ABOUT THE AUTHOR
Clayton Magleby Christensen (April 6, 1952 – January 23, 2020) was an Associate professor of business administration at the Harvard Business School and also a leader writer in The Church of Jesus Christ of Latter-day Saints (LDS Church). Before joining the Harvard Business School faculty, Professor Christensen served as chairman and president of Ceramics Process Systems Corporation, a firm he co-founded in 1984 with several MIT professors. He also served on the board of directors of Tata Consultancy Services, Franklin Covey, and the Becket Fund for Religious Liberty. Moreover, he also served for a time on the editorial board of the Deseret News.
He was the best-selling author of ten books, including his seminal work “The Innovator's Dilemma” (1997), which received the Global Business Book Award for the best business book of the year.
ABOUT THE BOOK
Generally, it is believed that some of the ways for the companies to succeed are better management, hardworking strategies, and well-planned executions. However, according to the author, these keys can lead to failure in certain situations.
The book - “The Innovator’s Dilemma” tries to answer the question as to why some of the great Companies fail even after investing in new and advanced technologies. It mainly focuses on the well-managed firms and not on the weaker ones. According to the author, good management and aggressive customer-sensitive approach of the companies are the main reasons why they fail at some point. Through this book, the author introduces the concept of “disruptive innovation”.
This book is divided into two parts. While the first part builds a framework that explains why some sound decisions taken by great companies can lead to failure, the second part resolves the dilemma and points out certain solutions and techniques which the managers must adopt to avoid such failures. Moreover, part two of this book is built upon detailed case studies of a few companies that succeeded, and many more that failed, when faced with disruptive technological change.
The patterns of success and failure we see among firms faced with sustaining and disruptive technology change are a natural or systematic result of goodmanagerial decisions. That is why disruptive technologies confront innovators with such a dilemma. Working harder, being smarter, investing more aggressively, and listening more astutely to customers are all solutions to the problems posed by new sustaining technologies. But these paradigms of sound management are useless and even counterproductive, in many instances when dealing with disruptive technology.
The problem is they fail to value innovations properly because incumbents attempt to apply them to their existing customers and product architectures — or value networks. Often new technologies are too new and weak for the more advanced and mature value networks that incumbents operate. as long as the new technology was required to address the needs of their customers, established firms were able to muster the expertise, capital, suppliers, energy, and rationale to develop and implement the requisite technology both competitively and effectively. It was only when confronted with disruptive technology that they failed.
SUMMARY OF EACH PART
PART I - WHY GREAT COMPANIES CAN FAIL
In the beginning, the author sets the tone of the book by summarizing the history of the disk drive industry. According to him, it provides a framework for understanding when "keeping close to your customers" is good advice and when it is not. He explains that the best firms succeeded because they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities, that satisfied their customers' next-generation needs. However, ironically, when the best firms subsequently failed, it was for the same reasons. The study of technological change over the history of the disk drive industry revealed two types of technology change, each with very different effects on the industry's leaders. While the technologies of the first sort sustained the industry's rate of improvement in product performance, by contrast, innovations of the second sort disrupted or redefined performance trajectories and consistently resulted in the failure of the industry's leading firms.
Thus, the main reason highlighted which led to the failure of many industries is their leader’s inability to keep up with the stunning rate of technological change. The inability to anticipate new technologies threatening form below and to switch to them in a timely way has often been cited as the cause of failure of established firms and as the source of advantage for entrant or attacking firms.
Further, the author proposes a theory thats explains why good companies can fail based on the concept of a value network. According to him, one explanation for why good companies fail points to organizational impediments as the source of the problem. He supports this argument with the incident which recounted in Tracy Kidder's Pulitzer Prize-winning narrative, ‘The Soul of a New Machine’.
Further, a comparison between Disruptive technological change in the disk drive industry and mechanical excavator industry has been drawn, and the impact of disruptive Hydraulics technology has been studied during three different time frames. While hydraulics technology ultimately didprogress to the point where it could address the needs of mainstream excavation contractors, it eventually failed because their customers could not use the technology and it seemed to be useless until it was too late.
Thus,it is clear from the histories of the disk drive and excavator industries that the boundaries of value networks do not completely imprison the companies within them. There is considerable upwardmobility into other networks. It is in restraining downward mobility into the markets enabled by disruptive technologies that the value networks exercise such unusual power.
Disruptive technologies have such a devastating impact because the firms that first commercialized each generation of disruptive disk drives chose notto remain contained within their initial value network. Rather, they reached as far upmarket as they could in each new product generation until their drives packed the capacity to appeal to the value networks above them. It is this upward mobility that makes disruptive technologies so dangerous to established firms and so attractive to entrants.
Similarly, the integrated steel companiesfaced the same innovator's dilemma that confounded the leading providers of disk drives and mechanical excavators: Sound managerial decisions are at the very root of their impending fall from industry leadership.
Thus, it can be said that good management itselfwas the root cause. The very decision making and resource-allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies, such as, listening carefully to customers; tracking competitors' actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit, etc.. These are the reasons why great firms stumbled or failed when confronted with disruptive technological change.
PART II - MANAGING DISRUPTIVE CHANGE
Part Two of this book is built upon detailed case studies of a few companies that succeeded, and many more that failed, when faced with disruptive technological change.
In the cases of Quantum, Control Data, IBM, and Hewlett-Packard, the innovating managers who were faced with disruptive technology created organizations whose cost structures enabled them to make money in the value network where the disruptive technology was taking root, and where customers' power and the managers' intentions were aligned. By harnessing their efforts to the forces of resource dependence, they succeeded in the face of disruptive change.
Whereas, Kresge's Cunningham achieved this alignment differently, by cutting off the customer base that historically had provided the company's resources, thereby intensifying Kresge's dependence on the new source of resources in discount retailing.
In other known instances described in the book, the managers of companies that faced disruptive technology change also proved the resource dependence theorists right. They simply lacked the power to change the course of their companies when their capabilities were pitted against the power of customer-focused, profit-driven, rational systems of resource allocation in their companies. The author has used the case studies of Apple Computers and Priam Corporation to support this assertion.
According to the author, what the best executives in successful companies have learned about managing innovation is not relevant to disruptive technologies. Most marketers have been schooled extensively, at universities and on the job, but few have any theoretical or practical training in how to discover markets that do not yet exist. The problem with this lopsided experience base is that when the same analytical and decision-making processes learned in the school of sustaining innovation are applied to enabling or disruptive technologies, the effect on the company can be paralyzing.
The author has taken the example of the Disk/Trend. Thestaff of Disk/Trend used the same methods to generate the forecasts for sustaining architectures as they did for disruptive ones. The techniques that worked so extraordinarily well when applied to sustain technologies, however, clearly failed badly when applied to markets or applications that did not yet exist. Similar is the case with other companies such as Kittyhawk, Honda, and Intel.
Regarding the market applications for disruptive technologies, the author has said that the managers can bet on two regularities, i.e., the weakness of disruptive technologies are their strengths and disruptive technologies are typically simpler, cheaper, and more reliable as well as convenient than established technologies.
The Author ends this masterpiece by giving certain tips, while undertaking a detailed case study of Electric powered vehicles, as to what should be its marketing, product, technology, distribution, and organization strategies. The reason as to why he chose this particular case is that, according to him, electric vehicles are a potentially disruptive technology.
Moreover, he has said that he would want his team to work in an environment that accounts for, rather than fights, the principles of disruptive innovation.
Thus,it can be said thatincompetence, bureaucracy, arrogance, tired executive blood, poor planning, and short-term investment horizons surely have played leading roles in toppling many companies. However, it is when great managers have not understood or have attempted to fight these forces, that their companies have stumbled.
CONCLUSION AND INSIGHTS
Thus, it can be concluded that better management, hard work, and not making dumb mistakes is not the answer to the innovator's dilemma. However, the companies must not throw out the capabilities, organizational structures, and decision-making processes that have made them successful in their mainstream markets just because they don't work in the face of disruptive technological change.
The author has concluded the book with the following insights regarding how to face disruptive technologies:
(i) While keeping close to our customers is an important management paradigm for handling sustaining innovations, it may provide misleading data for handling disruptive ones.
(ii) A company's executives may seem to make resource allocation decisions, but the implementation of those decisions is in the hands of a staff whose wisdom and intuition have been forged in the company's mainstream value network. Thus, keeping a company successful requires that employees continue to hone and exercise that wisdom and intuition.
(iii) Disruptive technology should be framed as a marketing challenge, not a technological one.
(iv) In many instances, the information required to make large and decisive investments in the face of disruptive technology simply does not exist. It needs to be created through fast, inexpensive, and flexible forays into the market and the product.
(v) 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.
(vi) It is not wise to adopt a blanket technology strategy to be always a leader or always a follower. Companies need to take distinctly different postures depending on whether they are addressing a disruptive or sustaining technology.
(vii) There are powerful barriers to entry and mobility that differ significantly from the types defined and historically focused on by economists.
Hence, the dilemmas posed to innovators by the conflicting demands of sustaining and disruptive technologies can be resolved. Managers must first understand what these intrinsic conflicts are. They then need to create a context in which each organization's market position, economic structure, developmental capabilities, and values are sufficiently aligned with the power of their customers that they assist, rather than impede, the very different work of sustaining and disruptive innovators.