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

by Clayton M. Christensen

the developers direct their energies toward a progressively simpler, more convenient product that provides adequate, rather than superior, functionality.

Cook decided that the makers of accounting software for small businesses had overshot the functionality required by that market, thus creating an opportunity for a disruptive software technology that provided adequate, not superior functionality and was simple and more convenient to use.

“In retrospect,” noted a Lilly researcher, “the market was not terribly dissatisfied with pork insulin. In fact, it was pretty happy with it.” 8 Lilly had spent enormous capital and organizational energy overshooting the market’s demand for product purity.

Novo, a much smaller Danish insulin maker, was busy developing a line of insulin pens, a more convenient way for taking insulin.

Novo’s convenient pens easily sustained a 30 percent price premium per unit of insulin.

a product whose performance exceeds market demands suffers commodity-like pricing,

while disruptive products that redefine the basis of competition command a premium.

the products heralding shifts in the basis of competition and progression to the next product life cycle phase were disruptive technologies.

The figure shows the strategic alternatives available to companies facing performance oversupply and the consequent likelihood that disruptive approaches will change the nature of competition in their industry.

The third strategic option for dealing with these dynamics is to use marketing initiatives to steepen the slopes of the market trajectories so that customers demand the performance improvements that the technologists provide.

Very challenging if market is not ready for your product. Have to educate and develop the market.

It has, essentially, increased the slopes of the trajectories of improvement in functionality demanded by their customers to parallel the slope of improvement provided by their technologists.

Cultivated an expectation from customers that the technology will improve in a positive feedback loop that reinforces technology development. Like Moore's law, developers expect faster, cheaper processors and technology trajectory follows, or leads, in parallel

In this situation, the companies whose products are positioned closest to the top of the market, such as Seagate and IBM, have been the most profitable, because in the absence of technology oversupply, a shift in the stages of the product life cycle at the high end of the market has been held at bay.

This study finds clear evidence that there is no one best strategy. Any of the three, consciously pursued, can be successful.

Then what conditions signal a given strategy? Which strategy favors disruptive technologies?

under-standing—whether explicit or intuitive—of both their customers’ trajectories of need and their own technologists’ trajectories of supply. Understanding these trajectories is the key to their success thus far.

The best strategy depends on technology trajectory and customer market need trajectory.

How much do we need to worry about electric cars? That is, aside from California’s mandate, does the electric car pose a legitimate disruptive threat to companies making gasoline-powered automobiles? Does it constitute an opportunity for profitable growth?

See only the paranoid survive for more on understanding or spotting disruption

I would graph the trajectories of performance improvement demanded in the market versus the performance improvement supplied by the technology;

Understand what the market needs and the ability today and trajectory forward of the mere technology to meet that need

To measure market needs, I would watch carefully what customers do, not simply listen to what they say.

observations indicate that auto users today require a minimum cruising range (that is, the distance that can be driven without refueling) of about 125 to 150 miles;

most electric vehicles only offer a minimum cruising range of 50 to 80 miles.

require cars that accelerate from 0 to 60 miles per hour in less than 10 seconds (necessary primarily to merge safely into high-speed...

electric vehicles take nearly 20 seconds...

buyers in the mainstream market demand a wide a...

impossible for electric vehicle manufacturers to offer a similar variety within the small initial unit volumes that...

the electric vehicle will be deficient compared to a gasoline-powered car.

This information is not sufficient to characterize electric vehicles as disruptive,

They will only be disruptive if we find that they are also on a trajectory of improvement that might someday make them competitiv...

we need to project trajectories measuring the performance improvement demanded in the market versus the performance improvement that electric vehicle technology may provide.

What will customers need over time versus when will the technology satisfy that need

If these trajectories are parallel, then electric vehicles are unlikely to become factors in the mainstream market; but if the technology will progress faster than the pace of improvement demanded in the market, then the threat of disruption is real.

This is because traffic laws impose a limit on the usefulness of ever-more-powerful cars, and demographic, economic, and geographic considerations limit the increase in commuting miles for the average driver to less than 1 percent per year.

Export restrictions as limit for infrared product to non military users? How does cqd compare with restrictions?

as an automotive company executive, I would worry about the electric vehicle, not just because it is politically correct to be investing in environmentally friendly technologies, but because electric vehicles have the smell of a disruptive technology.

Because electric vehicles are not sustaining innovations, however, mainstream automakers naturally doubt that there is a market for them—another symptom of a disruptive innovation.

Heard before, "niche for swir/eswir if cheaper, but not much of a market"

In evaluating these trajectories, I would be careful to keep asking the right question: Will the trajectory of electric vehicle performance ever intersect the trajectory of market demands (as revealed in the way customers use cars)?

Having decided that electric vehicles are a potentially disruptive technology, my next challenge would be to define a marketing strategy that could lead my company to a legitimate, unsubsidized market in which electric cars might first be used.

I would apply three findings from earlier chapters in this book.

First, I would acknowledge that, by definition, electric vehicles cannot initially be used in mainstream applications because they do not satisfy the bas...

we don’t have a clue about where the market is, the one thing we know for certain is that it isn’t in an established automobile market segment.

because the early entrants into disruptive technology markets develop capabilities that constitute strong advantages over later entrants. They’re the ones that, from a profitable business base in this beachhead market, will most successfully throw impetus behind the sustaining innovations required to move the disruptive technology upmarket, toward the mainstream.

This is consistent with crossing the chasm!

the very attributes that make disruptive technologies uncompetitive in mainstream markets actually count as positive attributes in their emerging value network.

What is unattractive to mainstream about cqd (why have i heard it won't work)? What are the converse and who might value these attributes?

Odd as it sounds, therefore, I would direct my marketers to focus on uncovering somewhere a group of buyers who have an undiscovered need for a vehicle that accelerates relatively slowly and can’t be driven farther than 100 miles!

Consistent with "where to play" framework, using the attributes of the product to identify possible market need/fit

no one can learn from market research what the early market(s) for electric vehicles will be.

will discover how they might use the products at the same time as we discover it—just

The only useful information about the market will be what I create through expeditions into the market, through testing and probing, trial and error, by selling real products to real people who pay real money.

The third point is that my business plan must be a plan for learning, not one for executing a preconceived strategy.

there is a high probability that a better direction will emerge as the business heads toward its initial target. I must therefore plan to be wrong and to learn what is right as fast as possible.

I need to conserve resources to get it right on the second or third try.

industry analysts naturally compare it to gasoline-powered minivans, using the metrics paramount in the mainstream value network.

Interesting...disruptive technologies are not comparable and should not be compared to incumbent mainstream technologies! Only other solutions in that same market segment

Without a market, there is no obvious or reliable source of customer input; without a product that addresses customers’ needs, there can be no market. How can we design a product in such a vacuum?

The most valuable guidance comes from chapter 9, which indicated that the basis of competition will change over a product’s life cycle and that the cycle of evolution itself is driven by the phenomenon of performance oversupply,

performance oversupply opens the door for simpler, less expensive, and more convenient—and almost always disruptive—technologies to enter.

Performance oversupply indeed seems to have occurred in autos.

Saturating functionality leads customers to decide based on ease of use and reliability (since the basic functionality had already been met for most users)