The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

by Clayton M. Christensen

“Why is success so difficult to sustain?”

“Is successful innovation really as unpredictable as the data suggests?”

Why is success so difficult to sustain?

most companies that once seemed successful—the best practitioners of best practice—were in the middle of the pack (or, worse, the back of it) a decade or two later.

What often causes this lagging behind are two principles of good management taught in business schools:

Contrarian idea. Challenges high end business model teachings

that you should always listen to and respond to the needs of your best customers,

you should focus investments on those innovations that promise ...

That’s why we call it the innovator’s dilemma: doing the right thing is the wrong thing.

Doing the obvious thing is the wrong thing...in what context does this apply?

This dilemma rears its head when a type of innovation that we’ve termed disruptive

technology arises at the low end of the market, in the simplest, most un...

disruptive technology is probably the cause behind the “creative destruction” that economist Joseph Schumpeter observed to be the primary engine of economic progress more than half a century ago.

theories are statements of cause and effect—which actions yield which results, and why. As such, a good theory is consummately practical.

Theory is then improved by using it to predict: retrospectively to predict what should have happened in the past, and prospectively to predict what will happen in the future.

The great historian of science, Thomas Kuhn, taught us that the key to improving any theory is to surface anomalies—events or phenomena that the theory cannot explain. It is only by seeking to account for outliers—exceptions to the theory—that researchers can improve the theory.

After you’ve read this book, put the theory of disruption on like a set of lenses and search for things in your past and present experience for which the theory cannot yet account.

Precisely became 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.

There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.

Alternative strategy when high end and lagging market position is not appropriate option. What are the conditions?

This book derives a set of rules,

managers can use to judge when the widely accepted principles of good management should be followed and when alternative principles are appropriate.

principles of disruptive innovation,

technology as used in this book, means the processes by which an organization transforms labor, capital, materials, and information into products and services of greater value.

Innovation refers to a change in one of these technologies.

Second, the pace of technological progress can, and often does, outstrip what markets need. This means that the relevance and competitiveness of different technological approaches can change with respect to different markets over time.

This means sustained innovation accelerating being rate of market adoption leads to lack of market fit and gap in market need

Most new technologies foster improved product performance. I call these sustaining technologies.

What all sustaining technologies have In common is that they improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued.

Better mass market widget

An important finding revealed in this book is that rarely have even the most radically difficult sustaining technologies precipitated the failure of leading firms.

Sustaining innovation rarely challenges market leaders...why? Origin of this finding? Implications?

disruptive technologies emerge: innovations that result in worse product performance, at least in the near-term.

it was disruptive technology that precipitated the leadi...

Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value.

Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.

in their efforts to provide better products than their competitors and earn higher prices and margins, suppliers often “overshoot’’ their market: They give customers more than they need or ultimately are willing to pay for.

it means that disruptive technologies that may underperform today, relative to what users in the market demand, may be fully performance-competitive in that same market tomorrow.

First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits.

Second, disruptive technologies typically are first commercialized in emerging or insignificant markets.

third, leading firms’ most profitable customers generally don’t want, and indeed initially can’t use, products b...

a disruptive technology is initially embraced by the least profitable ...

listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in d...

it is really customers and investors who dictate how money will be spent because companies with investment patterns that don’t satisfy their customers and investors don’t survive.

Customers direct product development, investors support companies with strong product market fit and growth potential which is driven by customer demand

disruptive technologies—lower-margin opportunities that their customers don’t want—until their customers want them.

Challenges Steve blank and business model canvas! If customers don't want it, and you're anticipating what they want, how can you know before they do?

free of the power of the customers of the mainstream company,

Disruptive technologies leverage the niche! Don't build for mainstream market. Build value for niche low end customers with disruptive technology

ensconce themselves among a different set of customers—those who want the products of the disruptive technology.

companies can succeed in disruptive technologies when their managers align their organizations with the forces of resource dependence, ...

It is very difficult for a company whose cost structure is tailored to compete in high-end markets to be profitable in low-end markets as well.

Creating an independent organization, with a cost structure honed to achieve profitability at the low margins characteristic of most disruptive technologies,

This is my business model goal

Disruptive technologies typically enable new markets to emerge,

What supports this,and is it consistent across industries over time? Are there signals in my market/industry?

enter the even newer small markets destined to become the large ones of the future.

Important point--not just niche, but growing

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.

the larger and more successful an organization becomes, the weaker the argument that emerging markets can remain useful engines for growth.

responsibility to commercialize the disruptive technology to an organization whose size matched the size of the targeted market.

The evidence is strong that formal and informal resource allocation processes make it very difficult for large organizations to focus adequate energy and talent on small markets, even when logic says they might be big someday.