W1: Christensen (2013): The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail Flashcards
Book’s aim
The failue of good companies to stay atop their industries when they confront certain types of market and technological change. These failures have one common theme: all the decisions that led to the failure were taken by leaders among the best companies in the world. About the competent decisions of management that are critical to the company’s success and are also reasons why they lose their positions of leadership
Failure framework
Built on three findings: (1) There is a strategically important distinction between what the author calls sustaining technologies and those that are disruptive, (2) The pace of technological progress, can and often does, outstrip what market needs. This means that the relevance and competitiveness of different technological approaches can change with respect to different markets over time, and (3) Customers and financial structures of successful companies heavily colour the sorts of investments that appear to be attractive to them, relative to certain types of entering firms
Disruptive technologies
Emerge occasionally, which are innovations that result in worse product performance, at least in the short-term. It brings very different value proposition to the market. Generally, they underperform established products in mainstream markets. But they have other features that a few fringe customers value. They are typically cheaper, simpler, smaller, and more convenient to use
1: Companies depend on customers and investors for resources
While managers think they control the flow of resources in their firms, in the end customers and investors dictate how money will be spent because companies with investment patterns that don’t satisfy their customers and investors don’t survive. Highest-performing companies have systems for killing ideas that their customers don’t want. Thus, companies find it difficult to invest in disruptive technologies until customers want them, which is too late
Small markets don’t solve the growth needs of large companies
As companies growth larger, it becomes more difficult to enter newer, smaller markets. To maintain share prices and internal opportunities, companies need to grow. The larger and more successful an organisation, the weaker the argument that emerging markets are useful engines for gowth. Waiting until markets are ‘large enough to be interesting’ is not a successful strategy
3: Markets that don’t exist can’t be analysed
Leadership in sustaining innovations is not competitively important. Followers do about as well. But in disruptive innovations, there are stong first-mover advantages. This is the innovator’s dilemma. Companies whose investment processes demand quantification of market sizes and financial returns before they can enter get paralysed or make mistakes when faced with disruptive technologies.
4: An organisation’s capabilities define its disabilities
Many managers assume that once employees are assigned to the job, it will be executed successfully. However, organisations have capabilities that exist independently of the people who work with them. Capabilities are found in processes and values
Process
Refers to the methods by which people have learned to transform inputs of labour, energy, materials, information, cash, and technology into outputs of higher value
Value
Refers to the criteria that managers and employees in the organisation use when making prioritisation decisions.
5: Technology supply may not equal market demand
Disruptive technologies are disruptive because they subsequently can become fully performance-competitive within the mainstream market. This is because the pace of technological progress frequently exceeds the rate of performance improvement that customers demand or can absorb. They compete and over-satisfy the needs of customers as they race the competition towards higher-performance, higher-margin markets
Innovator’s task
To ensure that the innovation, the disruptive technology, is taken seriously within the company without putting at risk the needs of present customers who provide profit and growth. The problem can be resolved only when new markets are considered and carefully developed around new definitions of value and when responsibility for building the business is aligned with the unique needs of the market’s customers
