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The Innovator’s Dilemma by Clayton Christensen

Posted on: August 2, 2012

The Innovator's DilemmaThe Innovator’s Dilemma by Clayton M. Christensen
My rating: 3 of 5 stars

This is one book that will keep coming up whenever one comes across the topic of innovation. It is considered by many as some sort of Bible for innovation. I picked up the book with a very wrong idea in that it is about how to innovate. The book is about how to innovate, but it is from a manager’s perspective. It is not for a person who wishes to innovate, but for people who wish to encourage innovation. I should have guessed it better considering that Clayton Christensen is a professor in the Harvard Business School.
The book is a study of how large businesses have failed to innovate or have found it difficult to innovate, despite having the resources, the wherewithal and the knowledge to innovate. Clayton Christensen indicates that a business is driven by two forces; the force of the investors and the force of the customers. The Investors are looking for returns on their investments and the customers are looking forward to their desires being satiated. Given this the path for the company is straight forward. Study and understand what the customers want and deliver it to them to earn the revenues that will provide the investors their return on investment.
Seems a straightforward thing to do and how this is to be achieved is what is taught in the Business Schools. As a result when the company has to do something that is not asked for by its customers it goes against its principle, it defies all logic and most companies shy away from it. The companies that dare to find it difficult to justify the cost of this to its customers and to its investors. This blinkered vision and straight-jacketed existence is what prevents large companies from making disruptive innovations.
The above the is gist of the book. Mr. Christensen extensively studied the growth of technologies in the Hard Disk industry and along with it the rise and fall of the fortunes of the various disk manufacturers. This study is what led him to believe what has been stated above. The Disk industry moved from the 14″ drives required for the mainframes to the 8″ drives initially required for the mini computers, to the 5 1/4″ drives initially required for the Desktops to the 3 1/2″ drives initially required for the laptops to the 2 1/5″ drives initially required for heart monitors to 1.8″ drives required initially for the PDAs.
Read the above sentence again and note the use of the word “initially”. Every reduction in the disk size addressed a market which was smaller or different than the market that was being addressed by the manufacturers of the larger disk. This meant that their customers never said that they needed the other drive. This led to the companies staying away from manufacturing those drives. These smaller drives over a period of time became more robust and the same customers that refused to look at the smaller drives because of their smaller capacities started to want the very same drives as they now wished to either address their market which was looking for a smaller equipment or were looking at something that was more reliable (Note that smaller the drive the more reliable the drive is as the degree of movement of the disk with respect to the head that reads it will less in smaller drives. In the larger disks even a small vibration can cause the disk to collide with the heads towards the edge of the disks causing physical damage to the disks.)
Mr. Christensen’s sites the following reasons for companies to be not innovative.
1. Companies depend on customers and investors for resources
2. Small Markets don’t solve the growth needs of large companies
3. Markets that don’t exist can’t be analyzed.
4. An Organization’s capabilities define its disabilities
5. Technology Supply may not equal market demand

The following are identified as parameters which determine the success or failure of a company
1. Resources. These are the people that constitute the organization. The people can be trained to learn new technology and to adapt to new environment.
2. Processes: Every organization has a set of processes and these processes need to be specific to the problem they solve. Not all processes used for solving one problem will be reusable in other scenarios. Processes can be changed and adapted if there is a will.
3. Culture: This is an undefined way the organization works. This is the most difficult to change. Unless this suited for the problem that is being solved it will be difficult for the company to succeed.

Larger companies tend to be steeped in Processes and Culture which suit the current problem they are addressing it is difficult for them to groom within these parameters a disruptive innovation. Added to this problem is the fact that the market for these innovations will either be unknown or small at best and it will be difficult to justify the cost of innovation to the investors and to the customers who sustain the business.

Mr. Christensen concludes that the only way a company can foster innovation and stay ahead in the race is by

1. Sponsoring a company that is in the field and ensure that it prospers so that it can be integrated into the bigger company at a later stage when the technology and market are more mature and can now appeal to the customers and the investors.
2. Spawning an independent arm within the company with a new set of empowered managers and allowing them to define their own set of rules and processes. In short by making them independent of the main company.

The books will provide enough food for thought to managers who are in charge of running companies are are looking out for opportunities to invest in new innovations in their business.

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