am 8. Mai 2000
In the space of a few months, I've bumped into a half-dozen corporate planners who've told me, "Drop everything you're doing and run--do not walk--to your nearest bookseller and get Clayton Christenson's The Innovator's Dilemma." Investigating further, I found that, in the industry press, Christenson's book is viewed as The New Gospel. Now having read the thing, I can see what all the fuss is about; by the final chapter, the counterintuitive idea that (under clearly specified conditions) "rigorous pursuit of your customer's interest can indeed sink your firm" seems as inevitable as the sunrise. Moreover, reading Christenson now, as Wall Street lurches through the Era of Dot.Com/Madness, it's easy to believe the book, and Chapter Nine in particular, has served a hefty percentage of recent internet start-ups as a template for mapping the market and assessing whether the technology offered is sufficiently disruptive. (Christenson's use of the term "technology" is process-related and more than just the latest widget). As a public sector drone, I was further impressed that Christenson's analytic approach is broadly, if metaphorically, applicable to a range of organizations--non-profit, non-commercial, public--trying to keep from being overrun by the forces of change. Some critics have pooh-poohed Christenson's analysis as old wine in a new bottle--"what's the big deal about successful firms having difficulty dealing with the low end of their markets?" etc.--but the lucid writing, clear plan, well-sprung analytic framework (particularly the integration of "value networks" and "technology trajectories"), and compelling marshaling of case material make this an enjoyable, often revelatory, and, yes, innovative dissection of how great firms become undone by new technologies.
am 6. Juli 2005
Professor Clayton M. Christensen's excellent book is a classic of strategy literature. The innovator's dilemma is that doing the right things can lead to failure. Sometimes it is wrong to listen to customers, invest in the highest return opportunities and do all of the things that made a successful company succeed. Clearly written, amply documented, provocative and challenging, this book is indispensable for anyone in business. If it has a shortcoming, it is that it focuses more on the dilemma than on resolving it and it does not offer specific remedial prescriptions. However, Christensen has authored or co-authored two other books that attempt to remedy that deficiency. We heartily recommend this book, which remains the leader of the three. It has the potential to change the way managers think about business - any business.
am 13. Januar 2000
Christensen clearly presents the reality of how disruptive technologies affect organizations. He reviews the business perspectives of large firms vs. those of small firms, and their issues with disruptive and sustaining technologies, i.e., resources, profit margins, customers, etc. Christensen explains that what to us, from the point of 20/20 hindsight, may now seem like blatantly obvious organizational faux pas, at the time seemed like the correct path for the organization to follow. He also reviews companies that have been able to not only survive, but succeed with the emergence of disruptive technologies.
Disruptive Technologies vs. Sustaining Technologies
One of the main reasons why great firms fail is that they attempt to market and manage disruptive technologies utilizing the same methodologies that are found to be successful for the management and marketing of sustaining technologies. These firms are essentially held captive by their customers, since this methodology is based on pleasing the established customer base. Disruptive technologies often are intended for different customer bases that may not have yet been discovered. Due to this, disruptive technologies are often not seen as successful or profitable by large firms that need to keep large profit margins. They are instead seen as successful by smaller entrant organizations with smaller profit margins.
"Resource Dependence - Customers effectively control the patterns of resource allocation in well-run companies"
Management, especially middle management, is very aware of the customer base their company holds. Their customers are the ones who keep pouring money back into their organization through the purchase of products. These customers have set their expectation on the sustaining technology the organization currently offers, as it helps them run their business. They usually have little interest in a disruptive technology that more than likely will not currently meet their needs. This, in turn, causes any new projects involving disruptive technologies that are kept within the same organization and held to the same profit expectations, which initially they will no be able to meet, to not be held at the top of the organizational priority list. The disruptive technology will be "shelved" until it comes into the mainstream, and by that time it may be too late.
"Small markets don't solve the growth needs of large companies"
When a disruptive technology begins to make its presence known, the disruptive technology needs to be viewed with serious consideration. From this, proper planning for its many possibilities should take place. These plans need to remain flexible, and development of the disruptive technology should take place within a department, organization, or subsidiary that has little financial bearing on the company as a whole. This is the necessary environment for the successful development of a disruptive technology. The larger organization can not expect this disruptive technology to command the profit margins of the organization's sustaining technologies until it has discovered its customer base.
"The ultimate uses or applications for disruptive technologies are unknowable in advance. Failure is an intrinsic step toward success."
A great example from the book is the introduction of Honda motorcycles in the U.S. in 1959. Initially Honda wanted to conquer the American market with their 50cc Supercub bike, but their bikes weren't built for running at high speeds for extended periods like Harley-Davidson and BMW. Honda discovered, after failing to market the bikes as road bikes, from actually watching how people used the bikes, that their bikes were best suited for off road dirt biking, a sport that had not yet come to fruition. Harley-Davidson attempted to take part of the new market, but tried to do so by marketing this disruptive technology as a sustaining technology. Their plan failed to prove profitable.
"Technology supply may not equal market demand. The attributes that make disruptive technologies unattractive in established markets often are the very ones that constitute their greatest value in emerging markets."
Honda was able to do this by creating a new market segment, off road bikers! These same bikes were not attractive to those customers interested in long haul road bikes such as Harley-Davidson and BMW, but Honda's bikes now hold a majority of the market.
am 12. Januar 2000
In his Introduction, Clayton M. Christensen makes his objective crystal clear: "This book is about the failure of companies to stay atop their industries when they confront certain types of market and technological change....the good companies -- the kinds that many managers have admired for years and tried to emulate, the companies known for their abilities to innovate and execute....It is about well-managed companies that have their competitive antennae up, listen astutely to their customers....invest aggressively in new technologies, and yet they still lose market dominance." Why? For Christensen, the answer is revealed in what he calls "the innovator's dilemma": the logical, competent decisions of management which are critical to the success of their companies are also the reasons why they lose their positions of leadership.
In the current and imminent global marketplace, paradox has become paradigm.
Managers in every organization (regardless of size or nature) eventually must resolve "the innovator's dilemma." Christensen's book provides invaluable assistance to completing that immensely difficult process. It remains for each of his readers to answer questions such as these: Which customers do we want? (also, which customers do we NOT want?) Which technologies will help us to get and then keep them? For each technology, which strategies will be most effective to sustain it? Should we attack competitors with disruptive technology? How can we best defend ourselves against it? How should our resources be allocated? What about timing? Should we lead or follow? If we follow, should we prepare to lead later? Correct (ie appropriate) answers to questions such as these will help to clarify today's realities and to suggest strategies for an uncertain future.
My own suspicion is that there will always be another dilemma to resolve. Christensen suggests a rigorous process by which to do so.
am 10. Januar 2000
Companies face a tough decision between making their customers happy in the short-term and the long term. It is a trade off that often results in a company focusing on the short-term while a start-up competitor focuses on satisfying the customer in the long term. This is the Innovator's Dilemma.
The on-going example offered by the book is that of the disk drive market. Historically customers have desired more storage capacity. Firms have sought to make "sustainable" advances in the amount of storage space of their hard drive products. Start-up firms have often introduced hard drives that were smaller, but had less storage space. At first the start-up cannot satisfy the customers that require high capacity, but over time introduce sustainable improvements in capacity that eventually satisfy the high-end market. In the meantime they dominate smaller markets that require smaller hard drives. At some point the high-end market has the option of using a big or a small hard drive, because both satisfy capacity requirements. They tend to pick small, because it also offers something else, reliability (a result of small size, apparently). A technological improvement is called "disruptive" if it provides inferior performance according to current "sustainable" criteria, but has other features of use to smaller markets. Disruptive technologies can be improved over time to eventually satisfy the demands of the high-end market.
The author argues that even very successful companies fall victim the Innovator's Dilemma, because it is a natural law of business for them to satisfy customers. Disruptive technologies do not initially satisfy those customers, so successful companies don't invest in them. To bet on every disruptive technology draws resources away from sustaining current products, so companies tend not to do so. Also, disruptive technologies initially only have application in low-end markets. Since the low-end is not a big money maker for successful companies, they naturally work toward the other extreme, seeking to satisfy customers in higher and higher margin markets. Eventually the disruptive technology improves to the point that it offers equivalent functionality, but by that time the firm has too much inertia toward the high-end market, and can't switch to the disruptive technology.
I found that the Innovator's Dilemma enhances the picture that Crossing the Chasm first illustrated. Crossing the Chasm is a recipe for the start-up that wants to topple giant competitors. The Innovator's Dilemma, on the other hand, shows how giant companies are toppled by start-ups. Both books are useful to all kinds of companies, because all companies face both situations. Start-ups need a strategy for going mainstream, and once there need a way to fight off new start-ups.
am 7. Januar 2000
The Innovator's Dilemma is one book in a series of many which needs to be taken in its intentional perspective to present one aspect of a delicate balancing act to effectively utilize resources and achieve a "reasonable" consistency between change and tradition. I SEE THIS BOOK AS ONE APPROACH OF SEVERAL TO COMPETITIVE STRATEGIES FOR MARKET OWNERSHIP.
The Innovator's Dilemma is founded on the premise that a Market Leader has developed preferred/reliable technology for a predefined market place, has taken a "customer-first" attitude, is using and implementing good, or better, management practices, and has a plan to facilitate growth of resources, technology and processes. The competitive nature of most leaders is to disrupt the control of complacent elements to improve their own position. When the Market Leader narrowly focuses financial return to microscopic time windows the value of investing in disruptive technologies is lost, and market dominance begins to deteriorate.
Typical corporate managers want to move up not down, and in the market cycle this leaves a vacuum for disruptive technologies. However, leaders are in many places, and it is all about balancing resource with opprtunity. The problem occurs when Market Leaders misread the size of the opportunity and fail to adjust the necessary resources.
Christensen has a wonderful way of presenting a "survival" package; but, real leaders do not seem to perceive disruptive technologies as survival. They see them as what they are, rare moments of great opportunity to gain advantages to obtain control from those who failed to calculate the true size of the opportunity. Like looking for a lost treasure, the arrival of a true leader on the scene of opportunity spells disaster for complacency and tradition. The HUNGRY are looking for the fat man's lunch. As I understand the elements presented in this book, I can see clearly several disruptive technologies: e-business disrupting the distribution channel of goods and services; wireless communications disrupting the market of electronic packaging (I.e., backplanes, hardwired networks, fiber optics, etc.); network independent protocols (I.e, IEEE 1451) disrupting automation and communication network-based markets; build-to-order integrated enterprise systems disrupting mass produced, full valued generic products; and more. Missing from this book, in my opinion, was a discussion on high volume niche markets to materialize competitive technologies that can be expanded by sustainable technologies into the general market place and displace the Market Leader. .
am 7. April 1999
I had heard rave reviews of this book before I read it, and now, I strongly encourage others to read it too. The idea is stunning. It offers a new perspective on why companies "stall". The idea is that by focusing too much emphasis on current customer needs, companies fail to adapt to new technologies that will meet customers' future needs. He calls these "disruptive technologies". It reminds me a little of Andy Grove's inflection points, except those are not limited to technologies. It sounds like Prof. Christensen agrees and suggests that to succeed, you should be first with the disruptive technology. What is most startling about this book is that the well done research looked at the highest technology companies, who should have been developing the next generation technologies. Clearly, this calls for a different model of how to succeed in business. In "THE 2,000 PERCENT SOLUTION", the inability of the existing companies to do this is called a "stall", much like Professor Christiansen's barriers to entry for the established firms. The Tradition Stall describes the perils of not questioning how and why things have been done the same way for decades. For example, one required change will be to update the financial system and resource allocation process that companies use today which hinders investing and does not accurately capture cost and returns.. Similarly a company that prides itself on focusing on customer needs may not have a good process to develop possible future needs of customers and translate them into new technologies that would be better, easier and cheaper technologies to satisfy those needs. Clearly a new management process is required. Professor Christensen begins to take us through this thinking using the electric car example. The process described in "THE 2,000 PERCENT SOLUTION" takes a complementary approach. It teaches how to create the ideal solution to solve a problem, or, for example, serve customer's current and future needs, to achieve twenty times the benefits or get there twenty times as fast. The "disruptive technology" becomes necessary as the way to get there. Read "THE INNOVATOR'S DILEMMA". It will become part of the standard business vocabulary.
am 13. März 1999
The sobering idea presented by Christensen is the very way good managers in successful firms make decisions sows the seeds of eventual failure. A paradigm example is drawn from the time condensed development of the computer disk drive industry. In every case, the leaders in one generation of disk drives (14", 8", 5.25", etc.) were displaced in the next. The author marshals compelling and extensive evidence this was not due to a technological or managerial failure, but rather to a marketing one. The fundamental distinction on which the entire argument (and book) turns is that between sustaining and disruptive technologies. This is closely related, but not reducible to, Utterback's discussion of discontinuous change and the emergence of a dominant technological design (1). A sustaining technology is a kind of technology that is either incremental or radical (discontinuous). But it maintains the same performance trajectory and provides the same basis for competition. Disruptive technologies show up as lower performance products, promising lower margins, in small, emerging markets. As sustaining technologies progress upmarket, a vacuum is created at lower price points into which competitors, employing disruptive technologies, can enter. Good managers, listening carefully to customers, in large markets, risk following these customers into oblivion, or, at least, ending up there themselves. One of this text's strong points is the wide variety of examples, extending beyond computing technology. Subsequent chapters disclose a strikingly similar pattern . Firms are blind-sided in diverse businesses, including, earth moving equipment, motor cycle manufacturing, pharmacology, discount retailing, minimills/steel. The technological risks involved in new product development for a known customer (market) are dwarfed by the risks of entering a new and undefined market. "They [firms] exchanged a market risk, the risk that an emerging market for the disruptive technology might not develop afterall, for a competitive risk, the risk of entering markets against entrenched competition" (p. 132). A significant technical product development risk for a known market is easier to justify using corporate hurdle and pay- back-period calculations than a "no brainer" but innovative product with an undefined market. Result? "One crucial additional disabling factor that afflicts established firms . . . is that the larger and more successful they become, the more difficult it is to muster the rationale for entering an emerging market in its early stages, when . . . that entry is so crucial" (p. 132). Resource allocation is really determined by what the big customers want. Sometimes, listening to customers can do us in. Once again, our strengths are our weaknesses. In the face of fatal sounding "gotchas," Christensen's strength lies in seeing the way out of the fly bottle: embed the disruptive technology initiative in a separate organization (subsidiary) or geographically remote laboratory. There a smaller scale market matches the size of the nascent technological initiative. Instead of trying to improve the disruptive technology enough so that it suits already defined markets - and meanwhile it sits on the shelf -experience shows firms that succeed commercially looking to find (or incubate) a new market for the disruptive technology. Having established a foothold, the new product then moves upmarket along competitive dimensions that favor the disruptive technology. The basis of competition is shifted by the new technology. This practical recommendation - though by no means trivial to implement - is an obvious starting point. At times, the reader may wonder how new technologies ever succeed in establishing themselves and flourishing at all. Consider: "Rational managers . . . can rarely build a cogent case for entering small, poorly defined low-end market that offer only lower profitability" (p. 77). Have we exchanged one puzzle - good firms failing -- for another - poorer products succeeding? Enter the role of the "value network" - commonly known as infrastructure - in determining the outcome of innovation. Edison's light bulb is just a clever cludge - indeed inferior to illuminating gas - without the right of way for wires and generators needed to deliver electricity. The overlooked - but not to be neglected part of innovation - lies in the construction of the alternative network of values (a differing trajectory for competition). The puzzle disappears as the reader realizes that an important aspect of innovation consists in building the value network within which the innovative product is to be embedded. This text exemplifies excellent writing, scholarship, editing, and publishing. The footnotes, which make excellent reading, contain useful references for further research. The author exemplifies the aphorism that those who see further stand on the shoulders of others - in this case Utterback and Moore (2) -- who came before them. The point, however, must be emphasized - Christensen really does see further. Share his vision. (1) Utterback. J.M. Mastering the dynamics of innovation: how companies can seize opportunities int he face of technological change. HBS Press, Boston, 1994. (2) Moore, Geoffrey. Crossing the chasm. New York: Harper/Collins, 1995. -- excerpt from my review published in COMPUTING REVIEWS, February, 1998
am 12. August 1998
We have all seen large, powerful, and successful corporations upstaged and driven out of business by startups using new ideas to grow exponentially and dominate the new business landscape. In his book "The Innovator's Dilemma," Clayton M. Christensen provides a unique and novel theory that explains why entrenched corporations often fail to capitalize on such new ideas, and fall prey to firms with fewer initial resources. With enough data and case histories to make even the skeptic sit up and take notice, Christensen sculpts an argument that demands our attention at once. Step by step he shows that such extinctions come about not necessarily because of arrogance and dogmatism (though these play their parts) but because of the architectural and organizational structures that make good companies good. Like Einstein's theory of relativity, with its concepts of relative time and space, some of Christensen's conclusions seem unintuitive. Others even seem contrary to phy! sical reality. Sometimes it really is wrong to listen to your customers. Sometimes it is better to build a product with low margin and a limited market rather than build a product with high margin and large, virtually guaranteed market.
Christensen builds his thesis upon the notion that technology comes in two broad flavors: sustaining and disruptive. Established product lines use sustaining technology to make incremental improvements. In the language of biology, sustaining technology facilitates gradual Darwinian evolution where incremental improvements coupled with survival of the fittest lead to gradual product improvement. For example, tire manufacturers use sustaining technology to enhance the tread, sidewall, and belt design of automotive tires. Sustaining technology is not trivial, and often involves tremendous expenditures of capital. It is, however, what established companies do best, and these companies have developed very effective organizational and manag! erial structures for dealing with it.
Disruptive technol! ogy, on the other hand, approaches product evolution outside the sustaining envelope. Disruptive technologies typically offer a cheaper solution to a small, often unidentified subgroup. Once established within this small market the disruptive technology evolves through sustaining technology until it eventually satisfies the performance criteria of more traditional markets. When this happens, the disruptive technology bursts onto the scene, attacking the soft underbelly of the established corporations, often with fatalistic consequences. In the parlance of evolutionary biology, disruptive technology is like punctuated evolution; fast with significant changes in the gene pool.
Christensen may be excused for lacking the breadth to discuss similarities between such diverse fields as biology and business management. Still, the book would have benefited immeasurably by a co-author in the field who might have offered greater insight into universal principles governing the evol! ution of complex systems. Repeatedly I found myself going to books by authors such as Richard Dawkins and Stephen Jay Gould to refine my mental image of the multidimensional landscape in which biological organisms and industrial businesses compete for the resources of survival.
The book is well written and persuasive in its arguments. It questions many established ideas and shows that often these ideas fail to apply to disruptive technologies. Often the best corporations are especially susceptible. Defense against disruptive technologies does not come from being smarter and working closer with customers. Paradoxically, working closely with customers and following established rules for corporate investment often make a company more susceptible to harm from disruptive technologies. Companies naturally evolve toward higher-end products with greater margins. Consequently, they find it difficult to enter markets with disruptive technologies that often begin with low margi! ns, are technologically simple, and do not have a clearly d! efined customer base. Such markets are ideal for start-up firms. The author suggests, with several case histories, that one of the best ways for established firms to deal with disruptive technologies is to spin off autonomous organizations that exist within the economic constraints of disruptive technologies.
The author does an excellent job of using examples, drawing most from the disk-drive industry. He also includes examples from the computer, motorcycle, steel, automotive, and earth-moving industries as well. In each case he explains how disruptive technologies emerged and often destroyed well-run companies that were following all the established rules. This drives home the fact that disruptive technologies pose such a great risk precisely because they can destroy industries not only in spite, but because they follow established business practices.
After describing disruptive technologies, with historical cases to illustrate points, the author ends with a case st! udy involving electric vehicles. I found this chapter to be among the weakest, and something of a distraction from the more substantial earlier material. Ironically, in the process of trying to frame electric vehicles as disruptive technology, the author seems to have missed one of the best examples of a disruptive technology, and one that nearly destroyed America's foremost industries: small cars.
Overall, Christensen's work is on a high academic level, though some of the technical material is inconsistent. For example, the ordinates in figures 1.4, 1.5, and 6.1 disagree with each other. The text on page 128 also disagrees with figure 6.1, while the text on page 150 disagrees with figure 7.1. These may be simple examples of typographical errors, but they lessen confidence in the book's technical accuracy. On the positive side, the book has excellent organization and lots of pertinent examples, as well as extensive notes and documentation. The index is also very co! mplete and thorough.
Though Christensen's ideas are new! and radical they are so lucid, logical, and clear that anyone involved in American business cannot afford to ignore them.
am 16. Juli 1998
Starts by turning the idea of "good management" completely on its head. OK - if you can prove it. I'm not sure yet that Christensen has proven his points; I've only read the book twice. But he makes sense. Alot of the roadblocks I've encountered personally in bring innovative practices or technologies into organizations start to make sense in light of Christensen's analysis. Read this book!