Clay Christensen: Competition Doesn’t Drive Prices Down
Even though I’ve heard him say it before, the words from Harvard Business School professor Clayton Christensen always bring me up short. Speaking to a group of health care professionals recently, Christensen said: “Competition doesn’t drive prices down.” In fact, he said prices increase 8 or 9 percent a year in industries characterized by sustained innovation. Think of universities, where student fees climb year after year even though competition is fierce. That’s because, to compete, these schools have to build ever better athletic facilities, food services and other costly upgrades, all of which drive up their costs. So what drives prices down? Those of you familiar with Christensen’s work know the answer: disruptive innovation. Essentially, the process whereby an upstart…
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