The Innovator's Dilemma by:Clayton Christensen

Week 6 Book Reflection: The Innovator’s Dilemma “Match the Size of the Organization to the Size of the Market”

“Leadership is more crucial in coping with disruptive technologies than with sustaining ones, and that small emerging markets cannot solve the near-term growth and profit requirements of large companies.”

This suggests that entering established markets and going up against the competition is more risky with lower chance of success than in creating a new market. But it is difficult to get the timing right and enter the emerging markets early before the companies grow too much and become too successful, that you then will be entering an established market. Because company’s goals are to gain more and more revenue each year to be able to grow, the small markets are becoming less valuable. One way to combat this is to commercialize disruptive technologies in companies in small markets, while maintaining the main business of the company. This will contribute to their path for growth and success.

As an innovator when is it better to be an innovation leader or an innovation follower? Both have their advantages, to be an innovation follower means you let the pioneers do all the hard work and learn from their mistakes. Being the leader innovator involves a lot more risk, “you can always tell who the pioneers were, they’re the ones with the arrows in their backs”. For some industries it does not make much difference for your business if you lead or follow, from a competitive standpoint.

Leadership in disruptive technology creates a higher advantage than would leadership in sustaining technologies. Leadership in disruptive companies has proven very important because the leaders determine the time frame in which they enter the market, which could mean the difference between success and failure of launch the business. This shows that it is advantageous to be a leader in disruptive innovation and it is more acceptable to be a follower in a sustaining company.

The larger and more success a company gets the harder it will be for them to enter the emerging market in the beginning, when the timing on entering the emerging market is the most important for success.

“How can a manager of a large, successful company deal with these realities of size and growth when confronted by disruptive change? I have observed three approaches in my study of this problem:

  1. Try to affect the growth rate of the emerging market, so that it becomes big enough, to make a meaningful dent on the trajectory of profit and revenue growth of a large company.
  2. Wait until the market has emerged and become better defined, and then enter after it “has become large enough to be interesting.”
  3. Place responsibility to commercialize disruptive technologies in organizations small enough that their performance will be meaningfully affected by the revenues, profits, and small orders flowing from the disruptive business in its earliest years. “

All three cases have their own set of issues but the third one holds the most potential. Small and independent businesses have their own advantages in innovation. To be discussed in the next chapter post.

 

References:

Christensen, Clayton, The Innovator’s Dilemma (Boston: Harvard Business School Press, 1997).

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