I recently finished reading Clayton Christensen’s book, The Innovator’s Dilemma. It’s a fascinating read on why successful companies struggle with disruption. Ultimately, it’s not because these companies were poorly managed, but because the very management processes that lead to a company’s success are the same processes that inhibits their ability to pivot and try something radically new.
Three key takeaways I found fascinating in The Innovator’s Dilemma:
- Big companies demand big revenue models.
The revenue and profits in disruptive markets do not justify investing resources early on because these markets are just too small. We saw this happen with the electric car industry. By the time the disruptive market grows lucrative enough to get into for big companies, it’s often too late. - Successful companies find their success by listening to their customers and providing them what they want.
Customers drive what companies invest in. Disruptive markets are usually not their typical customer base, so it becomes difficult for big companies to shift. - Large companies are extremely good at analyzing data and acting on that data.
Disruptive markets have never existed before, so there is often little data to analyze. The key to success then becomes a fail fast, which is against the very culture of large organizations.
While I enjoyed the read, the book seemed to dive into data far too much, specifically the history of hard drives. Granted, the data on hard drive development, size, and performance is impressive, but it seemed as though Christensen was more focused on data analysis than the strategic points to be learned. In fact, my favorite lessons came not from hard drives, but the analysis of excavator companies transitioning from steam to hydraulics. If you’re in a hurry, you can read the summary at the end of the book (which is outstanding) and retain most of the key points.
Additionally, the book focuses almost entirely on technology disrupters. At times the book seemed dated, not because the technologies were dated, but the concepts (the book and research were both originally published in 1996).
I would argue that in today’s world it is not so much advances in technology that are causing radical disruption, but how organizations are leveraging the existing technology. We all have access to the Cloud, but it’s how companies like Dropbox, Uber, or Salesforce leverage that technology that causes the disruption. Yes, technical disrupters are still happening (Apple, Smart Home Devices, Tesla) but I would argue that the greatest disruption now is not in technical innovation, but howexisting technology is leveraged.
Overall, The Innovator’s Dilemma is a good book that works to answer some key questions about how companies operate and grow that I’ve always been curious about. While many of the technical examples do not fit today’s software driven world, most of the strategic lessons do.