Book Summary 
Clayton M. Christensen 
1
Sameer Mathur 
Indian Institute of Management, 
Lucknow 
Marketing Professor 2013 – 
Marketing Professor 2009 – 2013 
Ph.D...
Contents 
1.How can great firms fail? 
2. Value network and impetus to innovate 
3.Distruptive technological change in the...
Contents 
6. Match the size of the organization to the size of 
the market 
7. Discovering New and Emerging Markets 
8. Ho...
Contents 
10. Managing Disruptive Technological 
Change: A Case Study 
11. The Dilemmas of Innovation: A 
Summary 
5
The Premise 
“This book is about the failure of 
companies to stay atop their industries 
when they confront certain types...
The Dilemma 
“…the logical, competent 
decisions of management that are 
critical to the success of their 
companies are a...
Chapter 1 
How can great firms fail? Insights 
from hard disk drive industry 
8
9 
Two Types of Innovations 
Sustaining 
Two Types of Innovations 
• Improve 
performance of 
established 
products 
• Mee...
10 
Disruptive Innovations 
Incumbents beat newcomers at sustaining 
innovations, but lose with disruptive innovations. 
D...
Disk Drive Industry 
11 
In the Disk Drive industry, successful firms have 
listened responsively to customer needs and 
i...
Disk storage capacity increased. 
The cost per MB of storage decreased. 
12 
Disk Drive Industry
Yet.. 
1980-1995: 109 out of 129 firms that entered the 
industry, failed ! 
13 
High Level of Failure
Disk Drive Industry 
14 
• Disruptive innovations happened 
• Firms developed unique architecture for 
existing technology...
Disk Drive Industry 
15 
• New entrants led in developing and adopting 
disruptive technologies. 
• Leading firms were hel...
Impact of Technology Change 
Technology mudslide hypothesis: With the 
relentless onslaught of technology change, firms 
s...
Proved wrong by study that revealed neither pace 
nor difficulty of technological change lay at root 
of leading firm’s fa...
Firms that are well-managed and do the right thing (like 
listening to customers, investing resources to build 
higher-per...
Chapter 2 
Value network and impetus to 
innovate 
19
Value networks & the Impetus to 
Innovate 
Value Networks 
20 
The context within which a firm identifies and 
responds to...
Value network & impetus to 
innovate 
21 
Value network: Nested commercial 
system
Value networks & the Impetus to 
Innovate 
22 
Competitive 
Strategy 
Perception 
of 
economic 
value of 
technology 
Expe...
Value networks & the Impetus to 
Innovate 
23 
Cost Structure characteristics of each value 
network can have a powerful e...
Value networks & the Impetus to 
Innovate 
24 
Technology S-curves 
Conventional S curve 
Disruptive innovation S 
curve
Value network & impetus to 
innovate 
25 
Metrics of value: Markets value individual 
attributes differently and value var...
Value network & impetus to 
innovate 
26 
Conventional 
technology S curve 
Disruptive technology 
S curve
Value network & impetus to 
innovate 
27 
Managerial decision making 
Disruptive technologies first developed in 
establis...
Value network & impetus to 
innovate 
28 
Reasons for failure 
Organizational and managerial explanation: When 
architectu...
Chapter 3 
Disruptive Technological Change in the 
Mechanical Excavator Industry 
The Mechanical Excavator industry has 
t...
Disruptive technology change 
LEADERSHIP IN SUSTAINING TECHNOLOGICAL 
CHANGE 
From William Smith Otis’ invention of the st...
Disruptive technology change 
They moved faster , were more efficient, 
reliable and at a lower cost as the process 
was t...
Disruptive technology change 
Slowly by 1928, the diesel and electric motors 
were catching up for shovel technology. afte...
Disruptive technology change 
THE IMPACT OF DISRUPTIVE HYDRAULICS 
TECHNOLOGY 
After world war 2 although the main source ...
34 
Disruptive technology change 
Players in the market for Steam Shovels
Disruptive technology change 
The excavation industry has seen a major 
change 
4 players upgrades 
Many players failed
Disruptive technology change 
The players who remained diverged into 
equipment as huge, cable-actuated draglines 
for str...
Disruptive technology change 
Performance demanded in the Mechanical 
Excavator Market 
First and largest, the general exc...
Disruptive technology change 
Second, sewer and piping contractors, who 
generally dig long trenches; 
Third, open pit or ...
Disruptive technology change 
Highest volume of bucket capacity was with 
mining, followed by excavation and followed by 
...
Disruptive technology change 
The Emergence and Trajectory of 
Improvement of Hydraulic Excavation 
Hydraulic backholes as...
Disruptive technology change 
The digger was mounted and attached with a 
tracker for faster mobility. These 
specificatio...
Disruptive technology change 
THE RESPONSE TO HYDRAULICS 
The leading cable shover acquired a hydraulic 
company and estab...
Bucyrus kept its Hydrohoe on 
the market for over a decade, 
attempting periodically to 
upgrade its performance to 
make ...
Ultimately, the 
company returned 
to the cable 
shovels that its 
customers 
needed.
45 
Disruptive technology change 
• Till 1966 profits were high 
on cable shoven 
• In 1960’s when the hybrids 
were intro...
Disruptive technology change 
CONCLUSION 
Contractors found, however, that hydraulic 
machines were much less prone to bre...
Disruptive technology change 
The basis of product choice in the market 
shifted to reliability. 
Sewer and piping contrac...
Key Points 
Early uses of hydraulic excavators were very 
different in size, use and distribution channels 
Use of previou...
Key Points 
Established players tried to adapt the 
technology as ways to meet the current market 
demands 
The big compan...
Chapter 4 
What Goes Up, Can’t Come Down 
Leading companies of a certain sector can 
move easily and steadily to high-end ...
Key Points 
With new product development, companies 
look for higher margins 
For catering to higher-market, all resources...
Three Factors 
Three important factors which create 
immobility to lower-markets : 
Promise of upmarket margin, 
simultane...
What Goes Up, Can’t Go Down 
In the tug-of-war for development resources, 
projects targeted at the explicit needs of 
cur...
What Goes Up, Can’t Go Down 
VALUE NETWORKS AND MARKET VISIBILITY 
The impetus to drift upmarket can be 
particularly powe...
What Goes Up, Can’t Go Down 
In the internal debates about resource 
allocation for new product development, 
therefore, p...
What Goes Up, Can’t Go Down 
THE NORTHEASTERLY MIGRATION OF 
INTEGRATED STEEL 
Minimill manufacturing steel was famous in ...
What Goes Up, Can’t Go Down 
In 1995, the most efficient Minimill required 0.6 
labor-hours per ton of steel produced; the...
What Goes Up, Can’t Go Down 
At the same time, management teams at 
integrated mills have taken aggressive steps 
to incre...
What Goes Up, Can’t Go Down 
The minimills could sell virtually over 
telephone all the steel they produced. By 
1980, the...
What Goes Up, Can’t Go Down 
Conclusion 
The integrated mills did not let the minimills 
tamper with the mainstream work o...
What Goes Up, Can’t Go Down 
The integrated steel companies’ march to the 
profitable northeast corner of the steel 
indus...
Chapter 5 
Give responsibility for disruptive 
technologies to organizations 
whose customers need them 
62
Resource Dependence Theory 
Give responsibility for disruptive 
technologies to organizations whose 
customers need them 
...
An independent organization 
Create an independent organization and 
embed it among emerging customers that 
do need disru...
Resource Allocation 
Good resource allocation processes are 
designed to weed out proposals that 
customers don't want 
Go...
How to harness this principle? 
Try to convince the company 
Or 
Spin out an independent Or 
organisation 
Technology is p...
Chapter 6 
" Small Markets Don't Solve the Growth Needs 
of Large Companies" 
Dilemma: To be a leader or a follower? 
Mana...
Chapter 6: How to harness this 
principle? 
Match the size of the organization to the size of 
the market 
Implant project...
Chapter 6 
Match the size of the 
organization to the size of the 
market 
69
Match the size of the organization to the 
size of the market 
Leadership is not essential in sustaining 
technologies – y...
“Disruptive technologies for small markets” is 
not interesting option 
Best strategy is to acquire a small company 
and l...
" Small Markets Don't Solve the Growth Needs 
of Large Companies" 
Dilemma: To be a leader or a follower? 
Managers must b...
How to harness this principle? 
Match the size of the organization to the size of 
the market 
Implant projects aimed at c...
Chapter 7 
Discovering New and 
Emerging Markets 
74
Discovering new and emerging markets 
For disruptive technologies, markets are 
unknowable. 
Then, how can we discover and...
Discovering new and emerging markets 
Sustaining vs. disruptive technologies: 
Sustaining technologies are improvements 
t...
Discovering new and emerging markets 
In contrast, Disruptive technologies 
are usually those innovations that 
initially ...
Discovering new and emerging markets 
Methods to forecast those two different 
markets can’t be the same. 
Example: Honda’...
Discovering new and emerging markets 
“Agnostic marketing” 
No one, not the firm or the customers 
know how a disruptive t...
Discovering New and Emerging Markets. 
Because markets for disruptive technology are 
unknowable, managers should plan to ...
Discovering new and emerging markets 
Plans to learn vs. plan to execute : 
For sustaining technologies, plans are 
establ...
Chapter 8 
How to appraise your organization's 
capabilities and disabilities. 
Organizations have distinct capabilities t...
How to Appraise your Organization’s 
Capabilities and Disabilities 
Not only must a manager well choose, train 
and motiva...
How to Appraise your Organization’s 
Capabilities and Disabilities 
The organizational capabilities framework : 
Resources...
How to Appraise your Organization’s 
Capabilities and Disabilities 
Values : the criteria to help organizations 
prioritiz...
How to Appraise your Organization’s 
Capabilities and Disabilities 
The relationship between processes 
and values, and su...
How to Appraise your Organization’s 
Capabilities and Disabilities 
Resources can easily fit in a new and 
disruptive busi...
How to Appraise your Organization’s 
Capabilities and Disabilities 
The advantage of start-ups : they create 
the processe...
How to Appraise your Organization’s 
Capabilities and Disabilities 
Creating capabilities to cope with 
change : 
Acquire ...
How to Appraise your Organization’s 
Capabilities and Disabilities 
Try to change the processes and values 
of the current...
How to Appraise your Organization’s 
Capabilities and Disabilities 
Fitting an innovation’s requirements with the 
organiz...
Chapter 9 
Technology Supply May Not Equal 
Market Demand 
92
Technology Supply May Not Equal 
Market Demand 
93 
When performance oversupply occurs, it creates 
an opportunity for a d...
Technology Supply May Not Equal 
Market Demand 
Two characteristics of disruptive 
technologies consistently affect produc...
When confronted with a disruptive technology, 
established firms typically view them as a 
technical challenge and therefo...
Chapter 10 
Managing Disruptive Technological Change: 
A Case Study 
96
How can managers succeed when faced 
with disruptive technological change? 
A case study on the electric automobile 
show ...
Managing Disruptive 
Technological Change: A Case Study 
98 
Electric Vehicle Example 
Identify whether technology is disr...
Managing Disruptive 
Technological Change: A Case Study 
99 
Electric Vehicle Example 
Identify where is the market for th...
Managing Disruptive 
Technological Change: A Case Study 
10 
Electric Vehicle Example 
Business plan must be one for learn...
Managing Disruptive 
Technological Change: A Case Study 
101 
Electric Vehicle Example 
Product plan cannot rely on achiev...
Chapter 11 
102 
The Dilemmas of Innovation: 
A Summary
The pace of progress that markets demand or 
absorb can be different than the progress that 
technological advances offer ...
Just as there is a resource allocation side to 
every innovation problem, matching the market to 
the technology is anothe...
It is not wise to adopt a blanket technology 
strategy to always be a leader or to always be a 
follower 
Perhaps the most...
106 
References 
1. http://www.maxmednik.com/1/post/2012/04/notes-on-the-innovators-dilemma.html 
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Book Summary of The Innovators Dilemma by Clayton Christensen

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The is a SUMMARY of a classic book. In this revolutionary bestseller, innovation expert Clayton M. Christensen says outstanding companies can do everything right and still lose their market leadership—or worse, disappear altogether. And not only does he prove what he says, but he tells others how to avoid a similar fate.

Focusing on “disruptive technology,” Christensen shows why most companies miss out on new waves of innovation. Whether in electronics or retailing, a successful company with established products will get pushed aside unless managers know when to abandon traditional business practices. Using the lessons of successes and failures from leading companies, The Innovator’s Dilemma presents a set of rules for capitalizing on the phenomenon of disruptive innovation.

Find out:
When it is right not to listen to customers.
When to invest in developing lower-performance products that promise lower margins.
When to pursue small markets at the expense of seemingly larger and more lucrative ones.

Sharp, cogent, and provocative, The Innovator’s Dilemma is one of the most talked-about books of our time—and one no savvy manager or entrepreneur should be without.

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Book Summary of The Innovators Dilemma by Clayton Christensen

  1. 1. Book Summary Clayton M. Christensen 1
  2. 2. Sameer Mathur Indian Institute of Management, Lucknow Marketing Professor 2013 – Marketing Professor 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009 2 © Sameer Mathur 2
  3. 3. Contents 1.How can great firms fail? 2. Value network and impetus to innovate 3.Distruptive technological change in the mechanical excavator industry 4. What goes up, Cant come down 5. Give responsibility for disruptive technologies to organizations whose customers need them 3
  4. 4. Contents 6. Match the size of the organization to the size of the market 7. Discovering New and Emerging Markets 8. How to Appraise Your Organization’s Capabilities and Disabilities. 9. Technology Supply May Not Equal Market Demand 4
  5. 5. Contents 10. Managing Disruptive Technological Change: A Case Study 11. The Dilemmas of Innovation: A Summary 5
  6. 6. The Premise “This book is about the failure of companies to stay atop their industries when they confront certain types of market and technological change. It’s not about the failure of simply any company, but of good companies – the kinds that many managers have admired and tried to emulate, the companies known for their abilities to innovate and execute.” 6
  7. 7. 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.” 7
  8. 8. Chapter 1 How can great firms fail? Insights from hard disk drive industry 8
  9. 9. 9 Two Types of Innovations Sustaining Two Types of Innovations • Improve performance of established products • Meet demands of mainstream customers in major markets • Vary in difficulty, cost, time, etc. • Established firms Disruptive • Generally underperform established products in mainstream markets • Have new features that fringe / new customers value • Cheaper, simpler, smaller, more convenient to use • Entrant firms
  10. 10. 10 Disruptive Innovations Incumbents beat newcomers at sustaining innovations, but lose with disruptive innovations. Disruptive innovations are often technically simpler than the previous generation. Example: PCs vs. mainframes.
  11. 11. Disk Drive Industry 11 In the Disk Drive industry, successful firms have listened responsively to customer needs and invested heavily in research, manufacturing and technology to satisfy next generation customer needs
  12. 12. Disk storage capacity increased. The cost per MB of storage decreased. 12 Disk Drive Industry
  13. 13. Yet.. 1980-1995: 109 out of 129 firms that entered the industry, failed ! 13 High Level of Failure
  14. 14. Disk Drive Industry 14 • Disruptive innovations happened • Firms developed unique architecture for existing technology and applied them to new markets. Example: 14 inch drive for mainframe computers 8-inch drive for mini computers 5.25 inch drive desktop market 2.5 inch Portable systems
  15. 15. Disk Drive Industry 15 • New entrants led in developing and adopting disruptive technologies. • Leading firms were held captive by their customers. • Sustaining technologies did not precipitate failure
  16. 16. Impact of Technology Change Technology mudslide hypothesis: With the relentless onslaught of technology change, firms should scramble with whatever resources they have to stay on top of the competition. 16 Technology Mudslide
  17. 17. Proved wrong by study that revealed neither pace nor difficulty of technological change lay at root of leading firm’s failures Industry’s leading firms led in developing and adopting sustained technologies Disruptive innovation resulted in failure of industry’s leading firms 17 Technology Mudslide hypothesis
  18. 18. Firms that are well-managed and do the right thing (like listening to customers, investing resources to build higher-performance products that yield higher profits) often can't handle disruptive innovations, and lose. If anything, the "right" thing may be counter-productive. This is why it's an Innovator's Dilemma. 18 Big Picture
  19. 19. Chapter 2 Value network and impetus to innovate 19
  20. 20. Value networks & the Impetus to Innovate Value Networks 20 The context within which a firm identifies and responds to customers’ needs, solves problems, procures input, reacts to competitors & strives for profits
  21. 21. Value network & impetus to innovate 21 Value network: Nested commercial system
  22. 22. Value networks & the Impetus to Innovate 22 Competitive Strategy Perception of economic value of technology Expected rewards from pursuing sustaining & disruptive innovation As a firm gains experience within a given network, it is likely to develop capability, organizational structure & cultures tailored to its value network’s specific requirements
  23. 23. Value networks & the Impetus to Innovate 23 Cost Structure characteristics of each value network can have a powerful effect on the firm’s decision on pursuing innovations Example: Disk Drive mfg. firms competing within mainframe computer network entail a particular cost structure with gross margin of ~50%. Within portable computer value network, a different cost structure may result in gross margins of ~ 15%-20%
  24. 24. Value networks & the Impetus to Innovate 24 Technology S-curves Conventional S curve Disruptive innovation S curve
  25. 25. Value network & impetus to innovate 25 Metrics of value: Markets value individual attributes differently and value varies over time Cost structures: Different value networks entail different cost structures Technology S curve: Magnitude of product’s performance improvement in a given time period or effort is likely to differ as technologies mature
  26. 26. Value network & impetus to innovate 26 Conventional technology S curve Disruptive technology S curve
  27. 27. Value network & impetus to innovate 27 Managerial decision making Disruptive technologies first developed in established firms Marketing personnel sought reactions from current customers Marketing managers threw impetus behind alternative sustaining projects
  28. 28. Value network & impetus to innovate 28 Reasons for failure Organizational and managerial explanation: When architectural technology change is required, organizations that facilitate component level innovations fail Capabilities and radical technology: Magnitude of technological change relative to company’s capabilities Value network and new perspective: Pattern of resource allocation leads to established firms consistent leadership in sustained innovation and dismal in disruptive
  29. 29. Chapter 3 Disruptive Technological Change in the Mechanical Excavator Industry The Mechanical Excavator industry has traditionally used steam-powered earthmoving equipment. This was then displaced by gasoline-powered engines. This was part of “radical technological transition”. Hydraulic powered mechanical excavators came as a “Disruptive change” in technology leaving the major players in the field unprepared and opening up the field for new, younger players. 29
  30. 30. Disruptive technology change LEADERSHIP IN SUSTAINING TECHNOLOGICAL CHANGE From William Smith Otis’ invention of the steam shovel in 1837 through the early 1920s, mechanical earthmoving equipment was steam-powered In 1920 with a much needed innovation gasoline-powered engines were substituted for steam power
  31. 31. Disruptive technology change They moved faster , were more efficient, reliable and at a lower cost as the process was through internal combustion rather than the steam based approach. Hence this was considered sustainable 23 out of 25 negotiated and transferred to gasoline powered shovels.
  32. 32. Disruptive technology change Slowly by 1928, the diesel and electric motors were catching up for shovel technology. after World War II, introduced the arched boom design, which allowed longer reach, bigger buckets, and better down-reaching flexibility further helping the established firms to innovate their machines
  33. 33. Disruptive technology change THE IMPACT OF DISRUPTIVE HYDRAULICS TECHNOLOGY After world war 2 although the main source of power was diesel engines, a new mechanism emerged for extending and lifting the bucket: hydraulically actuated systems replaced the cable-actuated systems Only 4 out of 30 had transformed into this technology
  34. 34. 34 Disruptive technology change Players in the market for Steam Shovels
  35. 35. Disruptive technology change The excavation industry has seen a major change 4 players upgrades Many players failed
  36. 36. Disruptive technology change The players who remained diverged into equipment as huge, cable-actuated draglines for strip mining and dredging The new entrants of Hydraulic mechanism gained market share
  37. 37. Disruptive technology change Performance demanded in the Mechanical Excavator Market First and largest, the general excavation market, composed of contractors who dig holes for basements or civil engineering projects such as canal construction;
  38. 38. Disruptive technology change Second, sewer and piping contractors, who generally dig long trenches; Third, open pit or strip mining
  39. 39. Disruptive technology change Highest volume of bucket capacity was with mining, followed by excavation and followed by sewer and piping contracts The capacity of easily moving out form a trench or mine was a important factor in deciding the mechanism of the equipment used.
  40. 40. Disruptive technology change The Emergence and Trajectory of Improvement of Hydraulic Excavation Hydraulic backholes as they had less basket capacity was restricted to only sewer mining where it did wok exceedingly efficiently in less than an hour and also were very mobile
  41. 41. Disruptive technology change The digger was mounted and attached with a tracker for faster mobility. These specifications limited the value of the hydraulic machines By 1974 the bucket capacity increased to 10 cubic tons making it capable to venture into the mining market
  42. 42. Disruptive technology change THE RESPONSE TO HYDRAULICS The leading cable shover acquired a hydraulic company and established good products but the market was not ready for it at that time. The technology was a combination of cable and hydraulics
  43. 43. Bucyrus kept its Hydrohoe on the market for over a decade, attempting periodically to upgrade its performance to make it acceptable to its customers but the machine was never commercially successful.
  44. 44. Ultimately, the company returned to the cable shovels that its customers needed.
  45. 45. 45 Disruptive technology change • Till 1966 profits were high on cable shoven • In 1960’s when the hybrids were introduced they caught on to market. • The new entrants took the opportunity and improved sales whereas the existing believed they are still dominant and the market will not change • Only a few ventured that stayed later along with the new players
  46. 46. Disruptive technology change CONCLUSION Contractors found, however, that hydraulic machines were much less prone to breakdowns than cable actuated excavators. In particular, those who had experienced the life-threatening snap of a cable while hefting a heavy bucket embraced reliable hydraulics quickly, as soon as it was capable of doing the job.
  47. 47. Disruptive technology change The basis of product choice in the market shifted to reliability. Sewer and piping contractors began adopting hydraulic equipment rapidly beginning in the early 1960s, and general excavation contractors followed later in the decade.
  48. 48. Key Points Early uses of hydraulic excavators were very different in size, use and distribution channels Use of previous technology combined with the “disruptive technological change” : shovels and backhoes powered hydraulically New players accepted hydraulics as a given and cultivated new applications of the technology 48
  49. 49. Key Points Established players tried to adapt the technology as ways to meet the current market demands The big companies failed because to them “hydraulics” didn’t make sense until it was too late Listening to customers, being smarter, good management may all fail when confronted with disruptive technology 49
  50. 50. Chapter 4 What Goes Up, Can’t Come Down Leading companies of a certain sector can move easily and steadily to high-end markets. However, moving down to lower-end markets is difficult because of the image created by the company and improved financial performance makes it hard for down-market development for these companies. 50
  51. 51. Key Points With new product development, companies look for higher margins For catering to higher-market, all resources within the company are aligned towards a very specific model of improving profitability Sensible resource allocation is at the root of companies’ upward mobility and immobility to lower markets 51
  52. 52. Three Factors Three important factors which create immobility to lower-markets : Promise of upmarket margin, simultaneous upmarket movement of its customers and difficulty of cutting costs to move down market This causes vacuum in lower-market which attracts companies with better cost structures and technologies 52
  53. 53. What Goes Up, Can’t Go Down In the tug-of-war for development resources, projects targeted at the explicit needs of current customers or at the needs of existing users that a supplier has not yet been able to reach will always win over proposals to develop products for markets that do not exist
  54. 54. What Goes Up, Can’t Go Down VALUE NETWORKS AND MARKET VISIBILITY The impetus to drift upmarket can be particularly powerful when a firm’s customers themselves are migrating upmarket. In this case the intermediate manufacturers will take a hit and the firms that have gone towards the trajectory of north east
  55. 55. What Goes Up, Can’t Go Down In the internal debates about resource allocation for new product development, therefore, proposals to pursue disruptive technologies generally lose out to proposals to move upmarket.
  56. 56. What Goes Up, Can’t Go Down THE NORTHEASTERLY MIGRATION OF INTEGRATED STEEL Minimill manufacturing steel was famous in 1960’s. For the same cost and efficient process of steel manufacturing Minimills took one tenth of the investment for setup compared to the Integrated steel mills.
  57. 57. What Goes Up, Can’t Go Down In 1995, the most efficient Minimill required 0.6 labor-hours per ton of steel produced; the best integrated mill required 2.3 labor-hours. It cost about $400 million to build a cost-competitive steel Minimill and about $6 billion to build a cost-competitive integrated mill Minimills virtually dominate the North American markets for rods, bars, and structural beams.
  58. 58. What Goes Up, Can’t Go Down At the same time, management teams at integrated mills have taken aggressive steps to increase mill efficiency. USX, for example, improved the efficiency of its steel making operations from more than nine labor-hours per ton of steel produced in 1980 to just under three hours per ton in 1991. It reduced the workforce and invested more than $2 Bn for the modernizing of parts
  59. 59. What Goes Up, Can’t Go Down The minimills could sell virtually over telephone all the steel they produced. By 1980, they captured 90 percent of the rebar market and held about 30 percent of the markets for bars, rods, and angle irons. 1992-95 the major players closed down their integrated minimills.
  60. 60. What Goes Up, Can’t Go Down Conclusion The integrated mills did not let the minimills tamper with the mainstream work of profitable business of the large auto, appliance, and can companies.
  61. 61. What Goes Up, Can’t Go Down The integrated steel companies’ march to the profitable northeast corner of the steel industry is a story of aggressive investment, rational decision making, close attention to the needs of mainstream customers, and record profits
  62. 62. Chapter 5 Give responsibility for disruptive technologies to organizations whose customers need them 62
  63. 63. Resource Dependence Theory Give responsibility for disruptive technologies to organizations whose customers need them Resource dependence theory: Customers allocate an organization’s resources, not management 63
  64. 64. An independent organization Create an independent organization and embed it among emerging customers that do need disruptive technology Same organization cannot support mainstream customer and pursuing disruptive innovation 64
  65. 65. Resource Allocation Good resource allocation processes are designed to weed out proposals that customers don't want Good resource-allocation processes will weed out disruptive innovations Resource allocation takes place at all levels of the organization. It is not a "top-down" process
  66. 66. How to harness this principle? Try to convince the company Or Spin out an independent Or organisation Technology is placed within a different value network Emphasis is on alignment of manager’s intentions and customer requirements
  67. 67. Chapter 6 " Small Markets Don't Solve the Growth Needs of Large Companies" Dilemma: To be a leader or a follower? Managers must be leaders, not followers, in commercializing disruptive change. Being a follower in sustaining technologies is a viable and possibly desirable strategy but leadership in disruptive technologies creates enormous value
  68. 68. Chapter 6: How to harness this principle? Match the size of the organization to the size of the market Implant projects aimed at commercializing Or disruptive innovations in organizations small enough to get excited about small market opportunities. Johnson comprises 160 autonomous companies, each of which can introduce small disruptive products such as disposable contact lenses.
  69. 69. Chapter 6 Match the size of the organization to the size of the market 69
  70. 70. Match the size of the organization to the size of the market Leadership is not essential in sustaining technologies – you can be a follower company But leadership is essential in disruptive innovations Big companies are searching for big markets to sustain growth rates 70
  71. 71. “Disruptive technologies for small markets” is not interesting option Best strategy is to acquire a small company and launch products through it 71
  72. 72. " Small Markets Don't Solve the Growth Needs of Large Companies" Dilemma: To be a leader or a follower? Managers must be leaders, not followers, in commercializing disruptive change. Being a follower in sustaining technologies is a viable and possibly desirable strategy but leadership in disruptive technologies creates enormous value
  73. 73. How to harness this principle? Match the size of the organization to the size of the market Implant projects aimed at commercializing Or disruptive innovations in organizations small enough to get excited about small market opportunities. Johnson comprises 160 autonomous companies, each of which can introduce small disruptive products such as disposable contact lenses.
  74. 74. Chapter 7 Discovering New and Emerging Markets 74
  75. 75. Discovering new and emerging markets For disruptive technologies, markets are unknowable. Then, how can we discover and target those markets that do not yet exist ?
  76. 76. Discovering new and emerging markets Sustaining vs. disruptive technologies: Sustaining technologies are improvements that sustain an organization's focus, goals, and customers. They allow an organization to do their job better, to improve their products and to increase customer satisfaction.
  77. 77. Discovering new and emerging markets In contrast, Disruptive technologies are usually those innovations that initially do not improve the focus of the company. A market must be developed and new customers are to be found.
  78. 78. Discovering new and emerging markets Methods to forecast those two different markets can’t be the same. Example: Honda’s inaccuracy in estimating the size and the potential use of its products for the North American market, despite the firm’s manufacturing prowess
  79. 79. Discovering new and emerging markets “Agnostic marketing” No one, not the firm or the customers know how a disruptive technology can be used
  80. 80. Discovering New and Emerging Markets. Because markets for disruptive technology are unknowable, managers should plan to learn and discover, NOT plan and execute. Many management skills are inappropriate, and can paralyze a firm. 80
  81. 81. Discovering new and emerging markets Plans to learn vs. plan to execute : For sustaining technologies, plans are established in order to take action. On the contrary, for disruptive innovations, first analyse and learn from what did not work, possibly resolve uncertainties. Only then elaborate a plan of implementation.
  82. 82. Chapter 8 How to appraise your organization's capabilities and disabilities. Organizations have distinct capabilities that differentiate them. Christensen argues the RPV framework is the best way to view such capabilities. To take on a disruptive challenge, therefore, Christensen discusses 3 options facing a company: acquiring a different organization where processes and values match the new task, changing the processes and values of the current organization, and separating out an independent organization with new processes and values. 82
  83. 83. How to Appraise your Organization’s Capabilities and Disabilities Not only must a manager well choose, train and motivate the right people for the right job, he also has to prepare the right “organization” for the job.
  84. 84. How to Appraise your Organization’s Capabilities and Disabilities The organizational capabilities framework : Resources : people, equipment, technology, relationships with suppliers, distributors, or customers, brand, information Processes : the methods of transforming the resources into products, including interaction, coordination, communication, and decision-making
  85. 85. How to Appraise your Organization’s Capabilities and Disabilities Values : the criteria to help organizations prioritize their decisions Values can evolve in two dimensions : the first relates to the acceptable gross margins, the second dimension relates to how big a business has to be in order to be interesting
  86. 86. How to Appraise your Organization’s Capabilities and Disabilities The relationship between processes and values, and success in addressing sustaining vs. disruptive technologies
  87. 87. How to Appraise your Organization’s Capabilities and Disabilities Resources can easily fit in a new and disruptive business, whereas processes and values are very hard, even impossible to adapt
  88. 88. How to Appraise your Organization’s Capabilities and Disabilities The advantage of start-ups : they create the processes and the values in accordance with the disruptive innovation, even if they don’t have the resources required yet
  89. 89. How to Appraise your Organization’s Capabilities and Disabilities Creating capabilities to cope with change : Acquire a different organization whose processes and values could easily match with the new project
  90. 90. How to Appraise your Organization’s Capabilities and Disabilities Try to change the processes and values of the current organization Separate out an independent organization and develop within it the new required processes and values
  91. 91. How to Appraise your Organization’s Capabilities and Disabilities Fitting an innovation’s requirements with the organization’s capabilities
  92. 92. Chapter 9 Technology Supply May Not Equal Market Demand 92
  93. 93. Technology Supply May Not Equal Market Demand 93 When performance oversupply occurs, it creates an opportunity for a disruptive technology to emerge and subsequently invade established markets from below. Performance oversupply triggers a fundamental change in the basis of competition in the product's market along four dimensions: functionality, reliability, convenience, and price
  94. 94. Technology Supply May Not Equal Market Demand Two characteristics of disruptive technologies consistently affect product life cycles and competitive dynamics: The attributes that make disruptive products worthless in the mainstream markets often become strong selling points in emerging markets. Disruptive products tend to be simpler, cheaper, and more reliable and convenient than established products 94
  95. 95. When confronted with a disruptive technology, established firms typically view them as a technical challenge and therefore seek to improve the disruptive technology enough so that it is suitable for known markets. However, firms that are most successful at commercializing a disruption are those who frame it as a marketing challenge and attempt to find a market that embraces the attributes of the disruptive technology as they currently stand. 95 Technology Supply May Not Equal Market Demand
  96. 96. Chapter 10 Managing Disruptive Technological Change: A Case Study 96
  97. 97. How can managers succeed when faced with disruptive technological change? A case study on the electric automobile show that major automakers do not see a market Innovators need to find a customer need, a niche, develop the marketing, and create a new distribution model. 97 Managing Disruptive Technological Change: A Case Study
  98. 98. Managing Disruptive Technological Change: A Case Study 98 Electric Vehicle Example Identify whether technology is disruptive •Look at market behavior, not the interviews. Plot market performance demanded over time. If it exceeds new technology capacity, then it might be disruptive. •Look at performance improvement of new technology over time. If it is growing faster than market performance demanded, then it can be disruptive. (It will intersect market need curve)
  99. 99. Managing Disruptive Technological Change: A Case Study 99 Electric Vehicle Example Identify where is the market for the new tech •Ignore mainstream market. Find a market that values the disadvantages of the disruptive technology •No one can learn from market research where the right market is for an emerging market. Only way to learn is through expeditions of trial and error, prototyping, selling real products to real people paying real money
  100. 100. Managing Disruptive Technological Change: A Case Study 10 Electric Vehicle Example Business plan must be one for learning, not executing strategy Product: simple, reliable, convenient. Designed for quick and cheap iteration. Low price point. Product plan cannot rely on achieving breakthrough tech innovations. Disruptive tech usually combines existing technology in new way.
  101. 101. Managing Disruptive Technological Change: A Case Study 101 Electric Vehicle Example Product plan cannot rely on achieving breakthrough technology innovations. Disruptive technology usually combines existing stuff in new way. Distribution strategy: Usually a new value network and channel is needed because existing one has clear formula that doesn't fit the need of the new product Create independent organization or spin-off so as not to compete against current needs & resources Bigger organizations are best for sustainable innovation
  102. 102. Chapter 11 102 The Dilemmas of Innovation: A Summary
  103. 103. The pace of progress that markets demand or absorb can be different than the progress that technological advances offer Managing innovation is the mirror image of managing the resource allocation process. Those proposals to innovate that get the funding and manpower they require might succeed. Those that formally or de facto are accorded lower priority get starved of resources and have little chance. 103 The Dilemmas of Innovation: A Summary
  104. 104. Just as there is a resource allocation side to every innovation problem, matching the market to the technology is another. The capabilities of most organizations are far more specialized and context-specific than most managers are inclined to believe In many instances, the information required to take decisive action in the face of disruptive technologies simply does not exist. 104 The Dilemmas of Innovation: A Summary
  105. 105. It is not wise to adopt a blanket technology strategy to always be a leader or to always be a follower Perhaps the most powerful protection to entry that small entrant firms enjoy as they build the emerging markets for disruptive technologies is that what they are doing simply does not make sense for the established leaders to do. 105 The Dilemmas of Innovation: A Summary
  106. 106. 106 References 1. http://www.maxmednik.com/1/post/2012/04/notes-on-the-innovators-dilemma.html 2. http://www.slideshare.net/NoorulhadiQureshi/the-innovators-dilemma-22447261 3. https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CEsQFj AE&url=https%3A%2F%2Fnet.educause.edu%2Fir%2Flibrary%2Fpowerpoint%2FELIWE B0810.ppt&ei=EfHPUrW3Dq2TiAeOsYGABw&usg=AFQjCNGjywy6JUNIbS2MibS1eB_T2 JSkRQ 4. https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCoQFj AA&url=http%3A%2F%2Fwww.ischool.utexas.edu%2F~i385q%2Farchive%2Fbuchanan _innovators_dilemma.ppt&ei=EfHPUrW3Dq2TiAeOsYGABw&usg=AFQjCNEdax2Gg5bIj RaXq5txTelyPaHt2g 5. http://www.barelkarsan.com/2012/08/the-innovators-dilemma-chapter-2.html 6. http://en.wikipedia.org/wiki/The_Innovator's_Dilemma 7. http://www.businessweek.com/chapter/christensen.htm 8. http://timkastelle.org/blog/2012/02/better-business-models-lead-to-better-businesses/
  107. 107. Over 1 Million views from more than 100 countries Prof. Sameer Mathur Top 1% most viewed Over 250 presentations on Marketing www.BuddingMarkets.com

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