📝 Notes: “The Innovator’s Dilemma”
Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable.
My notes on “The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business”.
Doing the right thing is the wrong thing.
The highest-performing companies, in fact, are those that are the best at this, that is, they have well-developed systems for killing ideas that their customers don’t want. As a result, these companies find it difficult to invest adequate resources in disruptive technologies — lower-margin opportunities that their customers don’t want — until their customers want them. And by then it is too late.
Companies whose investment processes demand quantification of market sizes and financial returns before the can enter a market get paralyzed or make serious mistakes when faced with disruptive technologies. They demand market data when none exists and make judgments based upon financial projections when neither revenues or costs can, in fact, be known.
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.
Projects targeted at the explicit needs of current customers or at the needs of existing users that a supplier has not yet been able to reach always win over proposals to develop products for markets that do not exist.
The best resource allocation systems are designed precisely to weed out ideas that are unlikely to find large, profitable, receptive markets.
While senior managers may think they’re making the resource allocation decisions, many of the really critical resource allocation decisions have actually been made long before senior management gets involved: Middle managers have made their decisions about which projects they’ll back and carry to senior management — and which they will allow to languish.
As these ideas bubble up from the bottom, the organization’s middle managers play a critical but invisible role in screening these projects.
Working harder, being smarter, investing more aggressively, and listening more astutely to customers are all solutions to the problems posed by new sustaining technologies. But these paradigms of sound management are useless — even counterproductive, in many instances — when dealing with disruptive technology.
The very decision-making and resource-allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening carefully to customers; tracking competitors’ actions carefully; and investing resources to design and build higher-performance, higher-quality products that yield higher profits.
Even if a manager has a bold vision to take her or his company in a very different direction, the power of the customer-focused people and processes in any company well-adapted to survival in its competitive environment will reject the manager’s attempt to change the direction.
It is the customers, rather than the managers, who really determine what a firm will do. it is forced outside the organization, rather than the managers within it, that dictate the company’s course.
And even after the senior management has endorsed funding for a particular project, it is rarely a “done deal”. Many crucial resource allocation decisions are made after project approval.
Rather than continue working to convince and remind everyone that the small, disruptive technology might someday be significant or that it is at least strategically important, large companies should seek to embed the project in an organization that is small enough to be motivated by the opportunity offered by a disruptive technology in its early years. This can be done either by spinning out an independent organization or by acquiring an appropriately small company.
… implanting projects to commercialize disruptive innovations in small organizations that will view the projects as being on their critical path to growth and success, rather than as being distractions from the main business of the company.
Markets that do not exist cannot be analyzed.
Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable.
The strategies and plans that managers formulate for confronting disruptive technological change, therefore, should be plans for learning and discovery rather than plans for execution.