Innovator’s dilemma, key takeaways
Prof. Clay(ton) Christensen is one of the few rare academics who examine the past with a thorough lens and pose thoughtful direction on the future possibilities.
The book, Innovator’s dilemma, opens by examining the evolution of memory market and excavators and how a new technology made the predecessor obsolete and why the market leaders, with experts in the field, capital, experienced support system for sales, marketing, distribution, were wiped out from their respective industries.
His hypothesis is that what was once a disruptive technology is successful, the characteristics that help sustain it are very different from how it originally disrupted or challenged the former status quo, and this leads to these innovator’s digging their own graves in a not-too-distant future.
Characteristics of sustaining technologies
Customer obsession is a buzzword among companies looking at sustaining technologies. They listen to what the customers want, invest heavily in what the high-paying customers are asking for, seek higher margins for the complex feature-set and target relatively mature markets. A mature product’s management evolve the disruptive technologies to sustaining technologies and have customers, investors, and employee egos to please and quickly and systematically kill any new disruptive technologies before these can bloom or scale to serve a large market, revenue target or some other mature performance metric.
Characteristics of disruptive technologies
A disruptive technology relies on the fact that “efficient engines” build products that can be prized with a premium to top customers, have complex features, have high margin products and are required in larger markets. This gives a disruptive entrant an opportunity to build the next innovative, but slightly less tested technology in the same space, offering it at a low price point which can grow through smaller markets before it evolves to be a challenger or even a leader in the space.
If you look at the growth of ZOHO in the CRM (Customer Relationship Management) software market, it serves as a good example of how a low-cost, feature-lean disrupter was first commercialized in an emerging market and is now growing to challenge the giants in the space. Below is another example from how people store music.
How can the big enterprises continue to be disruptive?
A few of the giants in respective industries are already doing this by:
a) Setting up smaller organizations who get excited by small gains and do not get penalized by small losses
b) Planning for failure when entering a market where no market research can be done when attempting to commercialize a new technology
c) Giving resources to these organizations ideally situated in emerging markets or at geolocations where the price sensitive customer is located and seeks such solutions
d) Posing a disruptive tech as a marketing challenge, not as a technology one. “Is there anyone, anywhere in the world that needs this? Where are they?”
Conclusion
Disruptive technologies almost follow a pattern when they displace older technologies and even industries. This happens because there is a tendency of maturing companies to move upmarket toward more complicated products with higher prices. This results in creation of optimizing functions from managements that kill disruptive technologies to maintain a high operational efficiency. As a result, disruptive technologies bloom elsewhere and overtime the customers start asking for the unique features from new incumbents. This results in the failure of “well-managed” technologies because they are exclusively well managed for larger markets, greater profits and high paying customers with complex feature requirements.
I have detailed one such detailed example on another blog, Blessed with poor memory. Book summaries are not a substitute for reading the original, but this writeup is for someone who is rushing like a squirrel before winter!
More book summaries from bubbykin here. You may also like some of these popular posts:
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