clayton clay christensenBy betsyweber on Flickr

Harvard Business School professor Clayton Christensen is the man who came up with the term disruption as we currently use it, and is one of the foremost experts on how companies innovate.

In a Q&A with Alan Hall at Forbes, Christensen argues that there are three types of innovating. Empowering innovations, which transform expensive products into affordable ones, sustaining innovations, which replace older models with new ones, and efficiency innovations, which reduce or simplify the delivery of something.   

The first two can create jobs, in the case of empowering innovations, millions of them. Efficiency innovations actually destroy jobs. Unfortunately, it's that last type of innovation that's the focus of our current economy. 

Here's what Christensen told Hall:



Our businesses and economy are focused entirely on the short term. That hurts us in the long run because the lack of jobs keeps the economy weak, and the lack of real innovation keeps us from making leaps forward. Efficiency innovations tend to push benefit up towards a select few, rather than throughout the country. 

Christensen suggests that we change the capital gains tax rate so that it decreases the longer an investment is held. He believes that would encourage investment for the long run and encourage real innovation, as opposed to short term measures designed to boost the next quarter's results. The impact on the budget would be small because capital gains taxation doesn't provide that much revenue, but the long term consequences could be huge.

Find the full Q&A at Forbes

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