So David at work has been talking about this book quite a lot recently, and that meant I had to read it despite the failure of Debugging to delight me. Interestingly, the book starts by telling the story of the hard disk industry, which aligns well with Chip War’s approach of telling the story of the semiconductor industry. Apparently the universe thinks I need to know more tech history!
The book asserts that disruptive innovation occurs when incumbent players become too good at serving their current market with improved products or services. While this might seem like the result of rational management, often those products end up over delivering compared to what customers want, and as a result then costing more than customers really want to spend. Disruptors on the other hand often launch with a worse product which doesn’t meet the needs of the incumbent’s customers, but does address the needs of some previously unserviced market segment. That’s great for everyone, until the new player adds sufficient functionality to now be competitive with the incumbent player, but at a lower price point — that’s when life gets sad for the incumbent.
An interesting point in the discussion is that the disruptive entrant did not in fact need to have some uniquely new technology. Often the incumbent player knew how to build such a product, but saw the effort to do so as a distracting from further servicing their current market. There are several examples in the book of where the incumbent players had working prototypes years before new entrants, but chose to shelve the work because it didn’t meet the needs of their current core customers. Ironically, often the new players are founded by engineers from incumbents frustrated with this behaviour. The new players however are forced to cultivate a new market to operate in until their products can develop to the point where they are competitive in the incumbent’s market.
As an aside, I think creating new markets is sort of Cisco’s accidental super power — many of Cisco’s biggest competitors were founded by people who either left Cisco in frustration or were laid off by Cisco. I don’t know how to actually correct that, but its interesting that Cisco is sort of its own biggest competitor.
For a while, I had to restrain my urge to come up with deliberately worse products to compete with things, because that’s not really what the author is saying — the new products were worse when compared to incumbents when you only considered the original market, but were a better fit for a new previously unexploited market. For example laptop hard disks were smaller in both size and total capacity, and more expensive per megabyte than desktop disks… Until they suddenly weren’t.
There is also an argument to be made that incumbent players are more siloed internally and ship their organizational charts in their products. A radical redesign of a product would require multiple business groups to cooperate, and thus innovation is limited to what can be fit into just one silo. I think I’ve seen this a lot of over the years, and its phrased more clearly here than I’ve previously seen.
The book makes the following recommendations to address these issues:
- Assign work on disruptive products to organizations whose customers want those products.
- Match the size of the organization to the size of the market. You need the organization to be excited by the size of wins available in the new market, and not hold them to the same bar as established markets.
- Plan to fail early and inexpensively. That is, conserve resources until it is clear you have product market fit instead of going all in on the first idea and then not having enough left in the bank to pivot if you need to. At first your plans should be “plans to learn” not “plans to execute”. Run experiments to validate a market before committing.
- Use resources from the larger organization, but not processes and values.
- Find a new market, don’t attempt to disrupt the current one.
Overall, I really enjoyed this book which was a surprise to me given it’s a “business book”. I’d strongly recommend it if you’re interested in understanding how to compete with big incumbent players in an established market.
Business & Economics
January 5, 2016
288
The bestselling classic on disruptive innovation, by renowned author Clayton M. Christensen. His work is cited by the world’s best-known thought leaders, from Steve Jobs to Malcolm Gladwell. In this classic bestseller--one of the most influential business books of all time--innovation expert Clayton Christensen shows how even the most outstanding companies can do everything right--yet still lose market leadership. Christensen explains why most companies miss out on new waves of innovation. No matter the industry, he says, a successful company with established products will get pushed aside unless managers know how and when to abandon traditional business practices. Offering both successes and failures from leading companies as a guide, The Innovator’s Dilemma gives you a set of rules for capitalizing on the phenomenon of disruptive innovation. Sharp, cogent, and provocative--and consistently noted as one of the most valuable business ideas of all time--The Innovator’s Dilemma is the book no manager, leader, or entrepreneur should be without.