First published in 1997, The Innovator’s Dilemma by Clayton Christensen is a classic, widely considered one of the best books on management. Why do companies, even successful and well-managed ones, fail? How to distinguish between passing fads and the next big thing? How do you balance sustaining the business you already have while also taking on the risks associated with innovation?
The basic dichotomy that runs throughout the entire book and lays the groundwork for the eponymous dilemma is that of sustaining versus disrupting technologies.
Sustaining technologies are improvements made within existing markets. They are not necessarily marginal, although they can become somewhat stagnant or boring over time. The example Christensen uses often is that of disk-drives. They got smaller, more efficient, cheaper to produce. But all these developments simply improved upon and furthered the status quo.
Disrupting technologies are those products and developments that find entirely new markets. They don’t merely improve upon existing technology. They create new products and find new consumers. This can cause rapid and radical growth, although naturally it comes with a lot of risks. Most disrupting companies fail. For every Facebook, there’s a dozen Myspaces.
Companies are run on three things, according to Christensen—resources, processes, and values. Sustaining companies will generally have the lion’s share of resources, after years of successful operations. But they also tend to get rigid and locked into their processes and values. What’s worked before must continue to work, right?
This then is the dilemma: The processes and values of successful sustaining firms explicitly cause them to avoid disrupting technologies. Put a different way, conventionally good leadership practices actually stifle innovation. Listening to what most of your customers want means that you will not be pursuing disruptive technologies or niche markets.
What start-ups and disruptive companies lack in resources, they make up for in nimbleness. They are able to take risks that the good business practices of sustaining firms have ruled out. But at the same time, disruptors generally lack the resources to sustain their own rapid initial growth and many fail.
The solution Christensen proposes is a bit underwhelming. He proposes that major firms purchase or form small subsidiaries that can experiment and take the risks involved with disrupting technologies.
Admittedly the book, even the updated edition from 2016, is somewhat outdated. Classic though it is, there is a focus on hardware and manufacturing that can make the book feel positively prehistoric in two decades into the 21st century. It is also a bit too academic and dry compared to more contemporary management books.
Nevertheless, it is a testament to the book’s insight that its ideas that were radical in 1997 are now basically taken for granted. The Innovator’s Dilemma presents a fascinating and compelling model for why businesses fail and what drives innovation in the market. It is a must read for anyone interested in these topics.
The Innovator’s Dilemma is available for purchase here.