The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton Christensen

In The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, author Clayton Christensen looks at why large and established companies fail when confronted by new disruptive technologies. Christensen, who has a great deal of experience in the field as a professor at Harvard Business School and as a successful author, examines the problem through a variety of case studies and lays out the principles of innovation that are necessary for companies to be successful.

The premise of the book is that when a disruptive technology presents itself and moves into the market, it undermines the position of established companies. This technology is often a low-cost and low-power alternative to existing products. Christensen argues that traditional competitive strategies are ill-suited to these new technologies, and that companies must instead think differently in order to remain competitive.

At the heart of Christensen’s argument is that successful companies get so comfortable with their existing market position that they fail to recognize and adapt to the changing landscape of technology. He refers to this failure as “the innovator’s dilemma” and makes the point that companies need to find ways to focus on both existing and disruptive innovations simultaneously.

In exploring this dilemma, Christensen surveys the history of innovation and looks at a number of case studies where established companies ultimately failed as a result of not adequately responding to disruptive technologies. Through these examples, he explains that disruption occurs in three stages. First, a company will create a disruptive technology but use it internally. Second, this technology begins to challenge existing market incumbents, who usually ignore it. Links, the third stage is that the disruptive technology inevitably moves into the mainstream and shakes up the industry.

At the heart of Christensen’s argument is the idea that successful companies need to find a way to balance their focus between sustaining and disruptive innovations. In order to respond to new disruptions, existing companies need to develop new organizational structures and build relationships with outsiders who can help them respond to new technologies. Furthermore, companies should seek out smaller and more maneuverable competitors that can help to act as an early warning system.

Christensen also suggests that companies should focus on different types of innovation and be able to evolve quickly in order to stay competitive. Companies should focus on what he terms “incremental improvements”, which are cost-effective ways to make small changes to existing products and services. He also recommends that companies look for “disruptive innovations”, which is the process of introducing completely new products or services into the market. Companies should also be prepared for what he calls “Sustaining Innovations”, which involves making small changes to existing products or services to improve performance and maintain customer loyalty.

Ultimately, Christensen argues that companies can only remain competitive in the face of disruptive technologies if they are open to change and willing to invest in innovation. Companies must also be able to quickly identify, analyze and respond to new technologies, while at the same time sustaining long-term success. By focusing on all three of the stages of innovation - incremental improvement, disruptive technology and sustaining innovation - companies can continue to remain competitive and grow even when confronted with disruptive technologies.