Review #5 – The Innovator’s Dilemma

Author: Clayton M. Christensen.

Genre: business non-fiction.

Target Audience: business professionals interested in innovation.

Length: 237 pages.

First Published: 1997.

Review: 

This is one of the most-read books about innovation published in the last 30 years.

In the first part, Christensen articulates reasons why managers fail when considering disruptive technologies, even when using sound and proven decision-making techniques. He roots his findings in research conducted on several industries.

In the second part, he writes about how managers can solve for the “innovator’s dilemma” of doing what is right for the near-term health of their established businesses and focusing on the disruptive technologies that could ultimately lead to their downfall.

In the intro, Christensen describes differences between sustaining technologies and disruptive technologies.

Sustaining Technologies: Technologies that improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued. Most technological advances are sustaining in character.

Disruptive Technologies: Technologies that bring to market a very different value proposition than had been available previously. At first, they generally underperform established products in mainstream markets but have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are generally cheaper, simpler, smaller, and more convenient.

Rather than try and summarize the whole book, I’ve paraphrased the author’s summary of the book. Christensen summarizes the book in seven key findings.

1. Customer Needs

Products that do not appear useful to our customers today may squarely address their needs tomorrow. We cannot expect our customers to lead us towards innovations that they do not now need. While keeping close to our customers is important for handling sustaining innovations, it may provide misleading data for handling disruptive innovations.

2. Resource Allocation

By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and allocating resources to products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.

3. Marketing

If, as most successful companies try to do, a company stretches or forces a disruptive technology to fit the needs of current, mainstream customers it is almost sure to fail. Historically, the more successful approach has been to find a new market that values the current characteristics of the disruptive technology. Disruptive technology should be framed as a marketing challenge, not a technological one.

4. Capabilities

The capabilities of most organizations are far more specialized and context-specific than most managers are inclined to believe. These capabilities are defined and refined by the types of problems tackled in the past. Very often, the new markets enabled by disruptive technologies require very different capabilities.

5. Investing

Successful organizations, which ought not and cannot tolerate failed investments in sustaining innovations, find it difficult simultaneously to tolerate failed investments in disruptive innovations. Managers who don’t bet the farm on their first idea, who leave room to try, fail, learn quickly, and try again, can succeed at developing the understanding of customers, markets, and technology needed to commercialize disruptive innovations.

6. Strategy

It is not wise to adopt a blanket technology strategy to be always a leader or always a follower. Companies need to take distinctly different postures depending on whether they are addressing a disruptive or sustaining technology. Disruptive innovations entail significant first-mover advantages. Sustaining innovations, however, very often do not.

7. Barrier to Entry

Despite their endowments in technology, brand names, manufacturing prowess, management experience, distribution muscle, and just plain cash, successful companies populated by good managers have a genuinely hard time doing what does not fit their model for how to make money. Because disruptive technologies rarely make sense during the years when investing in them is most important, conventional managerial wisdom at established firms constitutes a barrier to entry that entrepreneurs and investors can bank on.

Of course, Christensen goes on to write about how established companies can surmount this barrier. I hope you decide to read it to find out how.

Buy It Here!

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