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Holiday Reading Part III: The Innovator's Dilemma



Yes I read this one atleast for third time. ( I wanted to put ideas I learnt in perspective.) idea of Disruptive Technology has been beaten to death so much that I had to find out if I actually understoood it.( Here is a very interesting take on Christensen's ideas.)

Christensen has received a lot ofcriticism for his ideas. During a recent visit admitted that the term Disruptive Technology is a misnomer and what he described was actually a 'Disruptive Business Model'.

In my humble opinion, the name of this book itself is a misnomer and should rightly be called 'The dilemma of an Established organization' as the real victim of a disruption is an organization 'locked into' a sustainable technology.

Christensen lists the following principles of Disruptive Innovation:

  • Companies depend on customers and investors for resources. Its not the managers.
  • Small markets dont solve the needs of Large companies. Thus established companies often overlook emerging markets.
  • Markets that don't exist cannot be analysed. Research and planning are not useful here. This is why big companies often cannot be the first movers.
  • An organization's capabilities define its limitations.These capabilities include the organization's processes and the decision making criteria used within the organization.
  • Technology supply may not equal market demand.

Chistensen introduces the concept of the value network(Vastly different from the value chain.)The value network is the context within which a firm operates. They often mirror product architectures and the metric for measuring value is vastly varied among them.

So what can managers do?

  • Embed projects to develop disruptive technologies.
  • Keep them small enough to explore small opportunies and enjoy small wins.
  • Prepare for early failure in finding an early market. Then try again.
  • Use the resources of the organization but do not seek to change the existing value network.
  • Find new markets that value the attributes of the disruptive process.

Finally, for completeness, here are the three criteria for a Disruptive Business Model:

1. It is cheaper than the incumbent.

2. It underperforms the incumbent

3. It provides a whole new set on ancillary benefits that cater to a new market and creates a whole new value chain. It moves upward, displacing the incumbent. The older firm often tries to jump on the new bandwagon with disastrous consequences.






Related Links
http://en.wikipedia.org/wiki/Disruptive_technology
http://searchcio.techtarget.com/sDefinition/0,,sid19_gci945822,00.html

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