In this post, we’ll provide a summary of the book The Innovator’s Dilemma published by Clayton M. Christensen which delves into the field of innovation and business strategy.
What Is The Innovator’s Dilemma?
The term Innovator’s Dilemma describes the challenge that successful companies face when deciding whether to adopt new disruptive technologies that may cannibalise their existing businesses.
Sustaining Versus Disruptive Technologies
Christensen differentiates between sustaining technologies and disruptive technologies.
Sustaining technologies are innovations that improve the performance of established products and businesses which doesn’t alter the existing market trajectory. For example, the consistent advancements in computer processing speeds over the years.
Disruptive technologies are innovations that create new markets which displace established products and businesses which does alter the existing market trajectory. For example, the shift from film photography to digital photography.
Processes & Values
Established firms possess specific processes and values that help them succeed with existing customers and technologies. However, these same processes can prevent them from adopting disruptive technologies because they don’t fit the company’s current structure or profitability model.
Understanding Disruptive Technologies
Firstly, while disruptive technologies might underperform compared to existing technologies when they are introduced, their rate of improvement often outpaces the demands of the current market.
Secondly, it’s challenging for large companies to invest significantly in disruptive technologies because these often serve smaller, emerging markets before they shape into larger markets.
The Solution
Larger businesses can harness disruptive technologies by setting up smaller, more agile teams or departments that operate under different processes and values suited to the disruptive tech.
Alternatively, businesses can create entirely separate organisations that can focus solely on the new, disruptive technologies without the constraints of the main company.
Managerial Implications
Managers need to understand that catering only to current customers’ needs can blind them to emerging markets. Allocating resources to explore and exploit disruptive technologies is crucial.
While it is essential to listen to current customers, it’s equally crucial to pay attention to non-customers or emerging segments which might be the key users of disruptive technologies.
Summary (TL;DR)
The Innovator’s Dilemma describes the challenge companies face when making decisions about whether to adopt new products that may cannibalise their existing products.
To avoid the innovator’s dilemma, companies must recognise the difference between sustaining and disruptive innovations and adapt their structures, processes and values accordingly.
