One of the most counter intuitive books I have come across. Must read for anyone with a business bent of mind!!

I don't read many books, but for some reason this one was a bit of a let down especially after all the fascinating reviews. For me it read like a textbook written by an engineer. With so much business/industry vernacular as interesting and ground breaking the content may be, it was boring and a struggle to read.

I'll try again another time, maybe when I'm in a more analytical mood.

Finally got round to reading the original. Don’t find it all of equal quality, some passages made my eyes glaze over but others are quite well done. Major learning for me was how the big problem is an accounting one: how do you adequately value doing the next thing that needs to be done if your model only accounts for something else entirely? How do you organise yourself internally? That kind of stuff was more interesting than long winded analysis of hard disks.

A very interesting approach to disruptive technologies, so simple and so difficult to apply. The critical thing is to identify a technology as disruptive which is not always clear and easy. The best example we are now experiencing is with the electric vehicle industry. Is it disruptive or sustaining? To make it more difficult how are the environmental laws interfering in his development? It is clear that current cars are exceeding customers needs, so we will see it the implementation of electric vehicles will provide a different use of them. Current leading car manufacturers understand this as a sustaining technology, so we will see what happens in this decade that seems to be decisive.

Clayton M. Christensen in The Innovator’s Dilemma argues a distinction between two types of technology change, each with different effects on the industry’s leaders: technologies (either incremental or radical) that sustain the industry’s rate of improvement in product performance, a typical prerogative of dominant firms, and on the other side, disruptive innovations which redefine performance trajectories and result in the failure of the industry’s leading firms.

A longer summary can be found here

The book is a bit long and circuitous, but provides some useful mental models. However, the theory maybe too complicated to apply in practice.

Chapter 1:
1. The author poses a question in this chapter which he attempts to answer in the following chapters: `Why do very successful companies fail at disruptive competition?`. To study this question, he looks at the harddrive industry and concludes that there are 3 patterns 1. disruptive innovations are relatively straightforward 2. the technological breakthroughs tend to sustain the growth trajectory 3. despite the technological prowess of the established firms, it was the new entrants which moved first.

Having read the rest of the chapters, I can see that new entrants have a technological advantage but no process or resource advantage. If the business is high tech, new firms have an advantage. However, I am not so sure about the first 2 patterns. Even if the technology seems straightforward (i.e. has been applied to an adjacent area), it is not at all clear that it can be applied to another area.
What is very clear to one person, maynot be clear and straighforward at all to another person with a very different background.

Chapter 2:
1. The popular slogan “stay close to your customers” appears not always to be robust advice. One instead might expect customers to lead their suppliers toward sustaining innovations and to provide no leadershipor even to explicitly misleadin instances of disruptive technology change.
2. Talks about the fact that its usually the companies with resources who create the next generation of products. But due to beauracracy or otherwise it never gets to its implementation. I guess now it makes sense why Apple is so secretive about its products. Perhaps, its only Steve Jobs who can see the potential of a mouse when nobody cares about it while being developed in Xerox. Its probably true that he stole the idea of a mouse from Xerox, but if nobody cares about the idea and is freely giving it away, is it really stealing? That is the nature of innovation. It was also probably not that easy, as I am sure he also saw a hundred other things, which he had to discard. Figuring out what is noise and what is the signal, really depends on the person as in Steve Jobs. There's also probably hundreds of other people who saw the same thing who didn't see its potential. Another interesting thing I find about Apple and Tesla is that despite being huge companies when the founder (steve jobs at Apple) and now Elon at Tesla, they have been continuously innovating and disrupting the space. When I look at other companies and even at Apple (at its current state, because Steve Jobs is no longer there), it seems these huge companies only iteratively improve on the products. So even though Steve Jobs repeatedly talks in various speeches about how the success of the Apple is because of its engineers, perhaps its really that Steve Jobs was the engine behind why Apple was able to dream of and execute on those plans?

Chapter 3:
1. It seems that cable-based and hydraulic-based excavator industries have a similar trend as disruption in other industries. In the 1920s, cable-based excavator industries followed the best management guidelines and followed customers insights to provide the best cable-based excavators that they could build. In the mean time, there were hydraulic-based excavator machines that were coming up. In the beginning, hydraulic-based excavator machines couldn't perform at par with the cable based machines. The cable based machines had much higher capacity, better turns, had higher degrees of freedom and were mainly cattered to the mining industry. The hydraulic based machines couldn't compete with the cable-based ones in the mining industry. So the companies that did come out focused their effort on pipe contractors and small excavators. In time and by learning from the small excavators, the hydraulic companies overcame the problems and became competitive.

In hindsight, it always seems that the cable-based excavator industry leaders should have seen this happening. What Clayton mentions is the how the hydraulic industry disrupted the cable-based excavator industry. However, I wonder if there were other types of excavators in the industry as well. The thing, is its only after decades of work, that the hydraulic based excavator came on par with the cable-based excavator. If there wer not just the cable based and hydraulic based excavators, how on earth is the cable-based excavator industry leader understand that hydraulic based excavators are going to disrupt them? So is this just chance, or are you supposed to just take a lot of shots, and then one may become big?

Chapter 5:
1. Give responsibility of disruption to an organization whose customers need it: It is the nature of customer centric businesses to try to meet the needs of their customers. So if you give the responsiblity of innovation to a group whose customers don't need it, then they will reject it and try to meet the needs of a customer who is interested in sustaining innovation.
2. Gives examples of how Quantum and Control Data succeeded. On the corrolary when Micropolis tried to satisfy existing customers as well as enter a new territory, the person leading the charge went through a exhausting phase. Quantum and Control Data on the other hand just create a separate company for the same change.

Chapter 6:
1. Give small opportunities for disruption to small organizations: Because innovations are typically made by acheivement-hungry individuals, giving the task to innovate on a breakthrough technology while being part of a bigger organization wont work, as they will have to deliver to the needs of the bigger organzation. In these cases, its better to create a separate org whose task is
to just create the technology

Chapter 7:
1. Gives examples of 3 companies: Intel (microprocessor), Honda (dirt-bike) and Hewlett Packard (Kittyhawk). What the author concludes is 1. The first attempt to succeed in a disruptive market will rarely be successful. So you need to plan for 2nd and 3rd attempts. In order to do so, you need to make sure that even though you dont deliver the products your promised to your customer, you
still maintain the relationship. 2. You need to plan to learn rather than plan to execute. In recent history, I remember how Elon Musk planned for 3 rocket launches rather than the 1st attempt to succeed. When even 3 weren's successful the planned yet another one by betting his entire networth. <-- Despite all the shit people are throwing at Elon these days, this is why he is probably
successful at the crazy shit he dreams of.
2. Mistake made by HP technology was to assume that their idea was right, rather than that their idea was wrong, as admitted by the executives later on. Assuming your idea is right works for sustaining technologies, not disruptive technologies.

Chapter 9:
1. Example of Eli Lily vs Novo: Eli Lily developed a very pure insulin replacement by investing 1B$, while Novo solved a more human problem of how the insulin was injected. The question arose as to why Eli tried to get from 10ppm of impurity to 0ppm of impurity, and it turns out that purity was the highest objective in the industry and every marketer though that if they could get to 10ppm customers will be willing to pay a premium. Because of the the giant that Eli is, it was impossible to change course once that it had decided to follow through. While, it may seem obvious now, after Novo commanded the 30% premium, that Eli should have done more market research, it is very difficult to a popular concensus within a company if it has decided to go down a wrong direction. Perhaps, its because that if you have made a decision, its in the interests of the managers and the managers of the managers to keep going in that direction just to save face, and not destroy their career, as Clayton points out, earlier.
2. Weaknesses of Disruptive products are its strenghts: It is better to create a market for a disruptive technology rather than try to modify it to the needs of the market.
3. Disruptive products typically create a simpler use case. I can see that this may be true when the disruptive product attempts to enter the majority of market, but this definitely not true at the start. Disruptive products at the start are messy, break down often, but meet the needs of a few customers who value it highly.

While looking for Stuart Mabon, CEO of Micropolis, I came upon this article
from 1987:
http://articles.latimes.com/1987-02-1....
Its humbling to see articles about past technology, and the immense amount of
effort to create them. We stand on the shoulders of giants, most of whom we
will never know about.

KEY POINTS
Disruptive technologies or innovations upset the existing “order of things”. The process appeals to customers who are not served by the current market. With time, because the capacity/performance of the innovation exceeds the market’s needs, the innovation comes to displace the market leaders.

Market leaders generally don’t react until it’s too late, because they don’t represent an interesting market, being low end and often low cost. One successful strategy might be to hive off a separate “company within a company” that is responsible for the firm’s response. A smaller, more nimble organization is better placed to work in the initially smaller and less lucrative market that the innovation is creating.

SUMMARY
Initially the author examines why firms fail despite being a competitive market leader. Sustaining changes is not the problem, the issue is that they are almost always best utilized by well positioned firms. However, the story changes when disruptive innovations are brought to light as they either explore lowering the price per unit or serving a niche market.

It’s been over a year since I got really passionate about learning more about the disruptive innovation after dealing with it on daily basis as a consumer or just simply as a human being. I bought a book ages ago and it was waiting in a line for quite a while. I prefer articles to books I must admit, but felt like I really need to read the book said to be the mandatory theoretical background for entrepreneurs in all domains.

It was a hard and a dry read for me I must confess. First, due to academic approach the book takes. Second, due to the cases the study and book is built on (I have neither expertise no any interest in hard disk drive or mechanical excavator industries) . I agree with other reviews saying the book could have been 70% shorter or one can get the idea by just reading the first and the last chapters.

So far, I’ve found the concept of sustaining and disruptive innovation quite useful in understanding the innovator’s dilemma and hopefully will avoid the type of ‘good management that can lead to failure’. I believe I will have to re-read it a bit later again more passionately and thoughtfully.

I wish I had read this book a long time ago. It would have saved me a lot of problems, worries and money. I’m late to the game - I first heard of this book in Isaacson’s marvellous biography on Steve Jobs, but it was written before some of the dot.coms exploded. It was one of few books that really fascinated the strong-willed Jobs. And it’s easy to understand why...

Innovations drive markets forward. But innovations are not just about technology and biotech. One of my favourite cases in this book is about the mini-mills and how they outsmarted the huge integrated steel mills of America. In the end, innovations are either sustaining or disruptive. Sustaining innovations closely resembles making improvements to existing products and services. They are what we usually focus on, regardless of if it's in strategy books, management speeches or business school cases. It’s about listening to customers, investing aggressively to give customers what they say they want, seeking higher margins and targeting larger markets.

Disruptive innovations are more uncommon, trickier to manage and much harder to analyse and forecast. They happen when product qualities exceed market needs. Professor Christensen has termed it “Performance Over-supply” which perfectly describes this situation.

These situations create opportunities for products that are simpler, smaller, cheaper and frequently more convenient to use. Therefore, they open new markets. “Further, because with experience and sufficient investment, the developers of disruptive technologies will always improve their products performance, they will eventually be able to deliver sufficient performance on the old attributes, and they add some new ones”.

Why do well-managed companies fail with disruptive innovations? Professor Christensen answers this crucial question with facts that first surprise you. “Doing the right thing is the wrong thing.” For sure, it’s not because management is stupid or lazy. It’s rather the opposite - the same goals, practices and value networks that made them successful are now to their disadvantage with disruptive innovations.

“Perhaps the most powerful protection that a small entrant enjoy as they build the emerging markets for disruptive technologies is that they are doing something that simply does not make sense for the established leaders to do. Despite their endowments in technology, brand names, manufacturing prowess, management experience, distribution muscle, and just plain cash, successful companies populated by good managers have a genuinely hard time doing what does not fit their model for how to make money. Because disruptive technologies rarely make sense during the years when investing in them is important, conventional managerial wisdom at established firms constitutes an entry and mobility barrier that entrepreneurs and investors can bank on. It is powerful and pervasive.”

But there are ways for an established market leader to handle disruptive innovations successfully. It’s easy to be a believer in Christensen’s recommendations. His thoughts were e.g. behind the decision by Intel to launch a new label with simpler products (Celeron) along the established Pentium, in order to avoid being attacked from “below” and keeping market shares. But this is one of rather few successful examples. It is easy to list companies that lost their market position and hence their profitability and most of their market capital.

As an investor, this new understanding gave me significant clues regarding guesstimating the period of competitive advantage - years of excess return - although Christensen never explicitly mentions this in his book.

There is lot of additional wisdom in this book, e.g. on assumptions in NPV calculations, corporate culture, the RVP (resources, values, processes) framework and much more. Harvard Business School Professor Christensen is a brilliant man - named the world’s most influential business thinker in 2011 – and not only because of his strategy research. I truly recommend his speeches on Youtube on various issues. His new book – How do you measure your life? – will be my next buy.

The subject of this classic is disruptive technology.

With the help of many examples from industry (disk-drives being his main workhorse) the author explains what technologies are likely to disrupt, who is likely to be disrupted, why they are likely to be disrupted and what the choices are that the established players have when presented with disruption.

The most important point is that disruption generally comes from the practice of repackaging and marketing already existing, straightforward technology at a lower price point to a new customer base that is not economically viable for the established players.

For example, QuickBooks was marketed to mom-and-pop stores who could not afford to pay an accountant and it was the el-cheapo version of Quicken. It is of no use to a proper corporation. JC Bamford got started with hydraulic backhoes that were good enough for small contractors looking to dig a small ditch but wholly inadequate for the purposes of a miner. 5.25 inch disk drives were marketed to the nascent market for personal computers and were of no use to minicomputer manufacturers.

Disruptive technology is cheaper per unit, but its price / performance ratio is much worse than that of the established technology. It’s not good enough for the clients of the established players. Ergo it must be sold on its (lower) price alone, meaning that its purveyors must seek new markets. Flash memory, for example, was first used in cameras, pacemakers etc. Not in computers!

There is a large number of reasons that established players will frown upon the new technology:

1.tGood companies listen to their clients. Their clients will tell them they don’t want it. They will demand performance and they will pay for performance.

2.tProfitability will be lower in the lower-margin disruptive technology. Profit margins will typically mirror cost structures and will thus be higher for the higher-end product. Established players will in the short term make more money if they allocate their resources toward not falling behind their immediate competition for the higher-end product. (i.e. “sustaining” their competitive edge in the higher margin / higher tech market)

3.tThe processes used by the established players to sell and support the established technology may not be the right ones for the new tech.

The main thing to realize is that the technology does not live by itself. It is embedded in a “value network.” A car serves a commuter, a digger serves a mine, a disk drive is screwed down somewhere in a computer etc.

The seeds of disruption lie in the fact that the technology itself and its value network may not necessarily be progressing at the same speed.

If the technology is improving much faster than the trajectory of improvement of the “value network” (for example, if the desktop PC users demand extra disk storage slower than the industry is capable of delivering extra disk storage), then

1.tThe point comes when the value network of the established technology does not need the incremental improvements on which the established players are competing with one another to deliver.

2.tMore importantly, a point comes when the performance of the disruptive technology becomes good enough to be embedded in the value network of the established technology. So 3.5 inch disks developed for laptops can do good enough a job for a desktop, for example, without taking up the space required for a 5.25 inch disk.

It gets worse: sure, disruptive technology is deficient in terms of features / performance, but the price sensitive customers who do not care so much about performance often care a lot about reliability. (A small contractor who buys a single backhoe digger cannot afford a maintenance team.) Similarly, the unsophisticated customers of the disruptive technology may care a lot about ease of use. (Mom and pop using Quickbooks have no idea what double-entry book-keeping is!) What this means is that when the performance of the disruptive technology has become good enough for it to be embedded into the value network of the established technology, it often brings with it an advantage in reliability and ease of use.

So at that point the disruptive technology is cheaper, more reliable and easier to use than the established technology, all while delivering adequate performance.

And that’s how purveyors of the established technology (who have been at war with one another to deliver on the ever-increasing performance their customers have been demanding) find themselves at a disadvantage versus the disruptors when it comes to reliability and ease of use right about when their customers tell them they won’t pay for extra performance or features any more.

The disadvantage of the lower-tech disruptor has created an advantage and it’s game, set and match!

What’s an established player to do? If I’m running a super successful company and I spot a new technology what am I to do?

One thing I should not do is listen to my underlings. The dealers who sell my cars will not want a customer who just walked into the dealership to buy a V8 to drive out in a small electric car. The salespeople will keep asking me for the most expensive product because they will be paid a commission on their margin and will keep pushing me “north-east” on the price / performance chart. Resistance to disruptive technology often comes from the rank-and-file.

I also should not listen to my shareholders. Small markets (and all disruptive technology starts small) do not solve the growth problems of large companies.

First and foremost, I must understand that the challenge I face is a MARKETING challenge. The tech I’ve got covered. The resources too.

If my company’s processes and my company’s values (defined as “the standards by which employees make choices involving prioritization”) are aligned with the marketing challenge, I’m in luck: chances are that for my company this new technology will eventually become a “sustaining” technology.

I can get my wallet out and buy EARLY a couple of the new entrants. Early enough that my money is not buying process or values or culture, but merely assets/resources and ideally walking and talking resources (the founders) who will adopt the processes and values of my organization.

Alternatively, I can carve out some great people from my organization and:
1.tGive them responsibility for the new technology and assign to them the task of identifying the customers for this new technology
2.tMatch the size of this new subdivision to the current size of the market.
3.tAllow them to “discover” the size of the opportunity, rather than burden them with having to forecast it: “the ultimate uses or applications for disruptive technologies are unknowable in advance”
4.tLet them fail small, as many times as necessary
That’s what IBM did when they ran their PC business out of Florida and what HP did when they realized ink jets would one day compete with laser printers!

If, on the other hand, my company’s processes or my company’s values are not aligned with the marketing challenge, then I need to buy a leader in the new technology, and have a finger in every pie. And I need to protect my acquired company from my organization. This is, obviously, a bigger challenge (and one my shareholders may not embrace, as their dollars are as good as mine, but the author stays away from this discussion!) As the succession in technologies plays out, I will then eliminate large parts of my current organization. The author cites an occasion on which this is exactly how things played out.

And there you have it! I think that’s the author’s answer to “The Innovator’s Dilemma”

Obviously, that’s a very quick sketch. You’ll have to buy the book to see the complete story (and to be convinced, I suppose). Be warned that in the interest of keeping the various chapters self-consistent you may find some repetition, but overall this is a very quick read.

I’m aware of people who really dislike Clayton Christensen. I’ve even come across a Twitter account that’s dedicated to trashing him. But I, for one, was convinced that he’s describing a valid concept with many applications.

Also, as a guy who established a disruptive business within an established player I totally experienced both the dismay of my superiors when they realized that “small markets don’t solve the problems of large organizations” and the discomfort of trying to shoehorn my project into the rather baroque established processes.

So I have lived through many of the steps the book describes and I reckon they are rendered very accurately. The research shows!

Interesante, pero demasiado técnico en algunas partes.
Curiosa la visión del coche eléctrico, ya que se escribió en 1997.

The basis of most innovation/startup courses and books today.

Would've saved time and $$ if I had just read this in the beginning.

Well thought through and clearly explained, but a little dense.

Similar to watching a black and white movie today - you know it's a classic but you miss the special effects of the 21st century.