Buchanan Innovators Dilemma

8/20/2019 Buchanan Innovators Dilemma

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The Innovator’s Dilemma

by Clayton M. Christensen

Logan BuchananOctober 6, 2005


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Thesis

“Well-managed companies often fail because

because the very management practices that

have allowed them to become industryleaders also make it extremely difficult for

them to develop the disruptive technologies

that ultimately steal away their markets.”p.265


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Overview

• Characteristics of goods companies

• Why they fail anyway

• Case studies

• How to succeed

• Related KM Issues


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What do good companies do

well?Listen responsively to their customers

Invest aggressively in the technology,

products, and manufacturing capabilitiesthat satisfied their customers’ future needs

Seek higher margins

Target larger markets rather than smallerones


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Why do good companies fail?

• Good management

• The Dilemma: The logical, competent

decisions of management that are critical to

the success of their companies are also the

reasons why they lose their positions of

leadership.


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Why good management can lead

to failure1. Difference between sustaining and

disruptive technologies

2. The pace of technological progress oftenoutstrips the needs of the market.

3. Customers and financial structures of

successful companies heavily influencethe types of investments that appearattractive.


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Two Types of Innovations

Sustaining

• Improve performance ofestablished products

• Meet demands ofmainstream customers inmajor markets

• Vary in difficulty, cost,

time, etc.• Established firms

Disruptive

• Generally underperformestablished products in

mainstream markets

• Have new features thatfringe / new customersvalue

• Cheaper, simpler, smaller,more convenient to use

• Entrant firms


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Market Need v. Technology

Improvement• Technologies can progress faster than

demand

• Suppliers give customers more than they

need or are willing to pay

• Allows room for underperforming



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Disruptive Technologies v.

Rational Investments• Disruptive products are simpler and

cheaper, and promise lower margins

• Disruptive technologies are firstcommercialized in emerging or insignificantmarkets

• Most profitable current customers are notinterested in the product


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Case Studies

• Primary takes examples from the disk driveindustry. Equates this to studying fruit

flies…• Steel minimills

•Mechanical excavator industry

•Motorcycles•Insulin

•Department and discount stores


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Disruptive Technological Change in

the Mechanical Excavator Industry

•Leading firms have successfully adopted a

series ofsustaining innovations• Almost the entire population of mechanicalshovel manufacturers was wiped out by a

disruptive technology – hydraulics – that theleaders’ customers and their economicstructure had caused them initially to ignore


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Principles of disruptive

innovation1. Companies depend on customers and investors

for resources

2. Small markets don’t solve the growth needs oflarge companies

3. Markets that do not exist cannot be analyzed

4. An organization’s capabilities define its

disabilities5. Technology supply may not equal market

demand


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How did the successful managers harnessthese principles to their advantage?

1.Embedded projects to develop andcommercialize disruptive technologies withinan organization whose customers needed them

2.Projects in organizations small enough to getexcited about small opportunities and wins

3.Planned to fail early and inexpensively in thesearch for the markets for a disruptivetechnology

4.Utilized the organization’s resources, but

maintained independent values and processes5.Found or developed new markets that valuedthe attributes of the disruptive products, ratherthan search for a technological breakthrough


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Related KM Issues

• Values & Beliefs– “Values and beliefs are integral to knowledge,

determining in large part what the knower sees, absorbs,

and concludes from his observations […] The power of

knowledge to organize, select, learn, and judge comes

from values and beliefs as much as, and probably more

than, from information and logic. ” - Davenport and Prusak, p 12

• Lost innovation– Steve Jobs, Xerox PARC & the graphical interface

computer - Davenport and Prusak, p 59


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More KMS Issues

• Knowledge is the principle advantage, technology

eventually evens out. (But can knowledge and

organizational experience also be a hindrance?)• Autonomous groups

• Management support is essential, creativity should

be encouraged

• Organization size - large v. small

• Space and time are less of a constraint for sharing

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Buchanan Innovators Dilemma