Why do large, established companies falter or are even driven out of business entirely by rapidly growing start-ups as soon as groundbreaking innovations make their way into the market?
And how can large companies prevent this?
In "Innovator's Dilemma," business professor Clayton M. Christensen gets to the bottom of these questions:
Established companies have optimized their culture and processes to continuously improve their products along evolutionary paths according to the wishes of their regular customers.
Disruptive products often initially have poorer quality, reliability, and performance than established products (think of the first digital cameras, for example). As a result, they target small market niches that are insignificant to large companies, consisting of customers who care about other features (e.g., sending the captured image instantly via email). Sales that can be generated with these products in their initial phase are uninteresting for large companies and cannot cover their cost structures.
Thus, they leave the market to start-ups (often founded by former employees), for whom the revenues are very interesting and who are betting on the enormous growth potential of the new technology.
Meanwhile, the big companies keep evolving their products so that at some point, they over-fulfill their customers' needs (who needs 1,500 features in Word?). One day, the disruptive technology (Google Docs in this example) has evolved to the point where it meets the needs of the big companies' customers – now at a much lower price – and they replace the existing product with the disruptive one in droves.
The start-up grows and builds structures – until, at some point, it is itself the established company that is displaced by the next disruptive innovation.
How can companies resolve this dilemma?
The only way for a large company to get a piece of the pie (or to survive) is to create its own start-up (or other entity entirely separate from the main company) that develops the disruptive product, builds a separate customer base, and operates and grows independently with lower margins and revenues.
The book is excellently organized, written in an easy-to-understand manner, and has not lost its relevance more than twenty years after its publication. Numerous impressive case studies from various industries illustrate the dilemma and the ways out.
A book every entrepreneur should have read.
🎧 Suitable as an audiobook? Yes.
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