The Innovator's Dilemma
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The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, generally referred to as The Innovator’s Dilemma, first published in 1997, is the most well-known work of the Harvard professor and businessman Clayton Christensen.
Who is this book for?
- Readers who are interested in persuasive and leadership oriented books.
- People who need to use persuasion to generate sales or inspire change.
- Anyone interested to learn how to use why to get desired results.
Meet the author
Clayton Magleby Christensen (born April 6, 1952) is an American academic, business consultant, and religious leader who currently serves as the Kim B. Clark Professor of Business Administration at the Harvard Business School of Harvard University. He is best known for his theory of “disruptive innovation”—first introduced in his first book, The Innovator’s Dilemma—which has been called the most influential business idea of the early 21st century.
The Innovator’s Dilemma Summary
There two types of technologies in business
There are types of technology: sustaining and disruptive technologies. On the one hand, continuing technologies enhance the functionality of the already established products. Big companies that have been in existence for some time majorly practice it. They build on the already existing products moving towards sophistication. Their products are expensive and thrive in established markets.
On the other hand, disruptive technologies are for startup companies. They invent inferior quality products that are less expensive. They are simple, small, and very convenient to use. They thrive well in the new markets as they are new entrants. It is less risky for startup companies to create new markets.
Utilize your resources towards achieving business goals
The companies that use disruptive technologies depend on consumers’ and investors’ resources. The small markets do not match the expansion interests of a big organization. In this case, the big organizations can contemplate establishing subsidiaries are letting them exist as independent organizations as they venture into new markets to solve the invention dilemma.
Established organizations are suited for sustaining inventions. They are hindered to the downward movement because of the behavior cost systems, resource allocation, and up-market mobility of consumers, which creates pressure on the incumbent organizations forcing them to continue moving up-market. This generates a gap in the lower markets, causing startup companies with much simpler technologies and lower-cost systems to exploit the vacuum left.
Even the most established companies may fail
The great established organizations may fail due to over-concentration on investing in inventions that ensure high returns, failure to listen to the consumers’ needs and interests particularly in the new markets and, competition from the startup companies that may grow steadily and become market leaders. The same practices that propelled an organization to greater heights might be the same practices that would lead to its failure.
The incumbent organizations must learn to respond to the consumer needs by solving problems, securing resources, countering competition, and seek returns. The availability of resources, hardened procedures, and unchanged values of big organizations do not match the new market.
The competing models in the big organization are based on the organization structure and capabilities. The well-established companies with well-drawn structures find it challenging to reform innovations on products as it may arise to disputes within the various organization levels. The company depends on the prior knowledge and capabilities of making products hence not able to incorporate the advancements of the technology in producing their product.
The rigidity of the big organization on its values and processes makes it impossible for companies to exploit new opportunities in the new market. They are more concerned about differentiating the product, which may not even meet the consumers’ needs. The concern of the company directors is increasing the prices of the shares, which, in return, leads to high returns on their side.
The products have three stages of competition; performance, value, and convenience. The firms that depend on disruptive technologies should consider the product competition that blends well with its disruptive attributes to help the companies penetrate the market.
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“Disruptive technologies typically enable new markets to emerge.”― Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail
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