Overview
Christensen (Harvard Business School Press, 1997) — The foundational text on disruptive innovation. Explains why well-managed companies that listen to customers, invest in R&D, and follow best practices can still be destroyed by new technologies that initially serve only marginal markets.
The Dilemma
Good management is simultaneously the cause of success AND the cause of failure when facing disruptive technologies. The same practices that make firms excellent at sustaining innovation (listening to current customers, investing in high-margin products, targeting large markets) make them unable to respond to disruptive innovation.
Two Types of Innovation
| Type | Sustaining | Disruptive |
|---|---|---|
| Trajectory | Improves existing products along dimensions customers value | Introduces different value proposition, initially worse on mainstream metrics |
| Market | Existing customers in established markets | New or low-end customers initially |
| Margin | Higher margins, attractive to incumbents | Lower margins initially, unattractive to incumbents |
| Outcome | Incumbents usually win | Entrants usually win |
Part One: Why Great Companies Can Fail
- Hard Disk Drive Industry — Primary case study showing repeated disruption across form factor transitions (14” → 8” → 5.25” → 3.5”)
- Value Networks — Companies are embedded in networks that define what constitutes valuable innovation. Moving to a new value network requires organizational transformation.
- Mechanical Excavators — Hydraulic excavators displaced cable-actuated machines despite being initially inferior on every dimension established customers cared about
- What Goes Up, Can’t Go Down — Cost structures and profit models make it rational for incumbents to move upmarket, abandoning low-end positions to disruptors
Part Two: Managing Disruptive Change
- Separate Organizations — Give disruptive technologies to organizations whose customers need them
- Match Size to Market — Large organizations can’t get excited about small markets. Create small organizations for small markets.
- Discovering New Markets — Established planning methods fail for markets that don’t yet exist. Discovery-driven rather than analysis-driven planning required.
- Capabilities and Disabilities — Organizational capabilities live in processes and values, not just resources
- Performance vs. Demand — Performance overshooting creates the opening for disruption from below
- Case Study — Practical application of all principles
- Summary of Dilemmas — The five principles of disruptive innovation
Related
- the-phoenix-project — Fictional account of organizational transformation when facing technology disruption
- monetizing-innovation — Complementary framework: designing products around customer willingness to pay