The Innovator's Dilemma

Posted by Brian Thu, 25 Feb 2010 01:37:29 GMT

The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail
By Clayton Christensen

5/5

How do successful companies fail? Often the answer is obvious: poor management or an economic downturn are two common culprits. More interesting are the companies that seem to do everything right, but a few years later are in a steep decline. How is it possible that management which only a few short years ago was being lauded as a model for the industry can come to be regarded a blathering idiots with no clue as to what their customers want? In The Innovator’s Dilemma Clayton Christensen puts forth that this is caused by the introduction of disruptive technology into the market.

What is disruptive technology though? Christensen defines it as a technology which has worse performance, at least in the near term, in what has been considered the key market measurement but which is still considered acceptable. It trades off max performance in this key measurement for features that customers outside of what has been to now the core market care about more. He uses the disk drive industry as his major example throughout the book. When a new size disk drive was developed the established players repeatedly ignored it because its storage capacity wasn’t interesting to their current customers. However, its smaller size was interesting to a new market and because technological innovation often moves faster than market demand, eventually the disruptive technology is able to displace the existing technology, along with the companies pushing it. He explains a similar process with hydraulics in excavation, minimills in steel production, and discount retailers.

I was pleased to learn that The Innovator’s Dilemma is often used in MBA programs now, although I do wonder how it is received by both faculty and students. The idea that good management can be a direct cause of failure is probably a non-intuitive and disquieting thought to many of them. Christensen is an engaging writer with the data to back up his theory. Highly recommended.

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