the innovator's dilemma - clayton m christensen why good management decisions create market disadvantages ways to address it breaks technology into two categories sustaining foster improved product performance disruptive innovation that worsens performance at least in short term but they have advantages (cheaper, more convenient, etc) main idea established companies improve their value proposition beyond what the upper end of the market really needs this creates opportunity at lower end for someone to start outcompeting businesses often decide it is not reasonable to invest in developing disruptive tech because it seems inferior, lower margins, captures lower value clients (but that might be what wins in the long run) companies depend on customers and investors for resources they often are not pointing at the disruptive stuff because of their tight network and reliances small markets don't solve growth needs of big companies in standard large set-ups, projects and returns not large enough % wise doesn't fit the structure, communication set-up small businesses can grow in small markets for large relative gains markets that don't exist can't be analyzed prevents some businesses from getting past early planning stages in their established internal structure if approval requires clear projections, you can't even pitch it the businesses capabilities define its disabilities processes, values, culture are optimized for certain things and create friction in other directions tech supply might differ from market demand tech usually outgrows market this often triggers shift in product lifecycle performance -> reliability -> convenience -> price companies oversatisfy that effort would be better spent reinvested in new things tips on spotting disruptive threats and opportunities history and study of disk drive industry changing weights of features previously significant features like $/mb shifted to things like size and weight businesses sometimes worry about cannibalizing their own sales but if the developments enable new market growth, this isn't necessary general innovation patterns in the disk industry 1) the disruptions were tech straightforward repackaging of known stuff in unique arch that enabled use in new areas 2) advanced tech dev in industry was always sustaining, led by customers 3) entrants (rather than incumbents) led dev and adoption of disruption organizational structure influences how products develop over time eg may turn toward more component-level innovation because of department structure says this doesn't explain the whole problem though a theory of why good companies fail based on idea of a 'value network' the context within which a firm identifies and responds to customer needs solves problems, procures input, reacts to competitors, seeks profit past choices influence perception of value in new tech companies become established in a network because their products are integrated managers/companies become very good at adapting to new, better tech within the same feature set, as it surpasses current tech projections the problem is they miss disruptive stuff because different features disruptive stuff is often first developed within established firms but not continued with marketing often checks with top customers and see little interest instead invest heavily in sustaining startups find the new markets established ones shift late and don't capture much market (local optimization problem) nature of change and problems faced by incumbents 1) the value network influences ability to focus on innovation determined by weighting of product features 2) probability of innovation's commercial success majorly affected by the degree it addresses known needs of actors in the network 3) incumbents decision to ignore tech becomes fatal when two trajectories interact first - performance demanded within given network second - performance capable in given tech approach 4) entrants have an advantage of not needing to compare to a set network 5) the core issue is flexibility to change strategies and cost structures not tech earthmoving equipment industry easier to justify movement into known higher margin market easier projections part 2: managing disruptive tech change 5 principles of org nature to recognize and harness 1) resource dependence - customers effect. control patterns of allocation 2) small markets don't solve growth needs of big companies 3) ultimate uses of disruptive tech unknowable in advance 4) orgs have structural abilities independent of the people 5) tech supply might differ from market demand how to harness embed disruptive projects in an org whose customers need it to shift value network to shrink effective organization plan to fail early and inexpensively use big company resources but not same structure/values/process develop new markets rather than shove it into existing one leading innovation in sustaining tech doesn't seem to matter first to market apparently irrelevant but it does in disruptive stuff not whether it was a startup or established but its participation in creating the disruptive market ie whether it built the market planning to learn vs planning to execute test market assumptions view companies as having competencies in resources, processes, values this model can be used to study acquisitions and to plan how to merge the companies don't destroy their processes if that's why you bought them shift from product to commodity products effectively become commodities when the (effective) feature set is easily matched differentiation is irrelevant if the customers don't care 3 general strategies 1 - increase performance and go to higher end customers 2 - stay with customers, ultimately competing on price 3 - change (or follow) market's demand for functionality tips for evaluating disruptive tech graph performance improvement and tech improvement watch how customers actually use stuff compare demand in market on various features (including atypical ones) how to address chicken-and-egg problem of new markets (no product to get customers, no customers to guide product) keep aware of performance -> reliability -> convenience -> price shift keep aware of tendency of incumbents to shift toward higher end market strategy should ensure feature, function, style changes can be quick consumers have a record of paying premiums for convenience eg renting a truck on demand vs paying large sum to own it can aim for lower initial price even if it means higher ongoing cost