Summary and Analysis of The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

Based on the Book by Clayton Christensen

Worth Books

• Publisher: Worth Books
• Year: 2016
• Print ISBN: 9781504046701
• eBook ISBN: 9781504043427
• Topic: Study Aids
• Subtopic: Business Development

So much to read, so little time? Get a brief overview of The Innovator's Dilemma—the bestselling business book about disruption and how companies adapt.
 
Named one of the most important business books ever written by the Economist and the winner of the Global Business Book Award, The Innovator's Dilemma uses true stories of the successes and failures of prominent companies to analyze why great firms fail when faced with critical market and technological innovation.
 
In this summary of Clayton Christensen's book for entrepreneurs, managers, CEOs, and business leaders, you'll learn:
 

• Why sometimes "doing the right thing" can be the wrong thing, especially when faced with disruptive technology
• Why most companies, even good ones, struggle to adapt their business practices
• What executives can do to ensure both the short-term health and long-term survival of their organizations

 
With historical context, chapter-by-chapter overviews, important quotes, definitions of key terms, and other features, this summary and analysis of The Innovator's Dilemma is intended to complement your reading experience and bring you closer to a great work of nonfiction.

Summary

Preface

In this note to the reader, Christensen explains his reason for writing The Innovator’s Dilemma. In 1990, he asked himself two questions that would shape the book: “Why is success so difficult to sustain?” and “Is successful innovation really as unpredictable as the data suggests?”

His graduate research led to some unsettling answers. First, it’s often good management strategies that lead to a company’s demise—listening to the customer and focusing on products that yield high returns. Doing the right thing can be the wrong thing.

To answer his second question, Christensen urges his readers to look at innovation as something that is inherently unpredictable, as opposed to a risk to be managed. With the help of data, we can more clearly read where innovation is going and which companies will fail and which will succeed.

The purpose of The Innovator’s Dilemma is to help innovators, entrepreneurs, and investors know what to look for, what information to collect, what data to mine, and how to interpret that information so that they can develop proftiable services and products and run successful companies.

The Innovator’s Dilemma is the result of years of research, tested and improved by hundreds of students, investors, innovators, consultants, academics, and executives. However, the theory of disruption can always be improved upon, and Christensen challenges each and every reader to continue the research in their own lives.

Introduction

The Innovator’s Dilemma is about why great firms fail when faced with critical market and technological innovation. An example cited is Sears Roebuck, who introduced credit cards and mail order catalogs only to lose those markets to Visa and MasterCard, along with a long list of new catalog merchants.

The key principle regarding technological innovation is the difference between sustaining technology and disruptive technology. Well-managed companies routinely drive sustaining technological improvements, including incremental and breakthrough improvements, in their existing product lines. They are following sound business practices within the context of their organization, their customers, and the overall market for their products and services.

On the other hand, disruptive technologies are typically cheaper, simpler, and more user-friendly. They often enter at the low-cost, low-margin side of the market where larger organizations have limited or no motivation or even capability to step in.

Yet it is the disruptive businesses that capture new consumer segments and then start to move into the markets once owned by larger companies that, over time, leave legacy companies behind.

Part One: Why Great Companies Fail

One: How Can Great Firms Fail? Insights from the Hard Disk Drive Industry

Few industries have faced such a relentless march of performance improvements, sales growth, and market changes as the hard disk drive industry. In its nascent stage in the 1950s, it expanded with new players in the field over time. From 1976 to 1995, only one of the original seventeen leaders in the industry remained: IBM. Another 129 firms had entered the industry during this period, with 109 of those failing.

This rapid turnover in technology and organizations, coupled with detailed market information published by Disk/Trend Report, made this industry a fertile field for exploring the central question of the book: How do great firms fail?

Clayton Christensen identifies two types of technological change: sustaining and disruptive. In the former, leading firms have always led the industry in implementing and commercializing sustaining innovations. However, with disruptive technology improvements, the opportunities and the market applications are so uncertain and so limited in size that only smaller entry-level companies consider them worth their time and money. Yet time after time, these smaller organizations are able to establish a market with their disruptive innovation and move up the value scale to take ever-increasing business from the existing organizations.

Sustaining technology improvements meet existing customers’ needs with marked benefits, but ignore the needs of potential customers. Disruptive technology improvements are often at the low end of the market and typically find applications where the technology was not previously mechanically or economically feasible. They do not need to be massive breakthroughs, but are instead new applications in new or emerging markets.

Two: Value Networks and the Impetus to Innovate

While some firms fail because of leadership or organizational issues, and others due to lack of experience with ...

Table of contents

• Title
• Disclaimer
• Contents
• Context
• Overview
• Summary
• Company Directory
• Direct Quotes and Analysis
• Trivia
• What’s That Word?
• About Clayton M. Christensen
• For Your Information
• Bibliography
• Copyright