Christensen - The Innovator's Dilemma

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Exzerpt:

• distinction between "disruptive", "sustaining" and "radical" innovation (p. xviii): "An important finding revealed in this book is that rarely have even the most radically difficult sustaining technologies precipitated the failure of leading firms. Occasionally, however, disruptive technologies emerge: innovations that result in worse product performance, at least in the near-term."

• p. xxiii ff. five principles:

• Principle #1: Companies depend on Customers and Investors for Resources
  • "the only instances in which mainstream firms have successfully established a timely position in a disruptive technology were those in which the firms' managers set up an autonomous organization charged with building a new and independent business around the disruptive technology." (p. xxiii)

• Principle #2: Small Markets Don't Solve the Growth Needs of Large Companies: "the larger and more successful an organization becomes, the weaker the argument that emerging markets can remain useful engines for growth." (p. xxv)

• Principe #3: Markets that Don't Exist Can't be Analyzed

• Principle #4: An Organization's Capabilities Define its Disabilities: "But processes and values are not flexible. (...) The very processes and values that constitute an organization's capabilities in one context, define its disabilities in another context." (p. xxvii; Anm.: cf. core competences and core rigidities framework by Leonard-Barton)

• Principle #5: Technology Supply may not Equal Market Demand: "the basis of competition - the criteria by which customers choose one product over another - changes. (...) In their efforts to stay ahead by developing competitively superior products, many companies don't realize the speed at which they are moving upmarket, over-satisfying the needs of their original customers as they race the competition toward higher-performance, higher-margin markets." (p. xxviii)

• With regard to the disk drive industry: "Those companies are the closest things to fruit flies that the business world will ever see." (p. 3)

• Example of 8-inch drives: "Mainframe computer manufacturers did not need an 8-inch drive. In fact, they explicitly did not want it: they wanted drives with increased capacity at a lower cost per megabyte. The 14-inch drive manufacturers were listening and responding to their established customers." (p. 20)

• Cannibalization: "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-Conner 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." (p.2§)

• "There are several patterns in the history of innovation in the disk drive industry: The first is that the disruptive innovations were technologically straightforward. They generally packaged known technologies in a unique architecture and enabled the use of these products in applications where magnetic data storage and retrieval previously had not been technologically or economically feasible." (p. 25)

• The concept of Value Network as an explanation for "why good companies fail" (see also EN 7 on p. 65 for research papers on the value network concept):
  • "Because an organization's structure and how its groups work together may have been established to facilitate the design of its dominant product,the direction of causality may ultimately reverse itself: The organization's structure and the way its groups learn to work together can then affect the way it can and cannot design new products." (p. 34)
  • "The definition of a value network goes beyond the attributes of the physical product."
  • citing Richard Tedlow's history of retailing in America: "the most formidable barrier the established firms faced is that they did not want to do this." (p. 62)

• innovation definitions
  • definition of radical innovation as "innovations requiring very different technological capabilities"; (p. 34)
  • definition of incremental innovations as innovations "that build upon well-practiced technological capabilities" (p. 35)
  • definition of sustaining innovations: "sustaining technological changes within a single value network" with "a single measue of product performance" (p. 45)
  • definition of disruptive innovations: values "different attributes of performance than those relevant in established value networks." (p. 46); "Disruptive innovations are complex because their value and application are uncertain, according to the criteria used by incumbent firms." (p. 61)

• "Rather, disruptive projects stalled when it came to allocating scarce resources among competing product and technology development proposals (allocating resources between the two value networks" (p. 48)

• "differences in the rank-ordering of performance attributes defined the boundaries of the industry's value networks." (p. 75; Anm.: mobile phone business vs. smart phone business)

• Pressure to pursue sustaining innovations: "If they took their eyes off their customer's next-generation needs, existing business would have been put at risk." (p. 82)

• "the boundaries of value networks do not completely imprison the companies within them: There is considerable upward mobility into other networks. It is in restraining downward mobility into the markets enbled by disruptive technologies that the value networks exercise such unusual power." (p. 89)

• "What lies behind this asymmetric mobility? As we have already seen, it is driven by resource allocation processes that direct resources toward new product proposals that promise higher margins and larger markets." (p. 91)

• Example for complementarities:
  • "middle managers - acting in both their own and the company's interest - tend to back those projects for which market demand seems most assured." (p. 95; Anm.: internal complementarity)
  • "Well-run companies are not populated by yes-people who have been taught to carry out mindlessly the directives of management. Rather, their employees have been trained to understand what is good for the company and what it takes to build a successful career within the company." (p. 97; Anm.: internal complementarity)
  • "The impetus to drift upmarket can be particularly powerful when a firm's customers themselves are migrating upmarket." (p. 100)
  • "It is through these mechanisms of seeking corporate profit and personal success, therefore, that customers exert a profound influence on the process of resource allocation, and hence on the patterns of innovation, in most companies." (p. 120)

• "it is a company's customers who effectively control what it can and cannot do." (p. 117)

• "Many crucial resource allocation decisions are made after project approval - indeed, after product launch - by mid-level managers who set priorities when multiple projects and products compete for the time of the same people, equipment, and vendors. (..., quoting Chester Barnard:) "From the point of view of the relative importance of specific decisions, those of executives properly call for first attention. But from the point of view of aggregate importance, it is not decisions of executives, but of non-executive participants in organizations which should enlist major interest." (p. 120; bold by L.D.)

• "creating new markets is significantly less risky and more rewarding than entering established markets against entrenched competition. (...) Because growing companies need to add increasingly large chunks of new revenue each year just to maintain their desired rate of growth, it becomes less and less possible that small markets can be viable as vehicles through which to find these chunks of revenue." (p. 139)

• on first mover advantages:
  • "In contrast to the evidence that leadership in sustaining technologies has historically conferred little advantage on the pioneering disk drive firms, there is strong evidence that leadership in disruptive technology has been very important." (p. 143)
  • "the larger and more successful they become, the more difficult it is to muster the rationale for entering an emerging market in its early stages, when the evidence above shows that entry is so crucial. Good managers are driven to keep their organizations growing for many reasons. One is that growth rates have strong effect on share prices. (...) This problem is particularly vexing for big companies confronting disruptive technologies. Disruptive technologies facilitate the emergence of new markets, and there are no $800 million emerging markets. But it is precisely when emerging markets are small - when they are least attractive to large companies in search of big chunks of new revenue - that entry into them is so critical." (p. 147 f.)

• "Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable. " (p.165)

• Accepting the new usage is unpredictable: "This would lead them toward a much more exploratory, flexible approach toward product design and investment in manufacturing capacity." (p. 172)

• "Research has shown, in fact, that the fast majority of successful new business ventures abandoned their original business strategies when they began implementing their initial plans and learned what would and would not work in the market." (p. 179)

• "Because failure is intrinsic to the process of finding new markets for disruptive technologies, the inability or unwillingness of individual managers to put their careers at risk acts as a powerful deterrent to the movement of established firms into the value networks created by those technologies." (p. 180)

• "In general, für sustaining technologies, plans must be made before action is taken, forecasts can be accurate, and customer inputs can be reasonably reliable. Careful planning, followed by aggressive execution, is the right formula for success in sustaining technology. But in disruptive situations, action must be taken before careful plans are made. Because much less can be known about what markets need or how large they can become, plans must serve a very different purpose: they must be plans for learning rather than plans for implementation." (p. 180f.; Anm.: An dieser Stelle mit dem Speed-Argument andocken, so á la lernen kostet Zeit >> die allerschnellsten scheitern auch in neuen Märkten!?)

• Hiding Hand: "Philosophies such as management by objective and management by exception often impede the discovery of new markets because of where they focus management attention. (...) That is, they focus on unanticipated failures. But as Honda's experience in the North American motorcycle market illustrates, markets for disruptive technologies often emerge from unanticipated successes. (...) I have come to call this approach to discovering the emerging markets for disruptive technologies agnostic marketing. by which I mean marketing under an explicit assumption that no one - not us, not our customers - can know whether, how, or in what quantities a disruptive product can or will be used before they have experience using it." (p. 182)

• "Huge size constitutes a very real disability in amanging innovation." (p. 191)

• "Functional and lightweight teams are appropriate vehicles for exploiting established capabilities, whereas heavyweight teams are tools for creating new ones." (p. 206; Anm.: similar to the distinction of crowds and communities)

• performance oversupply as an indicator for upcoming disruptive innovation:
  • "Historically, when this performance oversupply occurs, it creates an opportunity for disruptive technology to emerge and subsequently to invade established markets from below." (p. 211)
  • "Generally, once the performance level demanded of a particular attribute has been achieved, customers indicate their satiation b being less willing to pay a premium price for continued improvement in that attribute. " (p. 215; Anm.: maybe an opportunity for modelling innovation in the multi-dimensional goods framework developed by jakob kapeller et al.)

• "If history is any guide, companies that keep disruptive technologies bottled up in their labs, working ot improve them until they suit mainstream markets, will not be nearly as successful as firms that find markets that embrace the attributes of disruptive technologies as they initially stand." (p. 221)

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