The Innovator's Dilemma by:Clayton Christensen

Week 7 Book Reflection: Ch. 7 “Discovering New and Emerging Markets”

Instead of managers creating strategic plans for going up against disruptive technological change, they should plan for ways to learn and explore from the disruptive change. With disruptive technology being the new entrance to a business, this will result in how they invest by recognizing the uncertainties of a developing market. Most managers learn about sustaining markets more so than disruptive ones. When sustaining markets are known markets where the customers’ needs are already understood. “In this environment, a planned, researched approach to evaluating, developing, and marketing innovative products is not only possible, it is critical to success.” This technique however does not apply to disruptive technologies. At universities there are few program that go in depth teaching the theory of how to discover new markets. Because this technique for sustaining business environments is what people are taught, they use it in disruptive technologies as well because they assume that the same concepts would apply. This course of action can actually be detrimental for a company. Using this process for disruptive technologies can lead to “applying inappropriate marketing, investment, and management processes can render good companies incapable of creating the new markets in which enabling or disruptive technologies are first used.”

Some managers think the answer is to work harder and plan smarter, once again this tactic would word with sustaining markets but does not with disruptive ones. With disruptive markets you can only count on one thing, “experts’ forecasts will always be wrong.” Because the markets are unpredictable of how large the markets will be or how the products will be used, any initial strategies or plans for coming into these markets will be wrong.

How can companies become more successful if they cannot predict the value market they are entering? When managers think about their own companies they realize that their situation is unique, and results cannot be predicted. “The findings violate their intuitive sense that creating new markets is a genuinely risky business.”

“There is a big difference between the failure of an idea and the failure of a firm.” It’s almost like a guessing game in picking a strategy. The majority of the ones that succeed learned what would work and what wouldn’t through trial and error and ended up abandoning their original business plans. Most companies are unable to survive going through trials and errors and still being able to sustain this business. The key is to be able to retain resources so that you can have multiple trials and errors. Failure is part of the process in order to find new and disruptive markets. Managers have to be willing to take this risk. Or obtain enough resources to be able to attempt the market more than once. In Joseph Bower’s book Managing the Resource Allocation Process, he states “pressure from the market reduces both the probability and the cost of being wrong.” When entering a new market there is no way to predict the demand which makes it difficult to enter a market that you don’t know is there or not. When entering a new market you have to be willing to risk failure.

 

References:

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

Joseph Bower, Managing the Resource Allocation Process (Homewood, IL: Richard D. Irwin, 1970), 254.

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