Book Review: The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail
The Innovator’s Dilemma is the most interesting and useful book on organizations that I have read since Crossing the Chasm by Geoffrey Moore. Where Moore explains why so many new companies have difficulty moving their products to a mass market, Christensen explains why so many old companies have difficulty dealing with new ideas that would mean they have to cross the chasm back in the other direction. (Christensen refers to Moore only once, near the end of the book, and does not explain most of his thesis with reference to Moore or the “chasm,” but that is in essence what he is talking about.)
Understanding the Dilemma
Christensen’s book is about organizational failure but not about all the reasons for failure that you would typically think of. As he says, “Companies stumble for many reasons, of course, among them bureaucracy, arrogance, tired executive blood, poor planning, short-term investment horizons, inadequate skills and resources, and just plain bad luck” (page ix).
But those are not the companies Christensen is talking about. Instead, this book is about “well-managed companies that have their competitive antennae up, listen astutely to their customers, invest aggressively in new technologies, and yet still lose market dominance” (page ix).
Who is he talking about?
Remember Wang and 8-inch disks? Remember DEC (Digital Equipment Corporation) and the VAX minicomputer? Remember when Sears was the dominant clothing store in the US (rather than Target or Wal-Mart)? Christensen is talking about companies that were so dominant in their field that they were unable to successfully change when the world was changing around them.
He is not only talking about these companies losing their dominant position-and, in many cases, disappearing entirely. He is talking even more about how difficult it is for people inside a successful company who do see the signs of the future or have innovative ideas to get heard within the company.
What type of change is so difficult?
Companies do change. They do grow. They do bring out new products. But Christensen points out that what successful companies do well is to keep on a straight path of whatever made them successful.
He draws a distinction between what he calls “sustaining technologies” and “disruptive technologies.” A “sustaining technology” is a technological advance that helps a company do better at what it has been doing, that fulfills what major customers perceive as their needs. A “disruptive technology” is an innovative idea that is related to the company’s business but that means changing course, changing customers, taking risks again like the company probably did in its early days.
Christensen has examples from many industries, but his main case study is disk drives-from 14-inch disks to 8-inch disks to 5¼-inch disks to 3½-inch disks. In each case, the companies with the then-dominant size kept making their disks better (faster, more capacity), moving in the direction that their big customers were pushing them. But meanwhile, the technology that they were continuously improving was becoming less and less relevant.
Here is how Christensen explains just one instance of the dilemma:
Until the mid-1970s, 14-inch drives with removable packs of disks accounted for nearly all disk drive sales…Hard disk capacity…increased at 15% annually…and capacity increased at 22%…reaching beyond the mainframe market to the…supercomputer market.
Between 1978 and 1980, several entrant firms-Shugart Associates, Micropolis, Priam, and Quantum-developed smaller 8-inch drives with 10, 20, 30, and 40 MB capacity. These drives were of no interest to mainframe computer manufacturers, which at that time were demanding drives with 300 to 400 MB capacity. These 8-inch entrants therefore sold their disruptive drives into a new application-minicomputers…. Although initially the cost per megabyte of capacity of 8-inch drives was higher than that of 14-inch drives, these new customers