Here is an excerpt from an article written by Bill George for the HBR Blog Network. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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In the mid-90s as CEO of Medtronic, I was concerned about whether we could sustain the remarkable success in innovation that we had enjoyed during the previous 10 years. As we grew, I knew it would be very difficult to continue to create the breakthrough innovations that had led to Medtronic’s high growth rate, which had exceeded 18% per annum for a decade. Then I read Clay Christensen and Joe Bower’s 1995 article “Disruptive Technologies: Catching the Wave” in HBR.

Christensen and Bower’s article offered the counterintuitive notion that great companies fail for the same reasons they initially experience success. They listen to their best customers — something we did religiously at Medtronic — making increasingly complex products to meet those customers’ most sophisticated needs. This process leaves companies vulnerable to competitors who develop new forms of technology that initially fail to serve the “best” customers well, but quickly improve.

This process of “disruptive innovation” enabled new competitors to create entirely new product categories. For example, early cell phones were woefully unreliable, and their voice quality paled in comparison with land lines. Then rapid improvement in cell phone technology combined with sharp reductions in cost opened up massive new markets that existing terrestrial business telecommunications companies had missed.

Impressed by the HBR article’s framework for resolving the tension between existing businesses and innovative ideas, I wrote an article for our employees titled “Reinventing Medtronic” that captured the essence of what was required to sustain our growth. We then initiated 12 radical innovations that challenged our conventional businesses. We organized these initiatives around small venture units, incubating them separately (and far away) from existing businesses. Venture innovators had greater freedom to deploy their independent R&D budgets. In financial terms these were small bets, with very low overhead. (See Peter Sims’ book, Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, for a more complete description of how this works.)

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Bill George is professor of management practice at Harvard Business School and former chair and CEO of Medtronic. His published books include True North: Discover Your Authentic Leadership, Finding Your True North: A Personal Guide, Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value, all published by Jossey-Bass/A Wiley Imprint. To check out his articles for the HBR Blog Network, please click here.