Book review: The Innovator’s Dilemma by Clayton M. Christensen

This book addresses the question “Why does Disruptive technology cause great companies to fail?”.

Sustainable technology vs. Disruptive technology

There are sustainable technology and disruptive technology. 

Sustainable technology is developed to meet known customers and markets. On the other hand, a disruptive technology may not meet those existing customers and markets.

Sustainable technology

• Big revenue
• Big & known customers
• Forecastable market

Disruptive technology

• Small revenue
• Unknown customer
• Unknown market

Obviously, to maximize profits, companies need to allocate resources to new products with high-profit margins and large markets. Needless to say, great companies invest in sustainable technology.

Why do great companies fail to introduce disruptive technology?

Because great companies know their customers and markets, already have high revenue, and look for further growth.

Firstly, great companies know market share and prioritize bigger customers. If bigger customers don’t need disruptive technology, they decide they don’t need disruptive technology. In other words, they don’t try to find new small customers that may require disruptive technology because smaller revenue can’t justify development costs.

Secondly, great companies have already big revenue and need bigger revenue for their growth. It means that getting small businesses and revenue is not their success. Therefore, instead of looking for customers who need disruptive technology, they look for customers who can pay them to grow.

Finally, good companies know how to maximize their investment and avoid the risk of failure. Therefore they don’t invest in products that have no customers or in markets where the growth rate is uncertain.

This is the Innovator’s Dilemma.

How to manage disruptive technology

• Organize a small team that can succeed with small sales
• Find customers that require disruptive technology regardless of revenue and profit
• Allow failure and fail early with minimal loss

Thank you for reading this post.

One day, I want to lead disruptive innovation.
And I hope you will do that.

By the way, disruptive innovation is one of fifteen types of innovation and please check other innovations in this post.

Please also check the author’s website.