Saturday, September 1, 2012

The Innovator's Dilemma: Chapter 6

Companies are susceptible to losing their customers as a result of disruptive technologies. In The Innovator's Dilemma, Christensen demonstrates that companies are overtaken despite doing everything right - listening to customers and investing in the highest-return projects. By studying the disruptive process, Christensen shows how companies can defend themselves from disruptive technologies.

While leadership in developing sustaining technologies hasn't proved to be important (with evidence provided by the author), first-mover advantage has been very important for disruptive technologies. For example, in the disk-drive industry, companies that joined new value networks in the first two years of their birth were six times more likely to succeed than firms that entered later.

But established firms fail to take the lead in disruptive technologies. This is because they are held captive by their customers, who see no need for the new technology. This problem allows disruptive players to cultivate new markets and become the leaders in the new technology until such time as it is ready to invade the established markets.

To avoid this, companies instead need to delegate the development of disruptive technologies into organizations that can be excited by small markets. This requires a clear separation between a company's segments; the larger segment with the currently higher returns cannot be allowed to steal resources from the disruptive segment. This also avoids the disastrous "wait until the market is big enough to be interesting" attitude that plagues incumbent firms.

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