The intriguing innovators dilemma is whether larger companies can be truly innovative. A book on this subject is one of the ‘must read’ resources included in the ‘Body of Knowledge for Innovation Management Professionals’ developed by the Swedish organisation Innovationsledarna. Although written before the development of thinking in ambidextrous organisations, the Innovator’s Dilemma provides an interesting critique of the challenge that companies are still facing.
The Innovator’s Dilemma
Is it possible for the entrepreneurial spirit of the business start-up to be successful within or alongside the business process orientated machinery of a large enterprise?
In his study of the patterns of innovation across a wide variety of industries Clayton Christensen, author of “The Innovator’s Dilemma” eloquently proves his hypothesis, that `the logical, competent decisions of management, that are critical to the success of their companies, are also the reasons why they lose their positions of leadership.’
He argues that good business practices, such as focusing on the most profitable products that are currently in demand by the best customers, ultimately can weaken a great firm. He observes that ‘there is something about the ways decisions get made in successful organisations that sows the seeds of eventual failure.’
With illustrations from many outstanding companies known for their abilities to innovate, such as Xerox, IBM, Sears, and DEC, the book reveals how it is possible to fall prey to the innovator’s dilemma and lose market dominance.
He concludes that successful companies are those that recognise that innovation driven growth for the next millennium requires a radical new approach from their business leaders. As a result they are emerging highly focused, down-sized and `business process re-engineered’.
To illustrate how to address the dilemma, Christensen presents a proven case and offers clear advice to help managers see the changes that may be coming their way, and shows them how to respond for success.
Key findings from the book
With the current emphasis on processes for managing innovation in the enterprise, his findings are timely.
- Need for new customer insights – he observes`whilst keeping close to our customers may be an important management paradigm for handling sustaining innovations, it may provide misleading data for handling disruptive ones.’ p. 208.
- Disruptive technology presents a marketing challenge – as encountered with the development and commercialisation of new technologies in ICT, sometimes experiments in marketing are necessary
- New markets enabled by disruptive technologies require very different capabilities in both the technical and commercial dimensions. He comments: ‘The capabilities of most organisations are far more specialised and context-specific than most managers are inclined to believe’.
- Companies that are intolerant of failure struggle to innovate – He observes that `failure and iterative learning are therefore intrinsic to the search for success with a disruptive technology. Successful organisations, which ought not and cannot tolerate failure in sustaining innovations, find it difficult to simultaneously tolerate failure in disruptive ones.’
- The information required to satisfy large company decision-makers simply may not exist. The successful innovator needs to generate this information by `fast, inexpensive, and flexible forays into the market and the product.’
- Leadership vital to generate significant first-mover advantages with disruptive innovation – evidence presented by Christensen suggests that companies whose strategy is to extend the performance of conventional technologies, do about as well, as companies whose strategy is to take big, industry-leading technological leaps.
Finally, this compelling treatise suggests that there are powerful barriers to entry and mobility that differ significantly from the types normally considered by economists.
He concludes: ‘Successful companies populated by good managers have a genuinely hard time doing what does not fit their model for how to make money.’ This is despite the emphasis that large companies place on their ‘endowments in technology, branding, manufacturing prowess, management experience, distribution muscle and cash.’
`The dilemmas posed to innovators by the conflicting demands of sustaining and disruptive technologies can be resolved. Managers must first understand what these conflicts are. They then need to create a context in which each organisations economic structure, developmental capabilities and values are sufficiently aligned with the power of their customers, that they assist rather than impede, the very different work of sustaining and disruptive innovators.’
Comments from the original review printed in R&D Management
This overview is based on a review by Martin E Fakley, Product Innovation Manager ICI Science & Technology, Policy & Strategy when the book was first published. He comments: ‘Exposure to the research and insightful analysis contained in The Innovators Dilemma will benefit all R&D, technology, business development, and marketing managers. CEOs of enterprises both large and small would gain insight into the challenge facing their managers in their endeavours to deliver innovative products. I cannot recommend this book strongly enough; ignore it at your peril.’
The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. By C.M. Christensen, Harvard Business School Press, Boston, 1997, ISBN 0 87584 585 1, 256 pages.