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What often causes this lagging behind are two principles of good management taught in business schools: that you should always listen to and respond to the needs of your best customers, and that you should focus investments on those innovations that promise the highest returns. But these two principles, in practice, actually sow the seeds of every successful company’s ultimate demise. That’s why we call it the innovator’s dilemma: doing the right thing is the wrong thing.
It is only by seeking to account for outliers—exceptions to the theory—that researchers can improve the theory.
substantial, markets. This book derives a set of rules, from carefully
As a consequence, the larger and more successful an organization becomes, the weaker the argument that emerging markets can remain useful engines for growth.
serious mistakes when faced with disruptive technologies. They demand market data when none exists and make judgments based upon financial projections when neither revenues or costs can, In fact, be known. Using planning and marketing techniques that were developed to manage sustaining technologies in the very different context of disruptive ones is an exercise in flapping wings.
The basis of product choice often evolves from functionality to reliability, then to convenience, and, ultimately, to price.
Most urgently, they want to know whether their own businesses are targets for an attacking disruptive technologist and how they can defend their business against such an attack before it is too late.
they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied their customers’ next-generation needs.
Interviews with marketing and engineering executives close to these companies suggest that the established 14-inch drive manufacturers were held captive by customers.
the firms that led the industry in every instance of developing and adopting disruptive technologies were entrants to the industry, not its incumbent leaders.
Finding new applications and markets for these new products seems to be a capability that each of these firms exhibited once, upon entry, and then apparently lost.
organizational impediments as the source of the problem.
value network—the context within which a firm identifies and responds to customers’ needs, solves problems, procures input, reacts to competitors, and strives for profit—is
This nested commercial system is a value network.
Essentially, innovations that are valued within a firm’s value network, or in a network where characteristic gross margins are higher, will be perceived as profitable.
The inability to anticipate new technologies threatening from below and to switch to them in a timely way has often been cited as the cause of failure of established firms and as the source of advantage for entrant or attacking firms.
Rather, disruptive projects stalled when it came to allocating scarce resources among competing product and technology development proposals (allocating resources between the two value networks shown at right and left in Figure 2.6, for example).
In contrast to the unattractive margins and market size that established firms saw when eyeing the new, emerging markets for simpler drives, the entrants saw the potential volumes and margins in the upscale, high-performance markets above them as highly attractive.
manufacturers were able to defend their market positions through belated introduction of the new architecture, many found that the entrant firms had developed insurmountable advantages in manufacturing cost and design experience, and they eventually withdrew from the market.
If the curve has passed its point of inflection, so that its second derivative is negative (the technology is improving at a decreasing rate), then a new technology may emerge to supplant the established one.
This is typical of industries facing a disruptive technology: The leading firms in the established technology remain financially strong until the disruptive technology is, in fact, in the midst of their mainstream market.
Therefore, because they provide the resources upon which the firm is dependent, it is the customers, rather than the managers, who really determine what a firm will do.
Johnson & Johnson’s strategy is to launch products of disruptive technologies through very small companies acquired for that purpose.
As a general rule, the more complex a market, the less important is leadership in sustaining technological innovations.
By approaching a disruptive business with the mindset that they can’t know where the market is, managers would identify what critical information about new markets is most necessary and in what sequence that information is needed.
Such discoveries often come by watching how people use products, rather than by listening to what they say.
The other five of these 116 technologies were disruptive innovations—in each case, smaller disk drives that were slower and had lower capacity than those used in the mainstream market. There was no new technology involved in these disruptive products. Yet none of the industry’s leading companies remained atop the industry
The leading disk drive companies had the resources—the people, money, and technology—required to succeed at both sustaining and disruptive technologies. But their processes and values constituted disabilities
in their efforts to succeed at disruptive technologies.
This is why focused organizations perform so much better than unfocused ones: their processes and values are matched carefully with the set of tasks that need to be done.
