 In his book The Innovator's Dilemma, Harvard professor and entrepreneur Clayton M. Christensen discusses why successful businesses might fail in the face of disruptive innovation. Christensen created the phrase "disruptive innovation" to explain how new technologies or business models have the potential to build new value networks and markets while eventually displacing more existing ones.
The book makes the case that profitable businesses frequently concentrate on providing sustaining innovations—gradual enhancements to current goods or services—to meet the needs of their current clients. This, however, can make companies susceptible to disruptive developments, which initially appeal exclusively to a niche market or a low-end segment but are frequently cheaper, simpler, or more convenient than the current offers. These disruptive technologies might get better with time and finally satisfy the needs of common consumers, who might then switch to different goods or services. By the time the established businesses become aware of the danger, it might be too late to act quickly.
The book uses multiple examples from several industries, including disk drives, steel, retail, and education, to highlight this tendency. It demonstrates how businesses such as Seagate, U.S. Steel, Sears, and Harvard were unable to foresee or adapt to disruptive advancements made by rivals such as Conner, Nucor, Walmart, and the University of Phoenix. It also demonstrates how some businesses, such IBM, Honda, and Apple, were able to develop disruptive breakthroughs or deal with them by utilizing various techniques.
The book suggests that incumbent companies can overcome the innovator's dilemma by following these principles:
- Recognize that different types of innovations require different types of management and organizational structures.
- Create separate divisions or subsidiaries that are independent of the core business and have their own resources, processes, and values to pursue disruptive innovations.
- Allocate resources to both sustaining and disruptive innovations based on strategic criteria rather than short-term financial returns.
- Experiment with new technologies and business models in emerging markets or low-end segments before scaling up or entering mainstream markets.
- Be flexible and willing to change course or abandon projects based on market feedback and learning.
The Innovator's Dilemma is a classic work that has influenced many entrepreneurs, managers, and scholars. It questions established beliefs and offers a framework for comprehending and appreciating disruptive innovation.Â
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