Christensen, C. (2003). The innovator’s dilemma: When new technologies cause great firms to fail. Boston, MA: Harvard Business School Press. 

Sometimes good management causes companies to fail. This is the startling conclusion of The Innovator’s Dilemma, a book about how certain technologies can cause great firms to fall short. As the author explains, good management focuses on increasing product performance and listening to the needs of customers. Established firms work hard to make sure their products continue to be bigger, faster, and better so sales can be sustained. However, sometimes new technologies spring up that disrupt the system. It is these disruptive technologies that good management disregards to its detriment.

Disruptive technologies are fundamentally different than what is currently available. They are often cheaper, smaller, simpler, and more convenient than what came before them. They often offer lower margins, and customers do not initially want them. So, the only firms that are willing to try them are entrants who have nothing to lose. These entrant firms can take the disruptive technology, market it to a new set of customers, and then begin to expand into more established customers.

The author provides several examples of how disruptive technology works. The first is in the disk drive industry. Initially, firms were selling 8 inch drives to customers who had mainframe computers. Entrant firms developed smaller drives that were cheaper, simpler, and more rugged. The mainframe customers had no interest in the smaller drives, so the established firms continued to manufacture the 8 inch. However, an emerging market of personal computer customers embraced the smaller drives. Eventually, the smaller drives took over and the firms who made the 8 inch drives lost their business.

As the example shows, disruptive technology does not make sense to the established firms or their customers. So, the author gives advice for firms who want to be able to successfully manage disruptive technologies. First, he urges managers to realize that their best customers will not help them use disruptive technology because they are not ready for it. Second, he informs managers that they must be looking for new markets, even if their company is large. This includes emerging markets that may be only on the horizon. Finally, he reminds managers that the uses of disruptive technology are unknowable in advance. When it comes to disruptive technology, failure is a step toward success.

The Innovator’s Dilemma offers its readers a new way to look at technology. While much of the time companies need to continue to improve their products, sometimes new, fundamentally different technology comes along that changes everything. The innovator’s dilemma is whether or not he/she will embrace this new technology and gain or resist it and risk losing the business.

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