January 28, 2023
Hexavia Business Club
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BOOK REVIEW OF INNOVATOR’S DILEMMA BY CLAYON CHRISTENSEN

     

 

 

 

 

 

 

Why do old businesses rarely develop new technologies? What is a “Disruptive” Technology? The Innovator’s Dilemma by Clayton Christensen thoroughly examined these questions in detail, which does so by utilizing gripping narratives from a variety of industries. One of the most influential books on innovation discusses how massive companies will inevitably fail once they lack the flexibility to adopt new technology.

The Innovator’s Dilemma is the decision of when business executives choose whether to adopt disruptive innovations in developing markets. As the business expands, it gets harder to use disruptive technologies because shareholders’ power grows. According to Christen, you need to discover which technologies are worth moving to and when you should do so. He also discusses why the majority of businesses miss out on emerging innovation waves. A thriving company with good products will fall by the wayside unless managers know when and how to break with conventional business procedures.

First disruptive products are easier to make and less expensive; they typically promise lower margins rather than higher profits. Second, disruptive technologies generally are the first to commercialize in emerging or small markets. Third, most lucrative clients of established businesses typically don’t need or want items based on disruptive technologies”. – Clayton Christensen.

Sustaining and Disruptive Technologies

“Disruptive technologies offer a different value proposition than what was previously accessible in a market. Disruptive technology typically underperforms established products in mainstream markets. But they also have additional advantages that a small fringe (and generally new) customers value. Disruptive technology-based products are generally more user-friendly, simpler, cheaper, and smaller” – Clayton Christensen.

According to Clayton Christen, there are two types of technology that an innovator can use: sustaining and disruptive. Identifying which technologies fit into which category is key to organizational leaders’ success.

 

Sustaining Technologies

Sustaining technologies are many times already been adopted by society. They are highly valuable and useful. Computers or cell phones are eminently recognizable instances of sustaining technologies. Modern society depends on these technologies. The public is aware of what to expect from these technologies. Without using a specific smartphone, nearly everyone in society will comprehend that a smartphone will be required to make calls, send texts and shoot pictures.

As a leader, entering the markets of sustaining technologies is quite challenging. This is because of the increased competition. Nevertheless, by investing in the sustaining technology market, you reduce some risk. Society has already come to understand and accept these technologies. Let’s say you want to be successful in sustaining technology. In that circumstance, you need to shake up the market by doing something disruptive or intriguing.

General Sustaining Company Practices

In his analysis of the typical sustaining company, Christen identifies four company practices. They include:

  • Listening to clients’ feedback.
  • Enhancing the features of technologies that are already operational.
  • Satisfying investors by fulfilling their demands.
  • Focusing on mass markets as opposed to specialized markets and local markets.

 

Disruptive Technologies

Disruptive technologies, as opposed to sustaining technologies, aim to solve problems that have never been solved before while still meeting the unspoken needs of a group of people. As a result, they completely alter the landscape of an industry and even give rise to a new one. Think of Google sheets enabling individuals to work on the same document seamlessly without requiring time-consuming versioning procedures.

Clayton Christen writes in his book that IBM found it simple to create thinner hard drives but challenging to move to 1.5-inch format disks at a time when the 14-inch standard was the most popular.

 

Disruptive technologies have a far higher failure rate. However, they can soar as well. Occasionally, these technologies will fail with their first few iterations and come dangerously close to bankruptcy before society embraces these forms of technology. For example, although the cell phone is not a sustaining technology, it would have been disruptive in the past. Disruptive technologies, according to Christen, are future-oriented. They have a lot more potential and face almost no opposition. However, there is no assurance that society will embrace these technologies.

Typical Disruptive Company Practices

Additionally, Christen breaks the typical disruptive company into four company activities. Which are:

  • Observing what customers do as opposed to what they say.
  • Searching for innovative and engaging approaches to problems.
  • Being motivated by the core values of the company.
  • Attempting to establish their markets by pursuing smaller and nonexistent markets.

Technological Transitions are Crucial.

This is one of the Innovator’s Dilemmas: Blindly following the rule that good managers should stay in touch with their clients can sometimes be fatal” – Clayton Christensen.

In this section of the book, the issue faced by innovators is explained. Business leaders are successful because they paid close attention to their consumers’ needs and made significant investments in new products and machines. However, this poses a conundrum given that numerous large corporations fail for some reasons.

Listening to customers won’t always be effective because customers don’t always know what they want. Customers typically concentrate on a stronger, faster, or more sophisticated version of the ideas they currently have. They do not approach problems creatively. This means that business owners should watch for major technological changes and make appropriate investments.

“The cause was good management itself. Managers properly played the game. The very decision-making and resource allocation processes that are vital to the success of established businesses are the very process that rejects disruptive technologies: paying attention to customers, keeping an eye on competitors’ moves, and allocating resources to design and build higher-performance, higher-quality products that will generate more revenue. These are the explanations for why great businesses struggled or crumbled in the face of disruptive technological development.” – Clayton Christensen.

Create an RPV Framework

The RPV Framework is presented by Christensen. RPV stands for Resources, Processes, and Values. Each of these elements should be understood by businesses to better position them to comprehend their capabilities. This information will have a big impact on what you can or cannot do if you want to keep the business successful.

Using the RPV Framework will help your business to avoid taking steps that are not appropriate. Christensen explains the RPV framework as an audit of your company. He advises your company to invest some time in developing its operational framework. As a result, your employees will be reminded of their motivations. additionally, they will be in a better position to decide about the future.

Resources

Your business resources include people, tools, knowledge, money, connections, and technology. Typically, businesses base their decisions on the resources they have available now. Christensen argues that this strategy is flawed. Let’s say you lack the knowledge necessary for a particular task. Then you can always contract this task off to another company. Do not let a lack of funds prevent you from making an incredible investment.

Processes

Your company’s processes are procedures used by your company to convert resources into finished products. Typical example of processes includes internal and external communication, market research, and budgeting. One of the most common errors is adopting processes for certain items and failing to modify them for new products.

Values

The company’s values are what it stands for and the reason it was founded. Your company’s value should be obvious to everyone. When a customer hears about your firm in the discussion, they should keep these values in mind. The market you choose to enter should be influenced by your values as well. A sustainable brand should not, for instance, decide to enter the oil industry.

How to Identify Disruptive Technologies

Christensen describes how to spot disruptive technologies. He specifically proposes making a graph that compares “performance improvement offered by the technology” to “performance improvement requested in the market.” Ask yourself whether that technology offers a chance for successful expansion. To achieve this, think about whether the graph’s trajectories are parallel. If they are parallel, it is unlikely that this technology will be able to integrate into the mainstream market. However, if the technology develops more quickly than the rate of development that the market requires, you may have a disruptive technology.

Conclusion

In the Innovators Dilemma, Christensen explains that doing everything “perfect” is insufficient to sustain market leadership. Rivals could appear and seize your market overnight. As a result, Christensen advises identifying disruptive technologies that can be very useful in developing markets. He offers the following guidelines to keep in mind to accomplish this goal:

  • Resources are used by a business to serve its current customers.
  • The specific market that disruptive technology will affect cannot be predicted.
  • A disruptive organization’s processes and core competencies are just as crucial as its employees.
  • Disruptive technologies are very valuable in emerging markets due to characteristics that make them appealing in established markets.
  • Know the RPV framework (Resources, Processes, and Values) framework to determine the capabilities of your business.
  • You must always be one step ahead of the game since customers do not know what they want.

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