Johnson & Johnson’s strategy is to launch products of disruptive technologies through very small companies acquired for that purpose. The key difference is that the value network of a disruptive technology is distinct to the market offering at the time. Small off-road motorcycles introduced in North America and Europe by Honda, Kawasaki, and Yamaha were disruptive technologies relative to the powerful, over-the-road cycles made by Harley-Davidson and BMW. Incumbents generally don’t react to disruptive innovations until it’s too late, because they don’t represent an interesting market, being low end and often low cost. This being a subjective list of what the author believes to be the main arguments, it is highly recommended you buy the book, which is worth every penny. Prof Christensen’s thesis was that most well-managed companies flounder in the face of disruptive technology precisely because they are well-managed. Occasionally, however, disruptive technologies emerge: technologies that result in worse product performance, at least in the near-term. In Clayton M. Christensen’s prior work, The Innovator’s Dilemma, he explores the paradox of successful companies’ frequent failures when exposed to disruptive markets. Transistors were disruptive technologies relative to vacuum tubes.  Health maintenance organizations were disruptive technologies to conventional health insurers. Please Note: There are links to other reviews, summaries and resources at the end of this post. The Innovator's Dilemma - Book Summary by Make Me Read. WhoisClaytonChristensen ! but a follow-up book entitled The Innovator's Solution was published. Christensen famously coined the word "disruption" which deserves some prior explanation due to its overuse in the media. Here is an excerpt from the book to hopefully clear things up: "Most new technologies foster improved product performance. Chapter Summary for Clayton M. Christensen's The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, part 1 chapter 1 summary. When The Innovator’s Dilemma came out in 1997, it upended the entire conventional managerial paradigm. Christensen then argues that the following are common principles that incumbents must address: He also argues the following strategies assist incumbents in succeeding against the disruptive technology: Shortly after the release of the book, Christensen "received the Global Business Book Award for The Innovatorâs Dilemma and The Economist named it as one of the six most important books about business ever written". Evidence shows that the longevity of companies is decreasing as the pace of technological advances increases. The Innovator’s Dilemma is the title of an excellent book by Clayton Christensen. Building on Part I's description of why and how new technologies have caused great firms to fail, Part II prescribes managerial solutions to the innovator's dilemma, i.e. Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible, and that help them play in substantial markets. ", "This recommendation is not new, of course; a host of other management scholars have also argued that smallness and independence confer certain advantages in innovation. Through this compelling multi-industry study, Christensen introduces his seminal theory of "disruptive innovation" that has changed the way managers and CEOs around the world think about innovation. The companies that entered the new value networks enabled by disruptive generations of disk drives within the first two years after those drives appeared were six times more likely to succeed than those that entered later. Competing theories 1. The Innovator’s Dilemma identifies the difficulties that large companies have in dealing with disruptive innovation. “The last element of the failure framework, the conclusion by established companies that investing aggressively in disruptive technologies is not a rational financial decision for them to make, has three bases. Thompson says that consumers are not as rational and single-minded as business customers, and hence are less susceptible to disruption. Both founded new ventures within the mainstream organization that had to earn money by mainstream rules, and neither could achieve the cost structure and profit model required to succeed in the mainstream value network.". In fact, they should be considered to be taking bets, and the most important factor should be reducing sunk costs in case of a failed bet, in order to make pivoting cheap. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. Yet, to expect the processes that accomplish these things also to do something like nurturing disruptive technologies — to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets — is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Bower, Joseph L. & Christensen, Clayton M. (1995). The innovator’s dilemma is that in every company there is a disincentive to go after new markets. A sustaining innovation is one that improves … New entry next generation products find niches away from the incumbent customer set to build the new product. The book proposes a set of rules that CEOs, entrepreneurs and managers can apply to solve this dilemma. a16z episode on Competing Against Luck with Christensen: https://a16z.com/2017/09/01/disruption-jtbd-modularity-christensen/. I've formatted this article in the following way: For every argument made in the book I’ve written what I understand its conclusion to be, and then followed it with an excerpt immediately below. First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits. how executives can simultaneously maintain the near-term health of their established businesses and focus adequate resources on disruptive technologies to prevent their long-term downfall. The Revolutionary Book That Will Change the Way You Do Business The Innovator's Dilemma looks at this dilemma in relation to rapidly developing technologies. That’s why these companies succeed at sustained innovation and fail at disruptive innovation, which does not fit well in the organizational chart. And third, leading firms’ most profitable customers generally don’t want, and indeed initially can’t use, products based on disruptive technologies. These unique firms shouldn't be pressured into being right the first time. For this reason, the next generation product is not being built for the incumbent's customer set and this large customer set is not interested in the new innovation and keeps demanding more innovation with the incumbent product. Clayton Christensen-Innosight Co-founder.  It also received the Global Business Book Award as the best business book of the year (1997). The new entry companies do not require the yearly sales of the incumbent and thus have more time to focus and innovate on this smaller venture. by!ClaytonChristensen! The book was published in multiple languages including English, consists of 286 pages and is available in Paperback format. About the Author 255. (Sometimes, as in disk drives, a market may cycle through several different functionality dimensions.) Customers follow the "Buying Hierarchy" depending on the maturity of the market. It's especially important to understand the difference between radical sustained innovation and disruptive innovation as explained above. I call these sustaining technologies. Finally, when multiple vendors offer a package of convenient products and services that fully satisfies market demand, the basis of competition shifts to price. He is an American-born... “The Innovator’s Dilemma PDF Summary”. But when two or more vendors improve to the point that they more than satisfy the reliability demanded by the market, the basis of competition shifts to convenience. The Persistence of the Innovator’s Dilemma In 1995, a young Harvard Business School Professor co-authored an article in Harvard Business Review, … Capabilities and radical technologies a… Clayton Magleby Christensen was born on April 6, 1952, in Utah. Each of the other sustaining technologies in the industry’s history present a similar picture. Innosight,(2014). Case built a market for excavators among residential contractors, where small buckets and tractor mobility actually created value; and Nucor found a market that didn’t mind the surface blemishes on its thin-slab-cast sheet steel.”. An Executive Summary of. In contrast to the evidence that leadership in sustaining technologies has historically conferred little advantage on the pioneering disk drive firms, there is strong evidence that leadership in disruptive technology has been very important. US affiliate link: http://amzn.to/2y8t52gUK affiliate link: http://amzn.to/2j4tXSI. Initially, when no available product satisfies the functionality requirements the market, the basis of competition, or the criteria by which product choice is made, tends to be product functionality. , indeed, an Innovator ’ s Dilemma is that the value network of a disruptive precisely... 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