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The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

Written by Clayton M. Christensen

Narrated by L.J. Ganser


The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

Written by Clayton M. Christensen

Narrated by L.J. Ganser

ratings:
4.5/5 (29 ratings)
Length:
8 hours
Released:
Apr 18, 2017
ISBN:
9781681686912
Format:
Audiobook

Description

His work is cited by the world's best-known thought leaders, from Steve Jobs to Malcolm Gladwell. In this classic bestseller—one of the most influential business books of all time—innovation expert Clayton Christensen shows how even the most outstanding companies can do everything right—yet still lose market leadership.

Christensen explains why most companies miss out on new waves of innovation. No matter the industry, he says, a successful company with established products will get pushed aside unless managers know how and when to abandon traditional business practices.

Offering both successes and failures from leading companies as a guide, The Innovator's Dilemma gives you a set of rules for capitalizing on the phenomenon of disruptive innovation.
Released:
Apr 18, 2017
ISBN:
9781681686912
Format:
Audiobook

About the author

Clayton M. Christensen es catedrático en la Escuela de Negocios de Harvard, autor de 12 libros, cinco veces galardonado con el Premio McKinsey al mejor artículo de Harvard Business Review y cofundador de cuatro empresas. Es reconocido repetidamente por Thinkers50 como uno de los pensadores de negocios más influyentes del mundo.


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What people think about The Innovator's Dilemma

4.5
29 ratings / 9 Reviews
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Reader reviews

  • (5/5)
    This book is a must read for high tech entrepreneurs and investors. Christensen explains what innovation is, why it succeeds, and why often it does not succeed. He gives clear cut examples from which you can learn for your own company.
  • (2/5)
    Overhyped. Techno-babble analysis of the hard drive market comes across as something of a procrustean bed.
  • (4/5)
    Some good ideas.Like alot of the business books I've read, it advocates that a large company should be an 'incubator' for a bunch of small ideas.This may be the first book to advocate such a position, though. (At least it's cited so much that I think it's the first).
  • (5/5)
    The Innovator's Dilemma tries to explain why great companies fail, how successful companies innovate, and what the differences are between innovating sustaining technologies versus disruptive technologies. One of the reasons why companies fail is because they are held captive by their customers. It is possible for customers to continually ask for the same product they have been using for ages, but with bigger, faster, better features.... however, they might not be aware of or willing to use something that is different and potentially better. This can prevent a company from creating technologies that will be useful to the customer in the future or for entering a new growth market. Organizations need more than capable employees to innovate. The organization needs to provide resources, processes, and values that support innovation of disruptive technologies. This can be difficult for some companies because small markets don't solve the growth needs of large companies. Management does not want to invest in markets that don't exist because they can't be analyzed. The tolerance for failure can be high in some organizations too. Smaller companies, on the other hand, are able to compete in small markets and markets with smaller margins and still create growth for the company.Matching markets to disruptive technologies can be difficult to do. Organizations can be more specialized than they think, which can make it more difficult to innovate new technologies. Leadership in disruptive technologies can create enormous value. Established companies may not have leadership values within its organization since it is less important in creating sustaining technologies.
  • (4/5)
    Great starter book on disruptive innovation. Gives you a solid view on innovation and why some great companies may fail and be disrupted. Classic.
  • (3/5)
    This business book had an interesting take on how companies should tackle disruptive technology - or innovations which create a new market and eventually disrupt and sometimes replace an existing market. The examples in the book were mostly from the high tech sector and included the move from 8" floppy drives to 5.25" floppies (yes, the book is a bit dated). What I liked about this book is it's application to ebooks. Definitely, it has created a new market that was not initially that popular or well received by readers, but has taken off and is very disruptive to the book industry. The book gives advice on how companies should invest and deploy resources on disruptive technology as it is emerging. No solid suggestions though on what to do when a company is already behind the curve (like bookstores and ebooks...)
  • (5/5)
    We are all familiar with the story of the innovative and nimble startup surpassing the corporate leader with a disruptive technology that the larger corporation was blind to. Why this happens is the subject of Clayton Christensen’s thoughtful Innovator’s Dilemma. Although originally published in 1997, it’s a highly relevant and useful read today.Christensen was interested in how the market leaders missed the disruptive innovations. At the time, most thought the corporate leaders were just too arrogant or too bureaucratic to see the disruption coming. Could there be more structural forces at play? Turns out, there are.The first half of the book follows the development of the disk drive and the hydraulic excavator to understand and make clear these forces. First, the author distinguishes between sustaining technologies and disruptive technologies. Market leaders, it turns out, are capable of innovation but those innovations typically occur as incremental evolutionary changes to existing products – sustaining innovations. Where they get tripped up is the development of disruptive technologies which fundamentally transform the existing product. In many cases the market leader also developed early forms of the disruptive technology or were at least aware of the development of the technology. Christensen, a professor at the Harvard Business School, makes the case that in ignoring the disruptive technology, the market leader was acting quite rationally. They were following their customers’ and corporation’s best interests.Christensen discovered that the disruptive technology yields a product that is inferior as measured by the traditional metrics for product quality. In the case of the disk drive it was price/unit storage. For the excavators, it was reach. For the disk drives, the disruption was the introduction of smaller and smaller drives. At each step of the way, these products were costlier than the existing larger drives in terms of price/unit storage. However, their advantages, in terms of other characteristics such as size, weight, and power consumption outweighed nominal improvement in the price/unit storage ratio provided by sustaining technologies. Eventually, price catches up and the disruptive products are better in both sets of characteristics.For the excavator (a big digger), the existing machines used cables to extend and control the basket. The overriding measure of performance was reach and capacity – how far out could the basket reach and grab a bucket of dirt. When hydraulic excavators appeared, their reach was very limited because of the physics of the hydraulic cylinders needed to control the baskets. Even today, a cable excavator will give you a longer reach. However, the hydraulic excavators had advantages of safety (no cable breaks) and had significantly lower maintenance costs. Eventually, as manufacturing of hydraulic excavators grew in practice, reach extended and for many uses such as building foundation excavation and utility pipe laying, as soon as the reach was sufficient for the task, the improvement in safety and the reduced maintenance costs made the hydraulic excavators superior.This book will change the way you think about innovation and the structures needed not only to spark the ideas, but get them built into new product lines. My name is David Marquet, from Practicum, Inc and we help our customers get everyone be a leader and avoid casting employees into follower roles. To continue the dialogue respond to david.marquet@practicuminc.com or follow our blog or follow us on twitter. @totheleadernyou.
  • (3/5)
    A pretty convincing argument for why large, established companies struggle to keep up with disruptive innovations. It turns out that the very things that make those companies dominant in an existing market work against them when considering new markets. As the pace of disruption accelerates, the lessons in this book become more and more important.

    Less convincing are the solutions the book proposes and, at an even more basic level, how to distinguish between what the book calls "sustaining innovations" and "disruptive innovations". It seems that the definitions rely on hindsight (ie, a disruptive innovation is one that turns out to, uh, disrupt the leaders) and are not particularly predictive. And since the solutions the book proposes only work for the disruptive ones, this is a rather big weakness.

    Still, the book is worth reading for building your awareness and vocabulary around these issues. The writing is a bit dry and academic-sounding, but there are plenty of good examples that, if you've ever worked at a large company, will feel all-too-familiar.



    Some good quotes from the book:


    First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. And third, leading firms’ most profitable customers generally don’t want, and indeed initially can’t use, products based on disruptive technologies. By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.

    While managers may think they control the flow of resources in their firms, in the end it is really customers and investors who dictate how money will be spent because companies with investment patterns that don’t satisfy their customers and investors don’t survive. The highest-performing companies, in fact, are those that are the best at this, that is, they have well-developed systems for killing ideas that their customers don’t want. As a result, these companies find it very difficult to invest adequate resources in disruptive technologies—lower-margin opportunities that their customers don’t want—until their customers want them. And by then it is too late.

    With few exceptions, the only instances in which mainstream firms have successfully established a timely position in a disruptive technology were those in which the firms’ managers set up an autonomous organization charged with building a new and independent business around the disruptive technology. Such organizations, free of the power of the customers of the mainstream company, ensconce themselves among a different set of customers—those who want the products of the disruptive technology.

    In dealing with disruptive technologies leading to new markets, however, market researchers and business planners have consistently dismal records. In fact, based upon the evidence from the disk drive, motorcycle, and microprocessor industries, reviewed in chapter 7, the only thing we may know for sure when we read experts’ forecasts about how large emerging markets will become is that they are wrong.

    Simply put, when the best firms succeeded, they did so because they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied their customers’ next-generation needs. But, paradoxically, when the best firms subsequently failed, it was for the same reasons—they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied their customers’ next-generation needs. This is one of the innovator’s dilemmas: Blindly following the maxim that good managers should keep close to their customers can sometimes be a fatal mistake.

    My findings consistently showed that established firms confronted with disruptive technology change did not have trouble developing the requisite technology [...] Rather, disruptive projects stalled when it came to allocating scarce resources among competing product and technology development proposals [...] Sustaining projects addressing the needs of the firms’ most powerful customers [...] almost always preempted resources from disruptive technologies with small markets and poorly defined customer needs.

    Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible, and that help them play in substantial markets. Yet, to expect the processes that accomplish these things also to do something like nurturing disruptive technologies—to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets—is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Such expectations involve fighting some fundamental tendencies about the way successful organizations work and about how their performance is evaluated.

    One of the dilemmas of management is that, by their very nature, processes are established so that employees perform recurrent tasks in a consistent way, time after time. To ensure consistency, they are meant not to change—or if they must change, to change through tightly controlled procedures. This means that the very mechanisms through which organizations create value are intrinsically inimical to change.

    In order for a $40 million company to grow 25 percent, it needs to find $10 million in new business the next year. For a $40 billion company to grow 25 percent, it needs to find $10 billion in new business the next year. The size of market opportunity that will solve each of these companies’ needs for growth is very different. As noted in chapter 6, an opportunity that excites a small organization isn’t big enough to be interesting to a very large one. One of the bittersweet rewards of success is, in fact, that as companies become large, they literally lose the capability to enter small emerging markets.

    Disruptive technology should be framed as a marketing challenge, not a technological one.
  • (4/5)

    1 person found this helpful

    Clayton M. Christensen is a professor at the Harvard Business School. In the Innovator's Dilemma, he presents his research into business life cycles and how larger companies find it difficult to innovate. He shows how these larger companies eventually are replaced by innovators who make inroads by taking the bottom markets willing ceded to them by the bigger companies. Little by little, the smaller companies eat away until they have market dominance themselves, leaving the once market leader without a place to go.The concept of how small companies can thrive in a world dominated by large companies is an interesting one, especially for the entrepreneurs facing Goliath. Christensen lays out several test cases where the larger company couldn't innovate, allowing smaller companies to enter at the bottom of the market. He even shows how and why it made sense for the management of these dominant companies to allow this to happen - at the time. Innovation is not an easy prospect for large companies because their large existing customer base often will not allow the innovations to move forward because it doesn't fit their needs. Innovations often bring a different customer and large companies are not always able to choose to service both.Christensen provides a few examples of this phenomena in excruciating detail, studying the rapidly changing industries of disk drives and steel production. He rounds out the book with a discussion of the steam shovel and how it lost out to hydraulics. In a final case study, he examines how the principles could be applied to a potential disruptive technology - the electric car. He lays out a complete game plan for a company to take the innovations available and capture a new market. Sadly, in the years since publication in 1997, it doesn't appear anyone has taken up the challenge, although perhaps Tesla Motors has come the closest.The problem I have with Christensen's book is his writing style. He is definitely a Harvard Business School professor. He delves deeply into his research, explaining every nuance of the industry in such detail as to leave no doubt he has done an extensive study. I grew up in IT, living just miles away from one of the great innovators of the disk drive industry, yet I learned many things about disk drives. I hadn't imagined I could get a technical education from a book on business management.Christensen's writing style was the biggest barrier to the material. His explanations were too deeply steeped with details that didn't move the story forward. While the datum was valid and important, it didn't necessarily have to be presented in long, exhaustive detail. Today's readers do not have a lot of time or desire to spend long stretches of deep explanation. I found it necessary to spend at least 45 minutes reading before getting "into" the book. I couldn't help comparing the style to that of Jim Collins in Great By Choice. Yes, Collins is also a researcher who loves detail. The difference is that Collins moves all his detailed explanations to the appendix where those who desire it can find it. The book itself is organized into fast moving, short chapters laying out the salient points distilled from the exhaustive research. I would really have appreciated this approach in this book by Christensen. Collins is a storyteller where Christensen is a Harvard professor.Christensen's insight is worth the slog through the knee deep data. Just be ready with a canteen for dry stretches of endless detail as far as the eye can see.

    1 person found this helpful