The Innovator's Dilemma
1. Disruptive Innovation:
Disruptive innovation refers to the process by which new technologies or business models emerge and eventually disrupt existing markets or industries.
Christensen argues that disruptive innovations often start by serving niche markets or underserved customers, eventually gaining traction and outperforming established products or services.
Examples of disruptive innovations include personal computers disrupting the mainframe computer industry, digital photography impacting traditional film photography, and streaming services transforming the music industry.
2. Sustaining Innovation:
In contrast to disruptive innovation, sustaining innovation refers to the incremental improvements made to existing products or services to meet the needs of existing customers.
Established companies primarily focus on sustaining innovations to maintain their market position and cater to their core customers.
However, sustaining innovations can become a double-edged sword, as companies may become overly focused on improving their existing products, leading to a blind spot for disruptive technologies.
3. The Innovator's Dilemma:
The core premise of the book is that successful companies can fail when confronted with disruptive innovations due to their inability to adapt and embrace disruptive technologies or business models.
Christensen argues that established firms are often trapped in a dilemma between exploiting their existing business model or exploring disruptive innovations, as the latter may not yield immediate financial returns or cater to their existing customer base.
The book provides numerous examples of well-known companies that failed to respond to disruptive innovations, such as Kodak's reluctance to embrace digital photography, leading to its downfall.
4. Technology Trajectories and Value Networks:
Technology trajectories refer to the rate of improvement and performance of a particular technology over time.
Christensen argues that disruptive innovations start by offering lower performance compared to existing technologies but gradually improve to reach a point where they surpass the capabilities of established products.
Value networks represent the interdependent relationships between companies, suppliers, and customers within an industry. Disruptive innovations often create new value networks that cater to different market segments.
Established companies often struggle to transition to new value networks, as they have established relationships and structures aligned with their existing value networks.
5. The Role of Incumbents and Entrants:
Incumbent companies, typically leaders in their industries, face the challenge of managing disruptive innovation while maintaining their existing business operations.
Entrant companies, often startups or new players in the industry, have fewer constraints and can take advantage of disruptive technologies and emerging markets.
Incumbents often dismiss the potential of disruptive innovations due to factors such as their focus on existing customers, cost structures, and organisational inertia.
6. Overcoming the Dilemma:
Creating autonomous business units or separate divisions that focus on developing and commercialising disruptive technologies can help protect them from the constraints of the parent company.
Building a culture that embraces experimentation, risk-taking, and learning from failure is crucial for fostering a disruptive mindset within the organization.
Developing a thorough understanding of customer needs, both existing and potential, can help companies identify disruptive opportunities and create solutions that address unmet demands.