The Innovator’s Dilemma

I keep coming back to this book when change gets difficult. Christensen says that every innovator has an inevitable dilemma: serve the current game (customers) or the next game (new customers). You can’t serve both. Therefore innovators have to ignore the demands of the present in order to create the reality of tomorrow. It’s the most insightful look into the nature of revolution I’ve seen.

 

The Innovator’s Dilemma
When New Technologies Cause Great Firms to Fail
Clayton Christensen
1997, 225 pages
$23
Harvard Business School Press

Available from Amazon

Sample Excerpts:

The research reported in this book…shows that in the cases of well-managed firms … good management was the most powerful reason they failed to stay atop their industries. Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership.

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Occasionally, however, disruptive technologies emerge: technologies that result in worse product performance, at least in the near-term… Generally disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value.

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By and large, a disruptive technology is initially embraced by the least profitable customers in a market.

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But while a $40 million company needs to find just $8 million in revenues to grow at 20 percent in the subsequent year, a $4 billion company needs to find $800 million in new sales. No new markets are that large. As a consequence, the larger and more successful an organization becomes, the weaker the argument that emerging markets can remain useful engines for growth.

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It was as if the leading firms were held captive by their customers, enabling attacking entrant firms to topple the incumbent industry leaders each time a disruptive technology emerged.

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The [non-hydraulic excavator manufacturers] did not fail because they lacked information about hydraulics or how to use it; indeed the best of them used it as soon as it could help their customers. They did not fail because management was sleepy or arrogant. They failed because hydraulics didn’t make sense – until too late.

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Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable. The strategies and plans that managers formulate for confronting disruptive technological change, therefore, should be plans for learning and discovery rather than plans for execution.

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