Tuesday, February 9, 2016

My Notes: The Innovator's Dilemma

This is just a few passages from the book that I underlined and then took down in a notebook as I re-read The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail by Clayton Christensen. 

The research reported in this book supports this view: It shows that in the cases of well-managed firms, such as those cited above, “good” management was the most powerful reason they failed to stay on top of their industries. Precisely “because” these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership.

Why good companies fail: 
Cushard Consequential: My Notes of the The Innovator's Dilemma Clayton Christensen


These three dilemma’s:
  • Sustaining versus disruptive technologies
  • Trajectories of market need versus technology improvement
  • Disruptive technologies versus rational investments
Principles of Disruptive Innovations:
  • Companies depend on customers and investors for resources
  • Small markets don’t solve the growth needs of large companies
  • Markets that don’t exist cannot be analyzed
  • An organization’s capabilities define its disabilities
  • Technology supply may not be equal to market demand
Managerial Decision-making and Disruptive Technological Change

Step 1: Disruptive technologies were first developed within established firms
Step 2: Marketing personnel then sought reactions from their lead customers
Step 3: Established firms set up the pace of sustaining technological development
Step 4: New companies were formed, and markets for the disruptive technologies were founded by trial and error
Step 5: The entrants moved upmarket
Step 6: Established firms belatedly jumped on the bandwagon to defend their customer base

Five fundamental principles of organizational nature that managers in the successful firms consistent recognized and harnessed. The firms that lost their battles with disruptive technologies chose to ignore or fight them. These principles are:
  • Resource dependence: customers effectively control the patters of resource allocation in well-run companies
  • Small markets don’t solve the growth needs of large companies
  • The ultimate uses or applications for disruptive technologies are unknowable in advance. Failure is an intrinsic step toward success
  • Organizations have capabilities that exist independently of the capabilities of the people who work within them. Organizations’ capabilities reside in their processes and their values - and the very processes and values that constitute their core capabilities within the current business model also define their disabilities when confronted with disruption.
  • Technology supply may not equal market demand. The attributes that make disruptive technologies unattractive in established markets often are the very ones that constitute their greatest value in emerging markets
I liked this part of the book - offers a way for managers to act.

In Chapter 4 at the end.

How did the successful managers harness these principles to their advantage?

They embedded projects to develop and commercialize disruptive technologies within organizations whose customers needed them. When managers aligned a disruptive innovation with the “right” customers, customer demand increased the probability that the innovation would get the resources it needed.

They placed projects to develop disruptive technologies in organizations small enough to get excited about small opportunities and small wins.

They planned to fail early and inexpensively in the search for the market for a disruptive technology. 

They found that their markets generally coalesced through an iterative process of trial, learning, and trial again.
They utilized some of the resources of the mainstream organization to address the disruption, but they were careful not to leverage its processes and values. They created different ways of working within an organization whose values and cost structure were turned to the disruptive task at hand.
When commercializing disruptive technologies, they found or developed new markets that valued the attributed of the disruptive products, rather than search for a technological breakthrough so that the disruptive product could compete as a sustaining technology in mainstream markets.

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