Diary of a Financier

Bookshelf update: The Innovator’s Dilemma

In Bookshelf on Tue 23 Dec 2014 at 23:31

Three takeaways from Clayton Christensen’s The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, as embodied by the following excerpts…

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1. The innovator’s dilemma:

“It is in disruptive innovations, where we know the least about the market, that there are such strong first-mover advantages… [Management teams mistakenly] demand market data where none exists and make judgements based upon financial projections when neither revenue or costs can, in fact, be known.”

2. Discovery-based planning:

“Companies whose investment process requires quantification of market size and market returns before they enter a market get paralyzed… Using planning and marketing techniques that were developed to manage sustaining [mature] businesses [doesn’t apply to disruptive innovations or startups].

“Discovery-based planning… suggests that managers assume that forecasts are wrong… [which] drives managers to develop plans for learning what needs to be known.”

3. How successful managers embrace the barriers to disruption, rather than being deterred by them (a.k.a. “Harnessing the five principles of disruptive technologies”):

“i. They embedded projects to develop and commercialize disruptive technologies within an organization whose customers needed them. When managers aligned a disruptive innovation with the ‘right’ customers, customer demand increased the probability that the innovation would get the resources it needed.

ii. They placed projects to develop disruptive technologies in organizations small enough to get excited about small opportunities and small wins [i.e. within business segments or subsidiaries].

iii. They planned to fail early and inexpensively in the search for the market for a disruptive technology. They found that their markets generally coalesced through an iterative process of trial, learning, and trial again.

iv. They utilized some of the resources of the mainstream organization [parent company] to address the disruption, but they were careful not to leverage its processes and values. They created different ways of working within an organization whose values and cost structure were turned to the disruptive task at hand.

v. When commercializing disruptive technologies, they found or developed new markets that valued the attributes of the disruptive products, rather than search for a technological breakthrough so that the disruptive product could compete as a sustaining technology in mainstream markets.”

–Romeo

#Business #Startup #Management #Unconventional wisdom

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  1. […] That said, I think the thrust of ‘focusing on finding answers’ is the same theory as Clayton Christensen’s “Discovery-based planning” strategy. […]

  2. […] also: Bezos on decentralization & minimizing collaboration; Christensen on failing early & inexpensively #Bureaucracy #Committee […]

  3. […] Fail early & inexpensively; Failure can be ok […]

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