stress impacting China is its rapid growth. To keep pace, he says, China will soon need to compete with the West in the innovation of products.

An edited transcript of the conversation follows.

You've talked about India's corruption struggles and how they are slowly becoming cleaner as they deregulate. In terms of India versus China, what are your thoughts on how each country is coping with corruption and how that's impacting their growth and innovation?

Christensen: I don't have my finger on the pulse of corruption in China, but I think most people on the ground would say that as China was emerging from communism it was a very regulated society and therefore it was very corrupt.

But as they have deregulated the economy, there just aren't as many opportunities for people to be corrupt. China has become a more efficiently lubricated capitalist economy.

In India, there is a huge difference. India's prosperity is sectioned by geography, such as in Bangalore, where the information technology industry is prominent. Because they have a conduit out of India, competing in the world by the Internet, it's not regulated in corrupt ways and it is very prosperous. But the physical economies of India, where products have to get to ports to get out of the country, it's not nearly as robust. It's improving but they still need to keep pushing ahead.

To what extent would you say that China is a disruptor? To what extent can China be controlled?

Christensen: What will happen is the next waves of disruption will come from countries such as Vietnam and other Southeast Asian countries that are not thoroughly corrupt. But because China is growing so fast, they are now starting to feel the impact of their policy on population control. Wage rates are going up at a very fast rate... I don't know who else can join them, but this will force China to not just knock off designs from the West. They'll have to compete on innovation as well, because other countries can take the low end.

For countries in the developing world, especially where entrepreneurs can't compete with cheap Chinese imports, is shutting borders a solution?

Christensen: Well, shutting borders will help a few wealthy people preserve their wealth. But there's no evidence that I know that shows shutting down borders helps your economy grow. Look at what happened with India during the first three decades after their independence, where they essentially wanted to keep imports out so that they could develop their internal industries. None of those industries became engines for economic growth. They were all inefficient and served India very poorly. It wasn't until things opened up that the local economies prospered. History is pretty strong on that question.

Saudi Arabia is trying to build up its local workforce by giving incentives to big multinationals to train their local employees. Is that an effective strategy?

Christensen: There are companies trying to build business within Saudi Arabia, and what they find is that if they try to bring on locals and teach them how to become senior executives, they just don't show up to work. They are not predictable as to when they'll come in and how much of their hearts are into that opportunity. I don't know why this is so. It's really hard to predict, but there is the requirement that you have to employ a certain number of domestic citizens.

Your newest book is on health care. Do you think there is a global opportunity to profit from its innovations?

Christensen: It's possible, but again, it will happen only with disruption. If Saudi Arabia uses its wealth to replicate the American healthcare system on the Arabian Peninsula, it won't create growth. It will only create local or regional services for the wealthy. But if there are companies focused on disruption, utilizing technologies that enable nurses to do things that in the United States require expensive doctors, it will make good health care available to the hundreds of millions of people who don't have access to it. So there are tremendous growth opportunities there, but it's not by replicating the American system. It's by disrupting.

You wrote a powerful piece "How Will You Measure Your Life" for the HBR. What advice do you have to offer people that are trying to strike a balance between being successful in business and adhering to certain personal beliefs?

Christensen: Do not be deceived by impostors. I remember a number of years ago, a group of Chechen terrorists took over a school and in the process over 300 people, including students, were killed. A British journalist somehow got her way into that group of terrorists and interviewed the leader. This guy claimed in the 1960s to have worked for Che Guevara in Bolivia. The journalist asked him what was his cause, what was it that brought him to take this school hostage with hundreds of children? It turned out he knew nothing about Islam. He was just carrying a banner so that he could accomplish his own purposes.

Click here to read the full interview in Arabic Knowledge@Wharton.