Innovation and Creativity Management Sessions 2 — 3

Innovation and Creativity Management Sessions 2 - 3 The Innovator’s. Dilemma and Solution by Clayton M. Christensen

Dilemma “Well-managed companies often fail 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

Overview Characteristics of goods companies Why they fail anyway Sustaining versus Disruptive Technologies Intersecting Performance Trajectories Market Need versus Technology Improvement Low-end versus high-end disruption

What do good companies do well? ü ü 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

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.

Why good management can lead to failure 1 Reason 1 Lack of understanding the difference between sustaining and disruptive technologies

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

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

Intersecting Performance Trajectories

Intersecting Performance Trajectories Radical Sustaining Technology

Intersecting Performance Trajectories applied to digital camera industry

Two types of disruptive innovations Low-End Disruption High-End Disruption • Disruptions that take root at the low end of the original or mainstream value network are low-end disruptions. • New-market disruption is a technology that creates a new market • Create a new value network, where it is non- consumption, not the incumbent, that must be overcome

Low-End Disruption applied to digital camera industry

Consequences of low-end disruption

Why good management can lead to failure 2 Reason 2 The pace of technological progress often outstrips the needs of the market.

Low-End Disruption

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

Why good management can lead to failure Reason 2 Customers and financial structures of successful companies heavily influence the types of investments that appear attractive.

Low-End Disruption 2

A high-end or new-end disruption

New-end/high-end disruption in the digital camera industry

The Innovator’s Solution Is there any solution for Innovator’s Dilemma? How is it possible to prevent low-end and high-end disruptive technologies/innovation for market leaders? “The Innovator’s Solution” by Clayton Christensen

The organizations structure for new products and services

Response to disruptive attacks based on “The innovator’s solutions”

Incumbents’ have high technological capabilities to create a new market

Implications for the managers of market leader/incumbents

Principles of disruptive innovation 1. 2. 3. 4. 5. Companies depend on customers and investors for resources Small markets don’t solve the growth needs of large companies Markets that do not exist cannot be analyzed An organization’s capabilities define its disabilities Technology supply may not equal market demand

Thanks! Any Questions?