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again. Others are big problems, or big solutions, that cause you to do a lot of things differently. Whenever we have a job to do, we look around and try to find something that we could buy or use and pull into our lives in order to get these jobs done. In order to understand that there is an opportunity for an efficiency innovation or a sustaining innovation or a market-creating innovation, you only have to watch what people are trying to pull into their lives in order to get it done. You only have to watch what people are trying to do. It gives you the opportunity — the ideas — around which you can create new products.

Isaac Singer was surrounded by people who paid very high prices for clothing and [he spotted an opportunity in that]. If you look around us now, smartphones are everywhere. If you watch what people are doing, it’s not that they are trying to get photographs for posterity. But rather, they are trying to communicate better with people. All the devices in your hands exist because people were earlier writing letters and that was complicated, expensive and time consuming. Now we can communicate with each other in ways that are affordable, accessible and efficient.

Marketcreating innovations create growth because they have to create the infrastructure. Let me give you example of a product in Nigeria called Tolaram’s Indomie Noodles. This was started by a family that came from Indonesia to Nigeria. In Asia, noodles are an inexpensive and simple way to get a meal. But in Africa, noodles were viewed as worms. There wasn’t a market for noodles in Africa. This family constructed a noodles factory in Nigeria and they developed a recipe that was tailored to products that are common to Nigeria. But they found that every batch of flour that they bought from the farmers in their area was different and therefore every product that they shipped was different in some significant way.

In order to control the quality and consistency of the flour, they had to buy a farm. Then they found that there were no dealers to sell their product. So they had to create a system of dealerships. Then they found that they didn’t have people who knew math and English. So they had to create jobs to teach this. They also had to build their own roads and bridges around their factories in order to ship their products. And in order to control corruption at the ports, they had to build their own port. And so, in order to sell their noodles, they had to build an entire infrastructure.

Knowledge@Wharton: Why has this approach of building prosperity through marketcreating innovations been overlooked in the past? What do you see as the main barriers to its adoption today?

Christensen: I think the core reason why market-creating innovations haven’t been the key to better growth is that managers need to have a different way to frame the problem. By framing it this way — market-creating innovations — it doesn’t cause people to demand different behavior as much as these are things that people are trying to do anyway. But by making it affordable and accessible, many more people have access to it. It’s a simple concept that allows us to do more. [Empowering] people to do what they’re already trying to do — that’s the key to innovation in every industry.

I have an example of the challenge. Companies like Shell, Gulf, BP and others go to Africa and drill oil and then they ship it to the Western nations. And every time they put an oil well into the ground, they engage in efficiency innovations so that they need to employ fewer people. Their purpose is to drive down costs. That’s why these companies don’t create growth or jobs — because that’s not their purpose. Their purpose is to eliminate jobs. This helped us understand why, when we compare China with Russia, their outcomes are very different. Most of the innovation that’s driving China’s growth has been around products. Products that were earlier complicated and expensive have now become affordable and accessible, like the Haier refrigerator, for instance. In contrast, Russia has focused its economy on efficiency innovations. Oil is a big one. Gas is a big one. But their innovations are eliminating jobs. And so, you see Russia is struggling to grow, and China is awash in growth opportunities.

I’ll go out on a limb and anticipate something that might happen, and that is in electric cars. The US firm Tesla makes really nice cars and they sell those cars for $80,000 to $100,000. Tesla competes headon with BMW and Mercedes and other large corporations. We call this a sustaining innovation. They try to make good products better, but they don’t create growth. That’s not their purpose.

In China, you can see electric cars everywhere. These cars are priced at $4,000. They are made out of plastic and they are very narrow so they can easily squeeze in and out of the markets where their owners sell their day-to-day supplies. While Tesla sells a few hundred electric cars, in China they’re selling hundreds of thousands of electric cars. There will be a booming market for electric cars in the world, but those cars won’t come from Tesla. They will come from China where they’re making them affordable and accessible.

Knowledge@Wharton: Towards the end of the book, you write that the Prosperity Paradox should become the Prosperity Process. How can this happen, and who should make it happen?

Christensen: The challenge in every corporation, and every university, is the process by which resources are allocated. Most corporations’ research allocation processes allocate capital to products or services that maximize the net present value of sustaining and efficiency innovations. Even if executives want to create new opportunities around the world, their resource allocation process doesn’t allow them to do it. So, managing the resource allocation process, the mechanism by which they prioritize market-creating innovations rather than efficiency innovations, is key. You have to manage that process year after year with these criteria in mind in order to be successful.