Business Nuggets from Clayton Christensen

In 50 Business Classics, Tom Butler-Bowdon includes a discussion of Clayton Christensen’s The Innovator’s Dilemma (1997).

These are among the dozens of insights that caught my eye:

o Research for The Innovator’s Dilemma revealed that “firms fail precisely because  of their ‘good’ management — that is, they listened to their customers and tried to provide them with what they wanted. Yet there are few times when it is right not to listen to customers, and instead to pioneer new products for markets that barely exist. The innovator’s dilemma is 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 if leadership.’ Firms must remain good managers of the existing business while at the same time making sure they give enough resources to disruptive technologies that, if not embraced, ‘ultimately could lead to their downfall.'” (Page 45)

o “‘Disruptive’ technologies are ones that underperform or are worse than existing technologies, in conventional terms, but which do something that fringe or new customers value. Disruptive products are often cheaper, more basic, or easier to use. One example: the cheap, lesser-powered off-road motorcycles exported to America by Japanese makers such as Honda and Yamaha in the 1970s, which paled in comparison with powerful, deluxe road bikes made by Harley-Davidson and BMW — and yet proved popular. A recent example: cloud computing data storage, which has given people a cheap alternative to buying expensive servers from firms such as IBM.” (46)

o “In part two of the book, Christensen looks at the few companies that dealt with disruptive change well. Common to these firms was, firstly, that they looked beyond their existing customers to find new ones that may be interested in disruptive technology; and secondly, they created autonomous small units to go after these markets, units which were charged with failing early, often, and inexpensively in their search for customers of a disruptive technology.” (48)

o “Christensen observes that if you enter a market in which there is an established technology, with enough resources and good management you can still do very well in it. There is no clear advantage in being the first,  technologically. However, there are real advantages in being a first mover in a disruptive technology field. A disrupting company, free of legacy clients, is more willing to pour resources into untried technologies and products, thereby sustaining their edge and increasing their share of the market. His conclusion: ‘creating new markets is significantly less risky and more rewarding than entering established markets against entrenched competition.’

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Here’s a direct link to learn more about Tom Butler-Bowdon and his work.

Here’s a direct link to learn more about Clay Christensen and his work.

50 Business Classics: Your shortcut to the most important ideas on innovation, management and strategy was published by Nicholas Brealey (2018).

The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail was published by  Harvard Business Review Press (1997).

 

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