The Innovator's Dilemma, Clay Christensen

Clay Christensen's classic helps define disruption while also contrasting progressive products with sustaining technologies. Here are some highlights from the book with the most interesting takeaways. 

What does it take to create disruptive technology?

  • Principles of Disruptive Innovation
    • “All firms have technology”
    • Technology = “the process by which an organization transforms labor, capital, materials and information into products and services of greater value”
    • Extends beyond engineering
    • Innovation refers to a change in one of these
  • Disk drive industry and failure – rich data exist
    • Repetitive patterns of failure – the ups and downs of disruptive domination and sustaining recession
    • Failure framework (from 3 findings in disk study)
    1. Strategically important distinction between sustaining technologies and those that are disruptive
      1. These are different than incremental vs. radical distinction
    2. Pace of technological progress can and often does outstrip what markets need (demand)
    3. Customers and financial structures color heavily the sorts of investments that appear to be attractive to them
  • Sustaining technologies = improved product performance
    • Some can be discontinuous or radical, while others are more incremental
    • All of them improve performance of established products
  • Features of disruptive technology: cheaper, smaller, more convenient to use. Simpler, they promise lower margins, not greater profits (example: transistors)
    • First commercialized in emerging markets
    • Leading firms’ most profitable customers generally don’t want or can’t use the products based on disruptive technology
    • Disruptive technology is initially embraced by the least profitable customers in a market. Companies intently focused on customer pleasing and profit will rarely invest in disruptive technology.
  • Theory of Resource Dependence = while managers think they control the flow of resources in their firms, it’s really customers and investors who determine how money will be spent. Established firms kill products that don’t satisfy their customers; as a result, they rarely invest in disruptive tech, because they want to appease. You have to detach yourself from resource dependence.
    • OR: companies’ freedom of action is limited to satisfying the needs of entities outside the firm that give it the resources it needs to survive (survival of the appeaser)
    • If you’re well adapted to resource dependence, your leadership is purely symbolic
    • Small markets don’t solve the growth needs of large companies (first mover advantage for agile groups, barriers for the monoliths). A small, provocative market today is a large market tomorrow. Waiting until it’s large doesn’t work.
  • Ways forward:
    • Embedded projects to develop and commercialize disruptive technology. They placed projects to develop disruptive technology in organizations small enough to get excited about small opportunities and small wins.
    • In disk drive industry, willingness to spend with risk was tied to potential customer interest.
    • HP did this well; they spun out an independent business unit and almost killed another of its business units. Ink jet printing was disruptive. Smaller and less expensive than laser jet. HP’s embedded unit was tasked with launching ink jet. One product ate the other, but HP survived.
    • We have to make the decision: is it important to be a leader or acceptable to be a follower?
    • “You can always tell who the pioneers were. They’re the ones with the arrows in their back.”
    • Innovation is difficult, but it’s hard in big, tied down companies. You always have to justify your disruption. Success probability increases when executed in a supportive ecosystem.
    • Plan for discovery, not execution. First mover advantage is at stake, so embark on discovery driven expeditions.