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Clayton M. Christensen The Innovator's Dilemma Buy this title or join our Management Literature Club and have a chance to GET IT FREE! |
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by Robert Morris In his Introduction to The Innovator's Dilemma (published by Harvard Business School Press), Clayton M. Christensen makes his objective crystal clear: “This book is about the failure of companies to stay atop their industries when they confront certain types of market and technological change....the good companies -- the kinds that many managers have admired for years and tried to emulate, the companies known for their abilities to innovate and execute....It is about well-managed companies that have their competitive antennae up, listen astutely to their customers....invest aggressively in new technologies, and yet they still lose market dominance.” Why? For Christensen, the answer is revealed in what he calls “the innovator's dilemma”: the logical, competent decisions of management that are critical to the success of their companies are also the reasons why they lose their positions of leadership. In Part One, Chapters 1-4, Christensen builds a framework that explains why sound decisions by great managers can lead to failure. In Part Two, Chapters 5-10, he attempts to resolve the dilemma by examining why and under what circumstances new technologies have caused great firms to fail. He makes an important distinction between sustaining technologies and those which are disruptive. He offers four “laws or principles” of disruptive technology: 1: Companies depend on customers and investors for resources (Chapter 5)Actually, these four could also be viewed as guidelines (as well as check-points by which to detect early-warning danger signs) unless and until it becomes obvious that a given technology will create sustaining rather than only temporary disruption. One of the book's most important points seems to confirm what Pogo the Possum once said: “We have met the enemy and he is us.” Nearly all of the corporate wounds that Christensen examines are self-inflicted. If not avoidable, at least the damage could at least have been reduced. For example, Christensen examines companies in which: (a) disruptive technologies were first developed internally,In essence, well-established companies (“incumbents”) thus become threatened by “entrants” and a disruptive technology change. In response, they re-allocate resources away from those technologies which address their customers’ needs. Note in particular Christensen’s detailed analysis of a disruptive technological change in the mechanical excavator industry (Chapter Three) and the correlations between value networks and characteristic cost structures (Chapter Four). Once again, he reveals how and why sound management decisions can often be “at the very root of [a ‘good’ company's] impending fall from industry leadership.” In Part Two, Christensen describes in detail HOW managers can address and harness four principles by which to prevail against disruptive technologies. Once again, he asserts that a company's customers effectively control what it can and cannot do. Managers who deny or ignore this do so at great peril. To support his assertion, Christensen examines several quite different companies: Quantum, Plus Development, Control Data, Micropolis, DEC, IBM, Kresge, Woolworth, and Hewlett-Packard. In some of these companies, the innovating managers who were faced with disruptive technologies created organizations whose cost structures enabled them to make money in the value network where the disruptive technology was taking root, and where customers’ power and the managers’ intentions were aligned. The emphasis is on alignment. In Chapter Six, Christensen insists that managers must be leaders, not followers, in commercializing disruptive change. Hence the importance of a strategic decision: To be a leader or a follower? It is often prudent for “incumbents” to be followers, resisting pressure from customers, until opportunities to commercialize disruptive technologies are sufficient and appropriate. As Christensen suggests, “In sustaining technologies, in fact, evidence strongly suggests that companies which focus on extending the performance of conventional technologies, and choose to be followers in adopting new ones, can remain strong and competitive.” Chapter Ten summarizes various key points. By now Christensen has offered dozens of examples of “some very capable executives in some extraordinarily successful companies, using the best managerial techniques, who have led their firms toward failure.” Lest this brief commentary suggest otherwise, managers in every organization (regardless of size or nature) eventually must resolve “the innovator's dilemma.” Christensen’s book provides invaluable assistance to completing that immensely difficult process. It remains for each of his readers to answer questions such as these: Which customers do we want? Which technologies will help us to get and then keep them? For each technology, which strategies will be most effective to sustain it? Should we attack competitors with disruptive technology? How can we best defend ourselves against it? How should our resources be allocated? What about timing? Should we lead or follow? If we follow, should we prepare to lead later? Correct (i.e. appropriate) answers will help to clarify today's realities and to suggest strategies for an uncertain future. Order The Innovator's Dilemma here. Find the full list of Robert Morris's Business Nuggets featured by Eastbook.com here.
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