Sunday, September 2, 2012

The Innovator's Dilemma: Chapter 7

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.

This chapter contains another deep dive into the disk drive industry, in order to illustrate how the capabilities of incumbent firms harm rather than help these firms with disruptive technologies. Incumbents are able to successfully develop sustaining technologies because they can measure ROI based on reasonable estimates of customer uptake. In disruptive fields, there are no markets yet; the industry is very uncertain.

This does not play into the hands of incumbents, who have come to rely on reasonable forecasts. Unreliable forecasts are seen as risky, and they are. But as a result, incumbents cede new markets to firms willing to be flexible in meeting uncertain market demands.

This process is further illustrated in the motorcycle industry (where Honda gains entry into the mainstream segment only after enjoying success in brand new markets) and microprocessor industry (Intel's shift away from RAM into processors).

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