The Innovator’s Dilemma Book Summary By Clayton Christensen

Table of Contents

Clayton Christensen

The Harvard Business School’s Kim B. Clark Professor of Business Administration was Clayton Christensen. Building and Sustaining a Successful Enterprise, one of the most well-liked elective courses for second-year students, was one of his subjects. Professor Clayton holds an M. Phil. in applied econometrics from Oxford University and a BA in economics from Brigham Young University. He attended Oxford as a Rhodes Scholar. Later, as a George F. Baker Scholar, he graduated from the Harvard Business School with a High Distinction MBA in 1979. Christensen has written nine best-selling books and more than a hundred articles. The Innovator’s Dilemma, his debut book, won the Global Business Book Award for being the best business book of the year (1997).

Intro

The dilemma faced by business executives when deciding whether to adopt disruptive innovations in developing markets is known as the “Innovator’s Dilemma.” As businesses expand, it gets harder to use disruptive technologies because shareholders’ power grows. You need to discover which technologies are worth moving to and when you should do so, according to Christen. He also discusses why the majority of businesses miss out on emerging innovation waves. Managers who don’t know when and how to break with conventional business procedures will see a thriving company with proven products fall by the wayside.

A disruptive or sustaining technology can be used by an inventor, according to Clayton Christensen. The effectiveness of organizational executives depends on their ability to identify which technologies fit into which category.

Many times, society has already adopted sustainable technologies. They are highly valuable and useful. Computers or cellphones are eminently recognizable instances of sustaining technologies. Modern society depends on these technology. The general public is aware of what to expect from these technologies. Nearly everyone in society will comprehend that a smartphone would be required to make calls, send texts, and shoot pictures even without utilizing a specific model.

It is quite challenging for a leader to enter the markets for sustaining technology. The increased competition is to blame for this. Nevertheless, you reduce some risk by investing in the sustaining technology market. Society has already come to understand and accept these technologies. Let’s say you wish to successfully maintain technology. In that circumstance, you need to disrupt the market by taking an intriguing or novel action.

Common Sustaining Business Practices
In his analysis of the typical sustaining corporation, Christensen identifies four corporate behaviours. Which are:

taking into account client feedback
enhancing the capabilities of technologies that are already operational attempting to appease investors by fulfilling their demands
focusing on mass markets as opposed to specialised and local markets

Technologies that disrupt the existing quo do just that. These technologies come from established markets and are part of the innovation market. Due to the lack of competition, disruptive innovations are typically easier to invest in. However, disruptive technologies typically have a smaller market and are less well-developed.

Disruptive innovations have a far higher failure rate. However, they have the ability to soar as well. Before society embraces this form of technology, these technologies occasionally fail after their first few iterations and come dangerously close to going bankrupt. In the past, the cell phone would have been disruptive even though it is not a sustaining technology now. Disruptive technologies, according to Christensen, are future-oriented. They have a lot more potential and face almost no opposition. However, there is no assurance that society will embrace these technology.

Common disruptive business practices
Additionally, Christensen divides the typical disruptive company into four business activities. Which are:

observing what consumers do as opposed to what they say
Searching for innovative and engaging approaches to problems
being motivated by the core values of the business
attempting to establish their own market by pursuing smaller and nonexistent markets

Large Businesses Struggle to Modify

It becomes increasingly challenging for an organisation to adapt to societal changes as it grows. Small innovators are better able to take advantage of market opportunities despite their ability to adapt. One of the main causes of this is that large companies have difficulty spotting new trends that warrant investing.

Christensen outlines four issues that make it difficult for large companies to recognize these trends:

Customers and investors are essential to businesses. Therefore, huge companies cannot join a new, possibly risky market without the support of their investors and clients. The backbone of the nation is made up of investors and consumers. They are essential to the major firm’s continued size. As a company grows and becomes more bureaucratic and reliant on meetings, investors’ influence increases considerably.
The biggest businesses in the world have little interest in cornering a niche market. Large sums of money are needed by large businesses to keep their operations running smoothly. Therefore, big corporations tend to steer clear of disruptive technologies because of their higher risk and longer-term investment potential.
A shift toward data-based decision-making occurs as an organization grows in size. However, it is impossible to measure markets that do not exist. The board of investors won’t therefore have the necessary information to invest in disruptive technologies.
Innovation in technology will never keep up with market demand. Therefore, since large corporations depend on consumer demand, they won’t be drawn to a disruptive technology that is now viewed as a little odd.

Technological Changes Are Important

In this section of the book, the issue faced by innovators is explained. Business leaders are successful because they paid close attention to their consumers’ needs and made significant investments in new goods and equipment. However, given that numerous large corporations fail for the same reasons, this poses a conundrum.

Because clients don’t always know what they want, listening to them won’t always be effective. Customers typically concentrate on stronger, faster, or more sophisticated versions of the ideas they currently have. They do not approach problems creatively. This means that business owners should watch for major technological changes and make appropriate investments.

“The cause was good management itself, which is why. The game was played by managers in the proper manner. The very processes that established businesses rely on to succeed—listening carefully to customers, keeping an eye on competitors’ moves, and allocating resources to design and build higher-performing, higher-quality products that will generate more revenue—are precisely the processes that reject disruptive technologies. These are the explanations for why great businesses struggled or crumbled in the face of disruptive technological development. (Clayton Christensen)

Create an RPV Framework

The RPV framework is presented by Christensen. Resources, Processes, and Values are abbreviated as RPV. Each of these elements should be understood by businesses in order to better position them to comprehend their own capabilities. This information will have a big impact on what you can and cannot do if you want to keep the business successful.

Your business will be able to avoid taking steps that are not appropriate for the industry by using the RPV framework. The RPV framework is compared to an audit of your company by Christensen. He advises your business to invest some time in developing its own operational framework. As a result, your employees will be reminded of their motivations.

Resources

Resources for your business include people, tools, knowledge, money, connections, and technology. Typically, businesses base their future decisions on the resources they have available now. Christensen argues that this strategy is flawed. Let’s say you lack the knowledge necessary for a particular task. Then you can always contract this task off to another company. Do not let a lack of funds prevent you from making an incredible investment.

Processes

The procedures used by your company to convert raw materials into finished goods are known as its processes. Internal and external communication, market research, and budgeting are typical examples of processes. Adopting processes for certain items and failing to modify them for new products is one of the most common errors.

Values

The company’s values are what it stands for and the reason it was founded. Your company’s ideals should be obvious to everyone. When a customer hears about your firm in discussion, they should keep these ideals in mind. The markets you choose to enter should be influenced by your values as well. A sustainable brand shouldn’t, for instance, decide to enter the oil sector.

You must be aware that your chances of success are lower when you enter a developing market. Before you are successful in emerging markets, it could require a few tries. Christensen advises you to prepare for this setback so it won’t affect your long-term objectives. Your strategy for your business will be healthier and more successful if you expect to fail. You’ll manage your resources more effectively and view setbacks as inevitable setbacks rather than catastrophes.

You shouldn’t invest all your resources in one product when you first start out, which is another important thing to learn. You should always withhold resources earmarked for an alternative in the event of failure due to the high likelihood of failure. Finally, iterate and learn from your mistakes.

In disruptive markets, only the first mover matters

Being the first to enter a market is one of the most frequent pieces of advice offered to businesses. In essence, you aim to enter a market first with a certain product. However, Christensen argues that being the first to introduce a disruptive innovation gives you an advantage. When functioning in a mature market, it has limited impact. Therefore, choosing whether to be a leader or a follower is crucial when working as a manager of innovation. Christensen makes the observation that executives who launch disruptive innovations appear to benefit from the first-mover advantage. New markets are being developed by these market leaders for their products.

Christensen offers proof of the value of being the first player in disruptive marketplaces. In particular, between 1976 and 1994, the companies that pioneered the introduction of disruptive innovations collectively generated 62 billion dollars in revenues. Those who entered the markets later only made a total of 3.3 billion dollars. The typical disruptive technology leader business made 1.9 billion dollars in revenue. So, attempt to take advantage of the first-mover advantage if you want to interact with disruptive marketplaces.

How to Identify Disruptive Technologies

Christensen gives a description on how to spot disruptive technologies. He specifically proposes making a graph that compares “performance improvement offered by the technology” to “performance improvement requested in the market.” Consider whether the technology offers a chance for successful expansion. To achieve this, think about whether the graph’s trajectories are parallel. It is unlikely that this technology will be able to integrate into the mainstream market if they are parallel. However, if technology develops more quickly than the rate of development that the market requires, you may have a disruptive technology.

Christensen explains in The Innovator’s Dilemma that doing everything “perfect” is insufficient to sustain market leadership. Overnight, rivals could appear and seize your market. As a result, Christensen advises picking disruptive technologies that can be very useful in developing markets. He offers the following guidelines to keep in mind in order to accomplish this goal:

Resources are used by a business to serve its current customers.
The specific market that a disruptive technology will affect cannot be predicted.
Processes and core competencies of a disruptive firm are just as crucial as its employees.
Disruptive technologies are very valuable in emerging markets due to characteristics that make them unappealing in established markets.
Know the RPV (Resources, Processes, and Values) framework to determine the capabilities of your business.
You must always be one step ahead of the competition since customers rarely know what they want.

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