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Title: The Innovator's Dilemma by Clayton M. Christensen, Don Leslie ISBN: 1-56511-415-9 Publisher: Highbridge Audio Pub. Date: 01 September, 2000 Format: Audio CD Volumes: 2 List Price(USD): $24.95 |
Average Customer Rating: 4.4 (124 reviews)
Rating: 5
Summary: Disruptive technologies create a threat to large companies
Comment: This is a book is about successful, well-led companies -often market leaders- that carefully pay attention to what customers need and that invest heavily in new technologies, but still loose their market leadership suddenly. This can happen when disruptive technologies enter the stage. Most technologies improve the performance of existing products in relation to the criteria which existing customers have always used. These technologies are called sustaining technologies. Disruptive technologies do something different. They create an entirely new value proposition. They improve the performance of the product in relation to new performance criteria. Products which are based on disruptive technologies are often smaller, cheaper, simpler, and easier to use. However, the moment they are introduced, they can not at once compete against the traditional products and so they cannot directly reach a big market. Christensen researched how disruptive technologies have developed in the computer disk industry, an extremely rapid evolving industry. He identified six steps in the emergence of disruptive technologies:
1. Disruptive technologies often are invented in traditional large companies. Example: at Seagate Technology, the biggest producer of 5,25 disks, engineers in 1985 designed the first 3,5 disk.
2. The marketing department examines first reactions from important customers to the new technology. Then they notice that existing customers are not very interested and they conclude that not a lot of money can be made with the new product. Example: this is what happened at Seagate. The 3,5 disk's were put upon the shelf.
3. The company keeps on investing in the traditional technology. Performance improvement of the traditional technology is highly appreciated by existing customers and a lot of money is being made. Example: Seagate invested in the 5,25 disk technology. This led to considerable improvement of the technology and to a considerable improvement of sales.
4. New companies are started up (by ex-employees of the traditional companies) and markets for the new technology emerge by trial and error. Example: ex-Seagate people started up Corner Peripherals. This company focused on the small emerging market for 3,5 inch disks. In the beginning this was only for the laptop market.
5. The new players move up in the market. The performance of the new technologies gets better after some time, enabling them to compete better and better with the traditional companies and products. Example: the performance of the 3,5 disks improved drastically. The 3,5 inch disk moved up in the market, to the personal computer market. Corner pushed Seagate out of the PC market for 3,5 inch disk drives.
6. Traditional companies try to defend their market position and to get along in the new market. Often they notice that they have fallen behind so far, that they cannot keep up. Example: Seagate did not succeed in capturing a significant part of the new market for 3,5 inch disk drives for PC's.
The events described above can be understood by the four principles of disruptive technologies which Christensen formulates:
1. In well-led companies it is customers, not managers, who actually determine resources allocation. This is a proposition of the resources dependence theory (Pfeffer & Salancik, 1978) which is supported strongly by the research of Christensen. In essence: middle managers will not tend to invest in technologies that are not directly appreciated by important (large) clients, because they will not be able to get quick financial gains by doing this.
2. Small markets can not fulfil the growth need of large companies. For several reasons, growth is important for companies. Unfortunately, the bigger the company, the harder it is to continue growth. A small company (40 million sales) with a growth target of 20%, must achieve 8 million extra sales. A large company (4 billion sales), has to achieve 800 million of extra sales! Emerging markets often simply are not large enough to fulfil such growth needs. They can, however, fulfil the growth needs of new small companies.
3. Markets that do not exist can not be analysed. The ultimate applications of disruptive technologies can not be foreseen on forehand. Failure is an intrinsic unavoidable step to success.
4. Technology supply does not always equal the market demand. The speed of technological progress is often bigger than the speed with which the customer demand develops. By improving the performance of the disruptive technologies (for instance the 3,5 inch disks, first only used in the laptop market), they became suitable for the larger PC-market.
These steps explain why traditional companies are often not capable of applying disruptive technologies. Christensen argues that you can not resist these four principles. What you can do however, is use them to your advantage. For instance: in a large company you can create an 'island' where the new technology is developed for the new market. Also it is possible get an ownership in emerging companies which develop the new technologies (several companies have done this successfully).
I think the innovator's Dilemma is an excellent book. The ideas are empirically foudend and together they form a coherent theoretical framework. The examples from the computer disk industry, the steel industry and others, are very well-documented and interesting. The book is logically structured and reads easily.
Rating: 5
Summary: Presents convention-defying rules on disruptive innovation
Comment: This book takes the radical position that great companies can fail precisely because they do everything right. It gives examples of outstanding companies that have lost their market leadership when confronted with disruptive changes in technology and market structure. Drawing on patterns of innovation in a variety of industries, including computers, retailing, pharmaceuticals, automobiles and steel, the author shows how breakthrough innovations are initially rejected by mainstream customers because they cannot currently use them.
This rejection can lead firms with strong customer focus to allow strategically important innovations to languish. An excessive customer focus prevents firms from creating new markets and finding new customers for the products of the future. As they unwittingly bypass opportunities, such firms can clear the way for more nimble, entrepreneurial companies to catch the next great wave of industry growth.
Using the lessons of successes and failures of leading companies, The Innovator's Dilemma presents a set of convention-defying rules on the phenomenon of disruptive innovation. This, then, is the innovator's dilemma: when to apply the rules of disruptive innovation that goes so much head-to-head against the conventional wisdom.
Clayton M. Christensen is an associate professor of business administration at the Harvard Business School. His research and writing focus on the management of technological innovation, the problems of finding new markets for new technologies, and the identification and development of organisational capabilities.
Reviewed by Azlan Adnan. Formerly Business Development Manager with KPMG, Azlan is currently Managing Partner of Azlan & Koh Knowledge and Professional Management, an education and management consulting practice based in Kota Kinabalu, Malaysian Borneo. He holds a Master's degree in International Business and Management from the Westminster Business School in London. He may be contacted at Tel: +6088-383 526 E-mail: [email protected]
Rating: 4
Summary: Driven by disks
Comment: Clay Christensen combines the science of empirical research with the art of organizational behavior in his best-selling "The Innovator's Dilemma." The book provides tangible advice on how to foster innovation within a corporate environment. His case studies draw from the successes and failures of American companies within numerous industries (disk drives, excavators, motorcycles, software). Christensen's strong points include a creative presentation of data, lucid writing and frank admission that the advice in his book is not a one-size-fits-all panacea for management challenges. But a heads-up to readers: perhaps 50% of the book centers on the disk-drive manufacturing industry. Although the lessons learned in hard drives are interesting, a more balanced approach would have been welcome. "The Innovators Dilemma" is a well written management how-to, in the same league as classics by Peters or Hammer. The book seems to be written for managers in large organizations, but entrepreneurs will probably find the material just as beneficial.
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Title: The Innovator's Solution: Creating and Sustaining Successful Growth by Clayton M. Christensen, Michael E. Raynor ISBN: 1578518520 Publisher: Harvard Business School Press Pub. Date: September, 2003 List Price(USD): $29.95 |
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Title: Crossing the Chasm by Geoffrey A. Moore ISBN: 0060517123 Publisher: HarperBusiness Pub. Date: 20 August, 2002 List Price(USD): $17.95 |
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Title: Harvard Business Review on Innovation by Clayton M. Christensen, Michael Overdorf, Macmillsn Ian, Rita McGrath, Stefan Thomke, Ian MacMillan ISBN: 1578516145 Publisher: Harvard Business School Press Pub. Date: 15 June, 2001 List Price(USD): $19.95 |
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Title: Mastering the Dynamics of Innovation by James M. Utterback ISBN: 0875847404 Publisher: Harvard Business School Press Pub. Date: September, 1996 List Price(USD): $16.95 |
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Title: Inside the Tornado : Marketing Strategies from Silicon Valley's Cutting Edge by Geoffrey A. Moore ISBN: 0887308244 Publisher: HarperBusiness Pub. Date: 01 July, 1999 List Price(USD): $17.00 |
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