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The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business Paperback – October 4, 2011
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“Absolutely brilliant. Clayton Christensen provides an insightful analysis of changing technology and its importance to a company’s future success.”
—Michael R. Bloomberg
“This book ought to chill any executive who feels bulletproof —and inspire entrepreneurs aiming their guns.”
The Innovator’s Dilemma is the revolutionary business book that has forever changed corporate America. Based on a truly radical idea—that great companies can fail precisely because they do everything right—this Wall Street Journal, Business Week and New York Times Business bestseller is one of the most provocative and important business books ever written. Entrepreneurs, managers, and CEOs ignore its wisdom and its warnings at their great peril.
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From the Back Cover
In this revolutionary bestseller, innovation expert Clayton M. Christensen says outstanding companies can do everything right and still lose their market leadership—or worse, disappear altogether. And not only does he prove what he says, but he tells others how to avoid a similar fate.
Focusing on “disruptive technology,” Christensen shows why most companies miss out on new waves of innovation. Whether in electronics or retailing, a successful company with established products will get pushed aside unless managers know when to abandon traditional business practices. Using the lessons of successes and failures from leading companies, The Innovator’s Dilemma presents a set of rules for capitalizing on the phenomenon of disruptive innovation.
- When it is right not to listen to customers.
- When to invest in developing lower-performance products that promise lower margins.
- When to pursue small markets at the expense of seemingly larger and more lucrative ones.
Sharp, cogent, and provocative, The Innovator’s Dilemma is one of the most talked-about books of our time—and one no savvy manager or entrepreneur should be without.
- ASIN : 0062060244
- Publisher : HarperBusiness; Reprint edition (October 4, 2011)
- Language : English
- Paperback : 336 pages
- ISBN-10 : 9780062060242
- ISBN-13 : 978-0062060242
- Item Weight : 8.8 ounces
- Dimensions : 5.31 x 0.76 x 8 inches
- Best Sellers Rank: #87,920 in Books (See Top 100 in Books)
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Microsoft's continued failure in emerging non-Windows-centric markets is a prime illustration of a pattern that should seem familiar to anyone who has followed the technology business for any length of time. A company is innovative, rises to the top, sets the standard for all to follow, but then loses its supremacy rather rapidly, and becomes just another company. The causes of failure are the very things that made the company strong. They do everything right, get lauded by all the business and technology rags for their brilliant management, and then just a few years later, are seen as losers with terrible management.
Clayton M. Christenson's The Innovator's Dilemma, explores this problem. It's not that these companies are badly managed, he argues, it's that they are so well managed. They keep their focus on their customers, listen carefully and do everything they can to deliver what they want, but in the end they lose their supremacy. The companies to whom this has happened have some big names: IBM, XEROX, Apple (yes, Apple).
Through the course of my career, I've seen this up close and personal. I've worked for some successful software companies and I've seen how the devotion to an existing customer-base can cripple innovation. Not just technical innovation, but business and marketing innovation as well. A new bit of technology, not necessarily revolutionary in itself, makes a new kind of product possible - a microcomputer, a laser printer, a graphical user interface - but the market doesn't seem too profitable with the existing business models. Typically, the profit margin is lower than the existing product and business model. Even more importantly, the existing customers have no use for the new technology. They only want, and insist, on bigger, better, faster versions of the things you're already selling them. So, in spite of the fact that the company is entirely capable of entering this new market - it has the technical know-how and the financial resources - on the advisement of the expert and professional product managers and business managers, the new venture is deemed as not profitable and is ignored. It all makes perfect sense. Unfortunate, just a few years later, the company finds itself in decline. Revenues are flat or falling, and those customers that you tried so hard to keep by listening to them, are defecting to a competitor you never knew you had.
By protecting your "franchise" at all costs, you end up destroying the value of your company. Value propositions are not carved in stone, they are transient and they change over time. A failure to recognize this can lead to destruction. Audiophiles will insist that vinyl records (analog technology), with the right equipment, sound far superior to any kind of digital format. Unfortunately, given the equipment that most people possessed at the time, the difference in quality was negligible but the convenience of digital formats was obvious and CD's replaced vinyl records. Back in the day, we argued over the merits of the various turntable manufactures who were locked in cutthroat competition and innovating like crazy. MP3's are even lower quality than CD's, but again, the convenience of the medium matters more. When it comes to audio quality, for most of us, "good enough is good enough." The value proposition changed and those who were dependent on the old value propositions, who couldn't change the way they did business, are gone and forgotten.
Listening to customers and giving them what they want, is part of every major company's mission statement and even makes it onto their business cards. Being customer focused is probably more often than not a good thing. Sometimes, however, your customers can become an echo chamber. As Henry Ford once said:
"If I'd asked customers what they wanted, they would have said a faster horse".
Indianapolis Motor SpeedwayWhen it comes to Microsoft and the pc tablet business, their problem seems to be that they are hell-bent on protecting the family jewels: Windows. Unfortunately, and as the iPad is proving, tablets are not pc's are not meant to compete with pc's (yet), and have a completely different value proposition, one that renders current pc operating systems (Mac OS as well as Windows) irrelevant. Apple recognized this and did not simply port Mac OS. They started from square one and envisioned an entirely new device with an entirely new value proposition. At some point, however, and we may already be there, the new value proposition will be a threat to the old. Consider what the vast majority of PC users in the consumer market do: they do email, they browse the internet, they play digital content. They don't need a desktop, or notebook computer for that. And an iPad is thinner and lighter than the thinnest and lightest notebook. In the corporate world, they are showing up everywhere, much to the chagrin of IT departments.
As Christensen warns, protecting your franchise, as Microsoft seems to be trying to do can end up having the opposite effect:
The fear of cannibalizing sales of existing products is often cited as a reason why established firms delay the introduction of new technologies. As the Seagate-Connor experience illustrates, however, if new technologies enable new market applications to emerge, the introduction of new technology may not be inherently cannibalistic. But when established firms wait until a new technology has become commercially mature in its new applications and launch their own version of the technology only in response to an attack on their home markets, the fear of cannibalization can become a self-fulfilling prophecy.
The irony is that few companies are have the financial and technical resources that Microsoft has at its disposal. They could potentially dominate, but their business model, their culture, their DNA are preventing them.
In the future, there will still be PC's as we know and love them. But a lot fewer of them. Microsoft will still be around, but just like IBM before them, they will no longer be "the environment," the dominant force that dictated direction to an entire industry. I remember when the saying was, "No one ever got fired for buying IBM." Well, that was a long time ago, and since then I have seen people get fired for buying IBM.
Who besides Microsoft is on your list for a mighty humbling? Oracle? Blackberry? SAP?
What the hell just happened?
The Innovator's Dilemma reveals the true source of groundbreaking and game-changing technologies, and why the Modern Corporate System works against real innovation. If you can understand why certain companies and entrepreneurs stall out, you can understand how to avoid it.
Notice the word Dilemma in the title. These are failed companies. They're enormously successful ones. Once you understand that these companies are very smart and very successful (and still subject to this effect), you get a hint of cause. Having an army of loyal customers sounds like a great place to be right? This book is about how those very same customers, if you listen to them, if you focus group them, if you beg them for feedback, will probably run your company into the ground.
There are two forms of Innovation mentioned in this book: sustaining and disruptive. Sustaining technologies are essentially evolutionary upgrades: taking the same product and bumping up the specs, giving it a bigger screen, or a faster processor. Shallow things like `new colors' also fall into this category. And these sustaining innovations are exactly the kind of things that customers want, and will ask for, if you're listening. Customers look at the widget and ask, "Can you make it smaller? Can you make it so there's no noise? Can you do one in gun metal grey?" The technologists in the company declare, "Sure we can! Because it's been about 9 months since we released a new model, and in that time, the price of those high end chips has come down, and they're even smaller. Here you go." And the next version is released. If you listen to your customers, you will keep putting out tiny evolutionary upgrades like this. As we learned in Lean Startup, most of the time focus groups lead you astray. But listening to your actual customers...as a bad thing? What happened to `Customer is King' or `The Customer is always Right?' I suspect those little sayings were actually cooked up years ago by bosses told to their employees, especially in retail operations, to cut down on complaints. That is not a very good mantra for R&D Labs. If the customer was `right', he'd be working at Boeing, Microsoft, or 3M.
The Customer isn't an expert. Rather than let them boss your around, maybe you should start to take away a little bit of their power. Sometimes the customer isn't the end user, but the retail store. Retail stores like Walmart won't be eating the food your company makes, or wearing the clothes. They just want your stuff a dirt cheap prices, and will push you do make uncomfortable compromises to hit those price targets. Are you sure you want to let these guys ruin your flagship product? Sometimes, like Enterprise computing, the customer is the IT department. They want your stuff to be cheap and modular, and they don't care about the User Experience, because they're not the ones using the product. To get around this, many companies have done their own distribution channel (open your own retail stores, or just quit retail altogether and go to the web directly), or fired their customers (by killing a product that wasn't part of the company's core competency). As a result, these companies are leaner, better branded, and more focused (and more profitable).
So what if you can ignore the customer for a few minutes, and consider developing a disruptive technology. What is that anyway? Intuitively, if sustaining technology is evolutionary, then disruptive must be revolutionary, right? Not quite. Disruptive technologies take a current technology and apply them to a new market. This is like when Nintendo released the Wii. They found a way to make Videogames less expensive, and more fun, to a broader market (everyday people, women, girls, seniors,etc). The result was the most dominant era in Nintendo's history. Little did they know that they would be disrupted a few years later by ... mobile phone gaming. Part of the reason why disruptive technology is so great is that it takes really long to copy. When Microsoft set about copying the Nintendo Wii, first they had to wait a few quarters to see if it was successful (because it was a brand new gaming experience, no one knew if it would take off). For the first 18 months of release the Nintendo Wii was sold out everywhere. Microsoft decided to start copying them. To make up for lost time, they looked around and acquired (link) a company with similar tech, that didn't even require a controller. While they set about integrating the `Kinect' into Xbox, Sony was doing their own copycat device (Sony Move Controllers). All this time, Nintendo is reporting amazing financial numbers. They were in the Blue Ocean, and making billions. When the Sony and MS devices came out, they were very late, and the response was middling at best: while the Nintendo tech camed bundled with every Wii, the Sony/MS versions would be add-ons, which meant developers had a very small market to develop for this new gameplay. Who wants to sell a game aimed at 15 million users, when they can sell almost the same thing on a Wii, and hit 85 million users? The result is almost no Kinect/Move games are being made, and tech isn't really being used. Kinect is currently being developed for Windows.
The Sony and Microsoft technologies didn't fail because management was arrogant; the management team was just being conservative, and smart. They failed because the technology (which had been available for years and years) didn't make sense until it was too late (when Nintendo showed them the way). You can't get their by copying, you can only get there by having a visionary leader who looks at the technology and says, "We need to invest in this, even if it doesn't make sense right now. This is where the industry is going." The Nintendo Wii, launched in late 2006, had been in development since 2001.
Disruptive technologies can also evolve. This is where you start to see amazing changes in the Industry. The iPod was disruptive at the low end, but eventually evolved into the iPhone, and later the iPad. The iPad sell about 25 million units per quarter now, and is reason both Apple and Microsoft are drastically redesigning their OSes. Mac OS X Lion released this year, has many touch elements, fullscreen mode and even an iOS-style launcher. Many expect Apple to ship iPads running OS X within the next 5 years. Windows 8, due out next year, will be Microsofts answer to iOS for iPad. It will have an App Store and fully touch interface. Can you imagine back in 2001, when Bill Gates first gawked at the iPod, he ever thought his company would redesign their cash cow Windows business because of it's disruptive powers? Amazon did the same thing with the Kindle. Disrupt at the low-end, fine tune it, then move it up the market (in price and features). In just a few years, I expect Kindle to be putting out some very beautiful Kindle Fires, to give Apple fits.
It's obvious how the innovators dilemma works for companies. Rather than listen to the customers, ignore them and try to make the best products you possibly can, by eliminating assumptions about what a product should have. I wonder though, if that same lesson can be applied to people. How can people be rapidly innovative and creative? By ignoring the career that makes us the most money, and follow our instincts about what a ideal lifestyle looks like? Why do I have to be married? Why do I have to own a home? Maybe I live in a new city every year, and rent beautiful apartments. Maybe I live with friends and couchsurf for a few years. Maybe I spend ten years mastering my favourite languages and living in various countries around Europe. Or maybe, I'm constantly changing jobs, looking for new work, emulating Howard Roark-an idealist a snob, who falls ass backwards into money and repute? Or maybe, just maybe, following your own path, will lead you to tremendous wealth and power (and just maybe, those white collar guys who told you to get a `real' job, will find themselves sideswiped by disruptive technology).
After all....what could be more replaceable (either by software, or machinery, or outsourcing) than a passionless, unoriginal, hopelessly conservative and painfully average employee?
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If you have to read one book about preparing yourself or your company to disruptive technology or more over understanding how new technologies, as immature it could be, might become disruptive in the next few years or decades, this is it.
I see why apple is so successful with some of their products: why they prepared iPad on the early 2000s, for example, and they launched at a precise point of the time (on an emerging market), when it could do something useful with WiFi, 3G, and an ARM chip powerful enough for the web, and what was probably the vision that makes them do it, the iPad Pro, a laptop replacement for the consumer market. More than 10 years ago.
Sometimes, just to be able to understand needs, to be able to draw a curve, could project you on the next decade, and make you successful like no other!
I would have given this a five star, but I do find some of the case studies provide to much detail about the industry that I find is not necessary to get the point across, yet I understand the need for the detail as you need to understand the context, stage and how the industry got there.
I have been very curious as to how healthcare could undergo the same disruption, that has been so clearly demonstrated in the disk drive and backhoe business. The theory of disruption curiosly seems to make a very compelling case in this field.
I have picked up the innovators prescription for healthcare and cannot wait to begin reading it.
I would like to ask Clayton Christensen if there is a case for the Indian satellite industry and disruptive innovation, if I get a chance that is.