The Innovator's Dilemma by Clayton Christensen
by Parker · 36 things on NewTwos
- When New Technologies Cause Great Firms To Fail
- One theme common to all of these failures, however, is that the decisions that led to failure were made when the leaders in question were widely regarded as among the best companies in the world
- It shows that in the cases of well-managed firms, good management was the most powerful reason they failed to stay atop their industries. Precisely because 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
- There is great value in coming to grips with “the way the world works,” and in managing innovative efforts in ways that accommodate such forces
- Technology therefore extends beyond engineering and manufacturing to encompass a range of marketing, investment, and managerial processes. Innovation refers to a change in one of these technologies
- Always listening to and responding to the needs of your best customers, and focusing investments on the innovations that promise the highest returns lead to successful companies ultimate demise
- The innovators dilemma, doing the right thing is the wrong thing
- There is a strategically important distinction between sustaining and disruptive technologies
- The pace of technology can progress past the markets needs
- Sustaining technologies foster improved product performance
- Disruptive technologies result in a worse product performance in the short term
- Disruptive products are simpler and cheaper and promise lower margins, not greater profits
- Set up an autonomous organization charged with building a new and independent business around the disruptive technology
- It is in disruptive innovations, where we know least about the market, that there are such strong first-mover advantages. This is the innovators dilemma
- One of the innovators dilemmas: blindly following the maxim that good managers should keep close to their customers can sometimes be a fatal mistake
- Leading firms were held captive by their customers, enabling attacking entrant firms to topple the incumbent industry leaders each time a disruptive technology emerged
- The organizations structure and the way its groups learn to work together can then affect the way it can and cannot design new products
- Sustaining investments appear far less risky than investments in disruptive technology: the customers exist, and their needs are known
- The context, or value network, in which a firm competes has a profound influence on its ability to marshal and focus the necessary resources and capabilities to overcome the technological and organizational hurdles that impede innovation
- Companies fail because they fail to embrace the new technology until it is too late
- Creating new markets is significantly less risky and more rewarding than entering established markets against entrenched competition
- Projects make sense to people if they address the needs of important customers, if they positively impact the organizations needs for profit and growth, and if participating in the project enhances the career opportunities of talented employees
- It is simply impossible to predict with any useful degree of precision how disruptive products will be used or how large their markets will be. An important corollary is that, because markets for disruptive technologies are unpredictable, companies initial strategies for entering these markets will generally be wrong
- Guessing the right strategy at the outset isn’t nearly as important to success as conserving enough resources so that new business initiatives get a second or third stab at getting it right
- Culture enables employees to act autonomously and causes them to act consistently
- When the organizations capabilities reside primarily in its people, changing to address new problems is relatively simple. But when the capabilities have come to reside in processes and values and especially when they have become embedded in culture, change can become extraordinarily difficult
- The most reliable vendors of the most reliable products earn a premium for it
- Customers will prefer those products that are the most convenient to use and those vendors that are most convenient to deal with
- Developers made it so convenient to use and continue to make it simpler and more convenient by watching how customers use the priduct not by listening to what they or the experts say they need. By watching for small hints of where the product might be difficult or confusing to use the developers direct their energies toward a progressively simpler and more convenient product that provides adequate rather than superior functionality
- A product whose performance exceeds market demands suffers commodity-like pricing, while disruptive products that redefine the basis of competition command a premium
- Competition centers first on functionality, followed by reliability, convenience, then price
- The pace of progress that markets demand or can absorb may be different from the progress offered by technology. This means that products that do not appear to be useful to our customers today may squarely address their needs tomorrow
- Disruptive technologies are a marketing challenge, not a technological one
- Managers who don't bet the farm on their first idea, who leave room to try, fail, learn quickly, and try again, can succeed at developing the understanding of customers, markets, and technology needed to commercialize disruptive innovations
- The Innovator's Dilemma by Clayton Christensen summary