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.