There are two kinds of innovations: sustaining and disruptive. Sustaining ones are about improving the product along some dimensions, without making it worse along any others: a new iteration of iPhones is an example, or the latest M1 MacBooks. Disruptive ones make the product noticeably worse, except for some dimension that is irrelevant to the users of the current generation. If you are actively using a Nokia smartphone or Windows mobile in 2006, the new iPhone looks like a toy: no copy-paste? No multi-tasking? $500? No keyboard? In my ultimate productivity&communication machine? Are you kidding me?

Or you are making 8-inch hard drives in the 80s, most of your customers are producing minicomputers, your engineers come to you with the prototype of a 5.25-inch hard drive. You bring it to your most valuable customers, they say:
—Looks cool, how many bytes does it fit in?
—Less than 5.25^2/8^2 = 0.43 times (in fact it seems closer to 0.2-0.3 from the data in the book) what the hard drives we are selling to you right now fit in.
—LOL.
—But look how small it is!
—Have you seen a minicomputer? "Mini" is in comparison to a mainframe.

—Ok I think I get your point.

Back at the office you tell the engineers "it is nifty but no one wants it, plus the margins are thinner than on the 8-inch drives", and give them a different project to work on. A year later some upstart is selling 5.25-inch drives to the makers of personal computers: they need a smaller drive (because they want a small computer, plus smaller drives vibrate less and thus are more reliable, which is less relevant for minicomputers which mostly stay in one place bolted to the floor), and don't need as much disk space as the minicomputers do. Your planning division estimates the personal computer market to maybe get to 10k computers tops, so you brush it off.

Couple of years later the PC market is overtaking the minicomputers market, but your business is doing well. That upstart shows the latest 5.25" drive, which is still lagging behind your latest 8" drives capacity by 2-3x, those noobs just can't keep up with you. But some of your customers, the ones that used to buy your cheapest drives, switch to the upstart (maybe reliability matters a bit more for them). Well, that's even better for you: the margins are larger on the more expensive models, so you just discontinue the cheapest line. A year later you discontinue another line, improve your margins even more, two years later 5.25" drives have enough capacity for all minicomputer manufacturers, you say "oh shit" and go bankrupt.

What happened? The 5.25" drive was a disruptive technology: it was worse along the axis important to the current customers, but the upstart found an emerging market that had a use for it, even though the performance was worse. Your company was large enough to ignore that emerging market (develop a new product, with worse margins, for a market that is about a couple percent of the one you are in, and sell it to the customers you don't have existing relationships with — why would you do that?). Plus, since the 5.25" drive has smaller margins, you'd need to find new suppliers, change the processes at your company to make the smaller margins culturally acceptable (if your boss is used to having 40% margins, are you going to bring them a proposal for a new project with 30% or even 20% margins?). You'd need to establish the relationship with new customers. And all of that — given that it is far from certain that those fancy PCs will ever be more than a dust speck on the total computer market share graph.

That is the basic gist of the innovator's dilemma: if you are dealing with a disruptive technology, it needs a new market. Your current customers, your suppliers, the sellers of your product, even your company culture will all be against a new product with the worse margins, worse performance along the axis that seems relevant, and a much smaller market. The CEO may not even hear about a proposal to develop a project further because someone below "of course the CEO is going to reject this and demote me for wasting their time on this obviously bad proposal". And so much for the "listen to your customers" wisdom.

What's the solution? Spin out a separate company for the project or acquire a startup. Christensen gives a great Resources, Processes, Values framework (basically, resources (i.e. people, patents, factories) are easier to change than the processes which are easier to change than the company values, and a disruptive technology probably needs different processes and values) for deciding how integrated the spun out company (and whether it needs to be a separate company at all) should be with the rest of the organization. If the project is treated as just another project, you won't find a product-market fit, or will ignore it even if you do because the market is not large enough. In a sense, a disruptive technology needs both a new market and a new company.

The book gives a lot of examples: the hard drives industry is the most frequent source because of all the parameters of all hard drives ever manufactured and sold are known, but it also features a very exciting (no sarcasm) tale of the steam shovels vs hydraulic backhoes, Apple Newton as the example of a large company trying to get into an emerging market with a disruptive product (spoiler: it doesn't work out well, don't bet hundreds of millions on your current idea of what the emerging market wants after doing "market research" instead of testing products with the users until you find an actual emerging market for your product), and the battle of integrated steel mills and so-called steel minimills (no less exciting than the excavators tale), and some others. Excellent book, I highly recommend it if you want to understand why large companies stop innovating.

...
And can you guess what the fun part is?
About the same year that your company goes bankrupt, the new 3.5" drives start appearing. You enjoy reading about that ex-upstart that has now taken your company's place: laptops? Who the hell cares about laptops?

This is not a book about innovation -- it is a book about managing innovation

** Mild spoilers for the movie Glass Onion follow **

I read The Innovator's Dilemma when I was in biz school, so around 2000. We studied Christensen's ideas in one of my classes, Marketing, I think. We were not assigned his book to read, but, being a reader, I got it and read it, anyway. It's an OK book and has some valuable ideas in it, but it is not, in my opinion, the groundbreaking work it is usually presented as. One of the most useful things I learned in biz school is that business management is a field that is frequently riven by new management fads. These fads spread like infections, with consulting firms as some of the main vectors. Most of these ideas are stupid blizzards of almost meaningless buzzwords backed up by very little evidence.

Christensen rode the fashion tornado. His ideas about disruptive innovations were all the rage for a short time. They are actually among the better of management fads, in that Christensen has some valuable ideas, and he actually based them on hard data. Perhaps as a consequence "disruptive innovation" is a thing people are still talking about. (Almost all the talk is nonsense and bears no relationship to Christensen's actual ideas.)

I was reminded of this by the movie Glass Onion, which I saw yesterday. One of the central characters in Glass Onion is billionaire Miles Bron. Early in the film Benoit Blanc asks him what he means by "disruptor". Bron responds with an impressive-sounding but mind-bogglingly stupid description of what disruption means. This is our first clue that Miles Bron is a clueless windbag. Later in the film we get a glimpse of his repudiated business partner Andi Brand's apartment, and there, among her books, we see a copy of The Innovator's Dilemma, hinting that Andi was the brains of the business partnership.

The most important thing to realize about The Innovator's Dilemma is that it is not about innovation, per se -- it is about why established businesses are bad at managing innovation. The reasons are straightforward -- a disruptive innovation breaks the business model by which an established business became successful (that is, more or less, the definition of "disruptive innovation"), so all their old rules and structures don't work.

Disruptive innovations are not typically technologically brilliant. Indeed, they may barely be innovations at all. The main example Christensen relies on is computer disk drives. Over the course of several years 5.25 in drives were replaced by 3.5 in drives. If you know how to make a 5.25 in drive, you pretty much know how to make a 3.5 in drive -- you make the same thing, but smaller. Obviously I am simplifying, but not enormously. This is not a super-difficult engineering challenge. (It is interesting that disk drives are indeed scientifically and technically sophisticated devices. Most modern drive heads are based on something called the quantum Hall effect, a scientific idea truly based in quantum mechanics, that required a new fabrication technique to put into practice. Christensen knows this, but he is careful to point out that this was NOT the disruptive innovation. The disruptive innovation was the easy one of making the drives smaller.) Christensen explains to us why drive manufacturers failed to foresee and skillfully manage this size change.

I didn't find The Innovator's Dilemma very interesting, because it is not really about innovation or innovators -- the title is misleading. It takes innovation as given -- something that happens to your industry, and which you need to somehow deal with.

Blog review.

A book I find myself referring to in conversation all the time. A necessary discussion of what makes currently successful companies great and how to stay there

Why Great Companies Fail
Great companies fail because they prioritize what their best customers want and focus on sustaining innovations. Disruptive tech starts as inferior and doesn’t appeal to top customers. Example: Disk drive industry moved fast—winners prioritized cost/MB, losers stuck to old tech.
Value Networks
Success depends on the value network—who you sell to, how you deliver. Disruptive tech often needs a new value network (new customers, supply chains). Example: Electric cars needed charging networks, not gas stations.
Processes and Culture
Big companies have rigid processes; they’re optimized for repeating success. Startups are flexible, using intuition. When startups succeed, their habits harden into culture. Processes = stability for big firms, death for disruption.
Sustaining vs. Disruptive Tech
Sustaining innovations improve existing products for current customers (faster cars, better cameras). Disruptive innovations underperform at first but are cheaper, simpler, or more accessible. Example: Mainframes vs. PCs.
Small Markets
Disruptive tech thrives in small markets that don’t interest big companies. Big companies ignore them because small markets don’t hit revenue targets. Startups can own these spaces. Example: Netflix started as a DVD rental niche.
Low-End and New-Market Disruption
Two types of disruption:
Low-end: Cheaper, simpler product takes bottom market (e.g., Southwest Airlines).
New-market: Enables non-consumers to enter (e.g., smartphones bringing new users online).
Overshooting and Undershooting
Incumbents overshoot customer needs (too many features, too expensive). Disruptors hit the sweet spot—just good enough and cheaper. Example: Early digital cameras were "bad" but affordable.
The Innovator's Solution
Big companies can survive disruption if they spin off separate units to explore new markets without corporate constraints. Example: IBM pivoted to services when hardware commoditized.
Modular vs. Integrated
Disruption shifts markets from integrated (all-in-one systems) to modular (mix-and-match parts). Incumbents stick to integrated solutions too long. Example: Mainframes (integrated) vs. PCs (modular).
Cannibalization
Disruption often means cannibalizing your own products. Big companies avoid this to protect profits, which lets disruptors take over. Example: Kodak invented the digital camera but buried it to protect film sales.
Customer Jobs
Customers hire products to solve problems ("jobs"). Disruption wins by solving new or overlooked jobs better. Example: Uber solves the "I need a quick ride" job better than taxis.
Experimentation
Disruptive products are messy at first. Launch fast, learn, iterate. Incumbents focus on perfection, which slows them down. Example: Tesla’s early cars were flawed but improved constantly.
Scaling Disruption
Once disruptors gain traction, scaling is critical. They must grow fast to avoid being copied or crushed. Example: Netflix scaled streaming globally before competitors caught up.
The Excavation Example
Disruption in excavation: electric or autonomous excavators could disrupt traditional ones by being cheaper, cleaner, or safer for new use cases (e.g., urban digging). Incumbents will resist as long as their margins stay strong.

So again, it seems to be more of a marketing problem, finding niche customer. Product does not have to be 100% better, but it solves some problem differently. Can be same category, or even sub-category. Another example is insulin pen: it did not need to have purest insulin, yet they managed to go with 30% margins compared to previous standard.

Look at current ways of doing and think how it can be done differently. Not necessarily better in everything, but maybe some parts only. Sometimes nobody knows how product is going to be used in the long-term, not the creator, nor customers.

Great book on why great managers fail with innovating - it is not poor management but great management that leads to failure. The management strategies that work to sustain a company does not translate to what works to disrupt a company, even if one’s own company.

Well, this is a mixed bag, this interesting little book. The observations are prescient but the presentation is abominable. I'm sure for those who demand an exhaustive regurgitation of every step in an analysis, it is useful, but I felt that most of the book could have been the research appendices. On the other hand, the conclusions drawn were incisive and incredibly useful. It would have worked well if it had been presented as a research paper with a 10-page abstract. As a practitioner, I could be pretty hard on it because it's missing application, but I get that it was meant to be more academic in its approach, and I'm big enough to draw my own conclusions about implementation. Very dry read. Very good analysis.

This is one of those books that becomes an instant classic. Everyone talks about it until you think you know most of what it has to say without reading it shortly after it comes out. You can barely carry on a conversation about technology without someone using the term "disruptive." It deserves that reception and as with most cases, there is much more to gain by reading the book than just the popular representation.

The book defined disruptive technologies vs. sustaining technologies and addresses why good, established companies usually dominate and prosper with new sustaining technologies and often fail or are even displaced because of disruptive technologies. It shows how such companies can cope with the challenge to maximize their chances even though there are systemic biases against it given how an established company must approach resource allocation.

In my own career, I'm generally in the place of the smaller companies that effectively utilize disruptive technologies rather than with large, established firms with that problem. It is equally valuable from that perspective because it sheds light on some of the advantages that are felt but perhaps not fully identified and guidance on how you might better exploit them.

This book ought to be read by most people interested in business and certainly everyone occupied with computer technology.

An excellent analysis of why so many companies rise to greatness, only to be surpassed by others. The analysis is thorough and includes some good examples. I've been involved in portfolio development in the semiconductor industry, and I wish I had read this book a few years ago.

Not only is there analysis of the problem, but there is also a detailed example showing how a company can address the problem. (Interestingly, the example is an electric car, and Tesla took a very different approach than was suggested by example. They went luxury first, rather than from the bottom. Even so, Christensen details the process to get to a solution and is careful to point out that his "solution" is just an example.)

The writing is very direct and business oriented. It reads like a book that would accompany a business class. It's not a dry textbook though.

Pretty boring. Basically 250 pages of somewhat-repetitive research.

This is a summary I wrote for class.

Although disruptive technologies are "typically simpler, cheaper, and more reliable and convenient than established technologies," the greatest firms often adopt them in ways and at times that cause them to lose millions or billions of dollars in revenue. This seems ironic, because successful large firms have the resources to develop, and even develop markets for, new tech. Too frequently, however, these firms are slow to move into risky areas when they do not perceive a competitive advantage.

Many examples are given, like the electric-powered car, disk drive, and steam shovel industries. In each of these examples, a revolutionary, disruptive technology was developed and eventually needed to be integrated into industry leaders' portfolios. Whether through acquisition or internal development, these companies always did adopt the technology, but they often did it late, halfheartedly, or without the proper market research, missing out on potential revenue and huge chunks of market share.

Christensen's book suggests that spinning off an independent organization to develop and market the technology, even if customers may not relate it back to the parent company, is often a successful strategy for these great firms to use. These independent organizations are more organic and therefore can navigate into new markets faster, with more success and less risk because of the parent company's resources. Additionally, disruptive and sustaining technologies often need different strategies, so choosing one strategy to take in regards to innovation will not always lead to the greatest market share.

The book isn't an easy read; I think it could have benefited from a better editor. It's quite repetitive and includes details that don't seem particularly relevant, especially concerning technologies that were already outdated when the book was published.

However, I can see why this book was important in the early 2000s. It introduced some key concepts and provided an in-depth study on innovation, attempting to identify patterns and formulas. The section on the electric car industry was especially interesting.

I love this book. Clayton Christensen masterfully combined practice and solid theoretical approaches that can be easily comprehended and put as oil into the engine of big corporations.

My summary:

The dilemma: how executives can simultaneously do what is right for the near-term health of their established businesses, while focusing adequate resources on the disruptive technologies that ultimately could lead to their downfall.
Most technological advances in a given industry are sustaining in character, they rarely precipitated the failure. Disruptive technologies bring to a market a very different values proposition that had been available previously. They result in worse product performance, at least in the near-team, but products based on disruptive technologies are typically cheaper, simpler, faster and often more convenient to use.
The principles of disruptive innovation:
1. Companies Depend on Customers and Investors for Resources
In order to survive, companies must provide customers and investors with the products,
services, and profits that they require. The highest performing companies, therefore, have well-developed systems for killing ideas that their customers don’t want. As a result, these
companies find it very difficult to invest adequate resources in disruptive technologies—lower-margin opportunities that their customers don’t want—until their customers want them. And by then, it is too late.
2. Small Markets Don’t Solve the Growth Needs of Large Companies
To maintain their share prices and create internal opportunities for their employees, successful companies need to grow. It isn’t necessary that they increase their growth rates, but they must maintain them. And as they get larger, they need increasing amounts of new revenue just to maintain the same growth rate. Therefore, it becomes progressively more difficult for them to enter the newer, smaller markets that are destined to become the large markets of the future. To
maintain their growth rates, they must focus on large markets.
3. Markets That Don’t Exist Can’t Be Analyzed
Sound market research and good planning followed by execution according to plan are the
hallmarks of good management. But companies whose investment processes demand
quantification of market size and financial returns before they can enter a market get paralyzed when faced with disruptive technologies because they demand data on markets that don’t yet exist.
4. An organisation’s capabilities define its disabilities
5. Technology Supply May Not Equal Market Demand
Although disruptive technologies can initially be used only in small markets, they eventually
become competitive in mainstream markets. This is because the pace of technological progress often exceeds the rate of improvement that mainstream customers want or can absorb. As a result, the products that are currently in the mainstream eventually will overshoot the performance that mainstream markets demand, while the disruptive technologies that underperform relative to customer expectations in the mainstream market today may become directly competitive tomorrow. Once two or more products are offering adequate performance, customers will find other criteria for choosing. These criteria tend to move toward reliability, convenience, and price, all of which are areas in which the newer technologies often have advantages.


PART ONE: WHY GREAT COMPANIES CAN FAIL
1 How Can Great Firms Fail? Insights from the Hard Disk Drive Industry
When the best firms succeeded they did so because they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied the next generation’s needs. Paradoxically, they failed for the same reasons.
The purpose of sustainable technologies was to sustain an established trajectory (higher performance and upper right corner of the trajectory map).

2 Value Networks and the Impetus to Innovate
A disruptive innovations have different attributes of performance than those in established value networks.
Decision-making pattern:
Disruptive technologies were first developed within established firms
Marketing personnel sought reactions from lead customers
Established firms step up the pace of sustaining technological development
New companies were formed and markets for DT were found by trial-and-error
Entrants moved upmarket
Established firms belatedly jumped on the bandwagon to defend customer base
Entrants have “attacker’s advantage”: new product architectures involving little new technology per se.
They have relative flexibility to change strategies and cost structures, not technologies.

3 Disruptive Technological Change in the Mechanical Excavator Industry
They failed not because management was sleepy or they lacked information about hydraulics, they failed because hydraulics didn’t make sense - until it was too late.

4 What Goes Up, Can’t Go Down
Big companies need constant improvements in profitability. Gross margins are clearly higher in high-end markets, compensating manufacturers for the higher levels of overhead characteristics of their businesses.
Decision making is thought to be done by senior managers, while the majority of decisions are taken by middle managers.
Well-run companies are not with yes-people who mindlessly carry out the directived, they are usually taught what is good for the company seen by the management.

PART TWO: MANAGING DISRUPTIVE TECHNOLOGICAL CHANGE
5 Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them
The strategy when managers deal with technology that customers don’t want: 1) convincing everyone in the firm 2) creating an independent organization and embedding it among emerging customers that need the technology (+ new value network & the powerful forces of resource dependence upon the appropriate set of customers for survival) -> no harm to the main organisation’s value network and no competition for customers within 1 organisation with 2 technologies.

6 Match the Size of the Organization to the Size of the Market
There is no chance for managers to let the rate of growth slow down, the stock price might fall.Small markets can’t satisfy the near-term growth requirements of big organisations.

7 Discovering New and Emerging Markets
The dominant difference between successful and failed ventures isn’t the astuteness/accuracy of their original strategy - conserving enough resources is more important/having trusting relationships with investors.
Plans to learn are more important than plans to execute -> discovery-driven planning & agnostic marketing (“no one knows whether, how and in what quantities a disruptive product will be used”).

8 How to Appraise Your Organization’s Capabilities and Disabilities
To succeed continuously managers need to be skilled not only in choosing, training and motivating the right people for the right job, but the right organisation for the job as well.
Organisational capabilities framework: resources -> processes -> values.
Values often change in at least 2 dimensions: acceptable growth margins & the size for a business to be in order to be interesting
Questioning what is the value that was paid for in M&A.
Creating capabilities to cope with the change:
Acquire a different organisation with the appropriate processes and values
Try to change the processes and values of the current organisations
Spin out an independent organisation.


9 Performance Provided, Market Demand, and the Product Life Cycle
A product becomes a commodity within a specific market segment when the repeated changes in the basis of competition, as described above, completely play themselves out, that is, when market needs on each attribute or dimension of performance have been fully satisfied by more than one available product. The performance oversupply framework may help consultants, managers, and researchers to understand the frustrated comments they regularly hear from salespeople beaten down in price negotiations with customers: “Those stupid guys are just treating our product like it was a commodity. Can’t they see how much better our product is than the competition’s?” It may, in fact, be the case that the product offerings of competitors in a market continue to be differentiated from each other. But differentiation loses its meaning when the features and functionality have exceeded what the market demands.
Product evolution model/buying hierarchy: functionality, reliability, convenience and price.
Established firms confronted with disruptive technology typically viewed their primary development challenge as a technological one: to improve the disruptive technology enough that it suits known markets. In contrast, the firms that were most successful in commercializing a disruptive technology were those framing their primary development challenge as a marketing one: to build or find a market where product competition occurred along dimensions that favored the disruptive attributes of the product.


10 Managing Disruptive Technological Change: A Case Study
How much do we need to worry about electric cars? Do they pose a legitimate disruptive threat? (trajectories of performance improvement: will the trajectory intersect market demands)
Where is the market for electric vehicles?
First, I would acknowledge that, by definition, electric vehicles cannot initially be used in mainstream applications because they do not satisfy the basic performance requirements of that market. Although we don’t have a clue about where the market is, the one thing we know for certain is that it isn’t in an established automobile market segment.
The second point on which I would base my marketing approach is that no one can learn from market research what the early market(s) for electric vehicles will be.
The third point is that my business plan must be a plan for learning, not one for executing a
preconceived strategy. Although I will do my best to hit the right market with the right product and the right strategy the first time out, there is a high probability that a better direction will emerge as the business heads toward its initial target.
Mainstream customers can never use a disruptive technology at its outset.
What should be product, technology and distribution strategies?
Product strategy:
First, this vehicle must be simple, reliable, and convenient. That probably means, for example, that figuring out a way to recharge its batteries quickly, using the commonly available electrical service, would be an immutable technological objective.
Second, because no one knows the ultimate market for the product or how it will ultimately be used, we must design a product platform in which feature, function, and styling changes can be made quickly and at low cost.
Third, we must hit a low price point. Disruptive technologies typically have a lower sticker price per unit than products that are used in the mainstream, even though their cost in use is often higher.
Technology strategy: low-end market and moving upmarket.
What organisation best serves disruptive innovations?
The electric vehicle is not only a disruptive innovation, but it involves massive
architectural reconfiguration as well, a reconfiguration that must occur not only within the product itself but across the entire value chain. From procurement through distribution, functional groups will have to interface differently than they have ever before. Hence, my project would need to be managed as a heavyweight team in an organization independent of the mainstream company.

Sometimes, supply creates demand.

That’s my summary of the book.