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The Innovators Dilemma by Clayton M' Christensen

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The Innovator's Dilemma. by Clayton M. Christensen. Logan Buchanan. October 6, 2005. Thesis 'Well-managed companies often fail because because the very management ... – PowerPoint PPT presentation

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Title: The Innovators Dilemma by Clayton M' Christensen


1
The Innovators Dilemmaby Clayton M. Christensen
  • Logan Buchanan
  • October 6, 2005

2
Thesis
  • Well-managed companies often fail because
    because the very management practices that have
    allowed them to become industry leaders also make
    it extremely difficult for them to develop the
    disruptive technologies that ultimately steal
    away their markets.
  • p.265

3
Overview
  • Characteristics of goods companies
  • Why they fail anyway
  • Case studies
  • How to succeed
  • Related KM Issues

4
What do good companies do well?
  • Listen responsively to their customers
  • Invest aggressively in the technology, products,
    and manufacturing capabilities that satisfied
    their customers future needs
  • Seek higher margins
  • Target larger markets rather than smaller ones

5
Why do good companies fail?
  • Good management
  • The Dilemma The logical, competent decisions of
    management that are critical to the success of
    their companies are also the reasons why they
    lose their positions of leadership.

6
Why good management can lead to failure
  • Difference between sustaining and disruptive
    technologies
  • The pace of technological progress often
    outstrips the needs of the market.
  • Customers and financial structures of successful
    companies heavily influence the types of
    investments that appear attractive.

7
Two Types of Innovations
  • Sustaining
  • Improve performance of established products
  • Meet demands of mainstream customers in major
    markets
  • Vary in difficulty, cost, time, etc.
  • Established firms
  • Disruptive
  • Generally underperform established products in
    mainstream markets
  • Have new features that fringe / new customers
    value
  • Cheaper, simpler, smaller, more convenient to use
  • Entrant firms

8
Why good management can lead to failure
  • Difference between sustaining and disruptive
    technologies
  • The pace of technological progress often
    outstrips the needs of the market.
  • Customers and financial structures of successful
    companies heavily influence the types of
    investments that appear attractive.

9
Market Need v. Technology Improvement
  • Technologies can progress faster than demand
  • Suppliers give customers more than they need or
    are willing to pay
  • Allows room for underperforming disruptive
    technologies

10
Why good management can lead to failure
  • Difference between sustaining and disruptive
    technologies
  • The pace of technological progress often
    outstrips the needs of the market.
  • Customers and financial structures of successful
    companies heavily influence the types of
    investments that appear attractive.

11
Disruptive Technologies v. Rational Investments
  • Disruptive products are simpler and cheaper, and
    promise lower margins
  • Disruptive technologies are first commercialized
    in emerging or insignificant markets
  • Most profitable current customers are not
    interested in the product

12
Case Studies
  • Primary takes examples from the disk drive
    industry. Equates this to studying fruit flies
  • Steel minimills
  • Mechanical excavator industry
  • Motorcycles
  • Insulin
  • Department and discount stores

13
Disruptive Technological Change in the Mechanical
Excavator Industry
  • Leading firms have successfully adopted a series
    of sustaining innovations
  • Almost the entire population of mechanical
    shovel manufacturers was wiped out by a
    disruptive technology hydraulics that the
    leaders customers and their economic structure
    had caused them initially to ignore

14
Principles of disruptive innovation
  • Companies depend on customers and investors for
    resources
  • Small markets dont solve the growth needs of
    large companies
  • Markets that do not exist cannot be analyzed
  • An organizations capabilities define its
    disabilities
  • Technology supply may not equal market demand

15
  • How did the successful managers harness these
    principles to their advantage?
  • Embedded projects to develop and commercialize
    disruptive technologies within an organization
    whose customers needed them
  • Projects in organizations small enough to get
    excited about small opportunities and wins
  • Planned to fail early and inexpensively in the
    search for the markets for a disruptive
    technology
  • Utilized the organizations resources, but
    maintained independent values and processes
  • Found or developed new markets that valued the
    attributes of the disruptive products, rather
    than search for a technological breakthrough

16
Related KM Issues
  • Values Beliefs
  • Values and beliefs are integral to knowledge,
    determining in large part what the knower sees,
    absorbs, and concludes from his observations
    The power of knowledge to organize, select,
    learn, and judge comes from values and beliefs as
    much as, and probably more than, from information
    and logic. - Davenport and Prusak, p 12
  • Lost innovation
  • Steve Jobs, Xerox PARC the graphical interface
    computer - Davenport and Prusak, p 59

17
More KMS Issues
  • Knowledge is the principle advantage, technology
    eventually evens out. (But can knowledge and
    organizational experience also be a hindrance?)
  • Autonomous groups
  • Management support is essential, creativity
    should be encouraged
  • Organization size - large v. small
  • Space and time are less of a constraint for
    sharing
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