Very insightful book – the research and theory that emerged from its findings explained an interesting phenomenon, what now makes complete sense. The main idea of the research is the explanation of surprising inability of established businesses to adopt disruptive innovation. This inability lies in the success of the established businesses itself – their dedication to satisfy their customers’ needs. As disruptive innovation does not yet have customers, or enough customers for successful business, the firm is unable to dedicate resources to the new, unknowable market. When the market is large enough “to be interesting,” it is usually too late.
Typically, the disruptive technology emerges at the point when it can not satisfy demands of the current market. Sustaining innovation is different – this type of technological advance is appreciated by the current market of the established organizations, and they excel in bringing sustaining innovation to the market. This principle is not intrinsically good or bad, it just exists – the author compares it to gravity. Flight is possible when gravity is understood and taken into consideration, rather than defied.
What should established companies understand to be able to deal with disruptive innovation in their markets?
- Current customers are not the best guide on disruptive innovation – the current state of technology may not appeal to them now, but it could in the future
- Managing innovation mirrors resource allocation process: resources of the firm may not be available to pursue disruptive technology as the organization itself will allocate all available resources to the projects benefiting current customers.
- Adapting disruptive technology to fit existing markets while the technology is inadequate for them would fail. New markets should be found for the disruptive technologies; these markets need to value current characteristics of the technology. Disruptive technology should be framed as a marketing challenge, not a technological one.
- Organizations exist within their value networks and adjusted to be successful in certain environment. Established organizations lack organizational capabilities that successful pursuit of the disruptive technology requires.
- As markets for disruptive technologies are unknown and unknowable in advance, the probability that the correct market will be found quickly is low. The company pursuing disruptive technology must plan to fail cheaply and not invest significant resources until the correct market is found.
- The company need to approach sustaining and disruptive technologies differently: first mover advantage is important in disruptive technology, but not in sustaining technology.
- Small entrants into the market often “protected” by the fact that they are doing something that just does not make sense for the established firms – pursuing new, small, unknown markets with lover margins than established organizations expect.
The best approach recommended for the established organizations is to create a separate entity that can pursue and develop disruptive technology.
The case study that shows the process in the most transparent form is the evolution of excavator market. First, the excavator producer switched successfully from steam to gasoline engine – no major player in the market disappeared. This was a sustaining technology – it benefited current customer of the established firms. Then, hydraulic power became a disruptive technology. At first, it was not good enough to satisfy needs of existing excavator market – the size of bucket was not large enough. However, small bucket size was perfect for a new market – building contractors – who now could use these excavators instead of digging small trenches by hands. As the technology developed, the companies established in pre-hydraulic era did not survive the change…