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INNOVATOR'S DILEMMA
 
Why established companies lose the battle for pioneering innovations
 

EVOLUTION & DISRUPTION:

THE BIG DIFFERENCE

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Why do great companies fail to remain competitive and innovative despite doing everything right? They watch their competition, survey their customers and have substantial R&D budgets. And yet they lose market-leading positions as soon as pioneering changes occur in technology or on the market.
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EVOLUTIONARY & DISRUPTIVE INNOVATIONS  –
an important distinction

Evolutionary technologies (or innovations) 

  • are focused on increasing the performance capabilities of established products that meet the entire range of customer needs in established markets. 

Disruptive technologies (or innovations)  

  • do not improve the performance of established products!
  • Measured against main quality features, they do not perform as well as established products.
  • Yet they have other features that are appreciated by a small fringe group of (typically new) customers.
  • Products based on disruptive technologies are typically cheaper, simpler, smaller and often easier to use.
  • Disruptive innovations are the ones that often make established companies fail!


THE PRINCIPLES OF DISRUPTIVE INNOVATIONS 

  • Technologies develop faster than market demands
  • Established companies tend to "over engineer"
  • A market vacuum emerges for simple, comfortable products
  • Disruptive innovations are simpler, typically cheaper and more convenient
  • They don’t fulfill the quality demands of established manufacturers in premium markets and are initially only of interest for a small, unattractive segment of the market.
  • Their continued development leads to them soon fulfilling the minimum requirements of the mass market.
  • Established companies typically decide to wait it out – until it’s too late!

 

 
 

LESSONS FOR ESTABLISHED COMPANIES 

  • Create a fully independent organizational unit, one far removed from the parent company that has complete responsibility for the introduction and marketing of disruptive technologies.
  • This unit needs to be small enough to inspire enthusiasm for small successes. Small markets do not satisfy the hunger for growth of large companies!
  • These organizational units need their own culture, their own resources and their own KPIs. They should not have to fight for resources with the main organization.
  • Don’t target the mass market. The disruptive innovation won’t be good enough for a while.
  • Ignore what the big customers on the mass market say. They are nowhere near being ready to switch over to new technologies.
  • Use the "first mover" advantage. It is decisive in disruptions.
  • Do not rely on market prognoses and planning.

... AND OPPORTUNITIES FOR SMALL COMPANIES ...

  • Identify the vacuum that market leaders often create by over engineering products.
  • Find the non-buyers in the market for whom these over engineered products are too expensive, complicated and over designed.
  • Find the special customer demands in this niche and meet them!
  • Invest early in these small niches that are of no interest to large companies.
  • Continually improve the technology.
  • Identify early enough when the disruptive innovation has fulfilled the minimum requirements of the mass market and attack from the bottom up.
  • Large companies won't take you seriously and typically "wait" until it is too late!

 

 
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THE INNOVATORS DILEMMA

Christensen, Matzler & Friedrich von den Eichen, 2011

One of the "100 most important business books of all times" (Covert et al. 2011)

 


The book that apparently influenced Steve Jobs:
"…the book "The Innovator’s Dilemma": "Why established companies lose the battle for pioneering innovations" influenced Jobs greatly (Walter Isaacson: Steve Jobs: The Authorized Biography of the Apple Founder, pg. 483)

 
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