22 years after its publication, 'The Innovator's Dilemma' is still the best book on disruption ever written. Here are 5 key takeaways you may have missed on your first read.
- A seminal work of business theory, "The Innovator's Dilemma" was first published in 1997.
- In it, Harvard Business School Professor Clayton Christensen describes how established companies are displaced by competition when they fail to self-disrupt.
- Takeaways from the book spawned a new framework for thinking about innovation that continues to resonate today.
- Despite its status as a touchpoint, its application is sometimes seen as limited even as many lessons are still highly useful.
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Years ago, as an employee at an ecommerce startup that sold quirky household items, I began hearing the word "disrupt" with more frequency than ever before in my life. It figured heavily during all-hands meetings and was often invoked when describing the flash sale model of the site, with products selling at a deep discount for a brief period of time.
Back then, I took for granted that it was just part of the Startupland vocabulary. But after reading Clayton Christensen's "The Innovator's Dilemma: When New Technologies Cause Great Firms To Fail," I understand that more often than not, "disrupt" was being misapplied. "Disruptive technology" is often used to describe a superficial departure from business as usual. In actuality, it refers to a technology or innovation that significantly affects the way an industry or particular market functions.
The book, which came out in 1997 midway through the dot-com bubble, is a seminal text that turned its author into one of the most influential business theorists of our time. Christensen, who has been a professor at the Harvard Business School for more than two decades, enlisted real-world examples to make the case that established companies are in a bind: The strategies that make them successful can hamper innovation, but failure to innovate can put them on a path toward demise. The theory itself describes how an innovation can transform a market or sector by "introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo," as described on the Christensen Institute website.
As an example from the text, when digital photography was first emerging, it wasn't initially suitable for the needs of "serious" photographers. Kodak, then an incumbent of the category, did not prioritize getting ahead of that innovation. But over time, digital photography advanced, eventually eclipsing film. Ultimately, Kodak was displaced as a Goliath of the category.
More than two decades after its publication, "The Innovator's Dilemma" is still a touchpoint in business school classrooms and a staple of executive bookshelves, with a legacy that can't be overestimated (though it also has its critics, too). The book also packs a lot of dense information and theory into 11 chapters; even for a journalist who regularly covers technology and the startup scene, it was a tough read to internalize.
To that end, I tapped innovation experts to comment on what they think the lasting lessons of Christensen's book are, 22 years later - and its limitations as a business bible.
Victor Bennett, an associate professor at Duke's Fuqua School of Business in the program's Strategy sub-discipline, cringes when he hears startups talk about "delighting their customers."
"I tell my classes: These are the last people you should delight because they're already your customer - you should think about the people who aren't buying from you and [be] asking, 'Why not?'" Bennett explained. "For me, that's the lesson of ['The Innovator's Dilemma']: You have to be thinking about the people you're not serving and whether or not you should be."
This concept is part of Christensen's core argument: Incumbent companies, he reasons, are so trained on serving the needs of the customers they already serve that they neglect to focus on who else they might reach or expand into untapped markets - which are being served by companies that might eventually become competition. At the same time, re-routing resources from a strategy with proven results to one whose ROI is murkier can be a hard sell, too.
Looking back at the intervening years since the book's publication, you can find a cautionary tale of a dilemma in the evolution of personal computers: Before PCs, mainframes and minicomputers, which cost hundreds of thousands of dollars and required expertise to operate, were the incumbent products. Then Apple began selling toy computers marketed to children. While at first those products didn't compete with mainframes or minicomputers, over time the PC emerged as a product that could do the work of its technological predecessors and was also smaller and more affordable. Ultimately, the new market for PC replaced the status quo.
"The heart of innovation is still building a plane on the way down," said Patrick FitzGerald, a lecturer in the University of Pennsylvania Wharton School's Entrepreneurship program. "Big companies just aren't always willing or able to take those massive leaps of faith."
Today, more so than in 1997, Fortune 500 companies recognize the need to innovate and expand scope. Many adopt strategies suggested in "The Innovator's Dilemma" to broaden their strategy and offerings. Still, said FitzGerald, "At the end of the day, if your business model is making cars, and you're really good at making cars and making shareholders happy, it's hard to take a risk and do something else."
Takeaway #2: No matter how successful your company is right now, assume that someone out there is already nibbling your lunchBeing too comfortable can do damage. Another legacy of Christensen's theory, according to FitzGerald, is increased awareness among leaders that new contenders are trying to disrupt their industries every day. Regardless of your current status, said FitzGerald, "It can happen to you, because there's young bucks coming up and trying to make new things every day." Also file under: the benefits of healthy paranoia.
But while Christensen outlines the barriers to innovation at an incumbent company, Mohan Sawhney, a professor at the Kellogg School of Management at Northwestern, where he is also the director of the Center for Research in Technology & Innovation, insisted that many companies are able to disrupt from within. He explained that, rather than hinder an established business, resources and infrastructure can be an asset when properly leveraged.
"If you combine the weight of a dinosaur with the agility of a gazelle, you have a very dangerous animal," Sawhney said. "Size and incumbency are correlated with a lack of ability to disrupt yourself, but correlation is not causation."
Takeaway #3: Don't underestimate the power of a 'good enough' productWhile "disruption" is most-often bandied about in tech circles, Christensen illustrates the concept across specific fields, including heavy industry. Consider the case of the mini-mill, a '70s era innovation that enabled steel to be produced from scrap metal rather than iron ore. Initially, the incumbents within the industry weren't too concerned: Their time-tested product was stronger and better quality than the "competitor" product, which they didn't view as a competitor at all. But over time, the mini-mills continued to improve in quality and reputation, with the added benefit that they were able to set up shop close to cities instead of being locationally limited to iron ore mines.
"The definition of innovation is usually to keep climbing in performance and building increasingly more sophisticated, complex, high-performance products," said Sawhney. "What that does is potentially open up a flank in the low end, where customers say: Enough already. I don't need a bazooka to open up a can of peas - I just need a can opener."
Even as Sawnhey gave Christensen credit for highlighting the value of a "good enough" product, he also thought the title of the book has it backwards. "It's not the innovator's dilemma. It's the incumbent's dilemma," he said - they're the ones that have to adapt to survive.
Takeaway #4: Disruption isn't (just) a marketing buzzword - it's a systemic redesign of the way things are donePeople use the word "disruption" all the time, often attributing the meaning to Christensen. But, "a lot of what they're talking about is not what he was talking about," said Bennett, the Fuqua professor. "People use 'disruption' when they're talking about a different business model." True disruption, in the Christensen sense, is relatively rare.
For example: People talk a lot about the ways that the internet has disrupted retail. But Bennett challenges people using the word "disrupt" to consider the secondary innovations and technologies that make online shopping possible. For example, though the internet enables online shopping, robotic distribution centers enable items to be delivered efficiently. Furthermore, inventory management tech systems are essential sales and returns; delivery relies on roads and transportation infrastructure; and Saturday mail makes it easier for people to receive packages. "So is it the internet that's disrupting retail?" he asks, "or the structures that built out around it?"
At the same time, what counts as "disruption" may be in the eye of the beholder. WeWork, once heralded as a beacon of disruption, looks more like a standard real estate model today. Sawnhey, the Kellogg professor, cited Tesla as a disruptive company - the ability to deploy technological updates is game-changing, as is the sales process. Jeremy Kagan, the managing director at Columbia University's Eugene Lang Entrepreneurship Center, pointed to Uber and Airbnb as examples. What those companies did, he said, was "change the perception of what we can do" by reshaping the way we interact with travel and transportation.
"Disruption, to me, is typically something that changes the rules of engagement," Kagan said. One example he cited from the dot-com-boom days was when AOL shifted its rates from browsing per minute to unlimited access for a set price. "People didn't feel like the meter was running, so they were willing to try new things. That changed consumer behavior," he explained.
Another example: Software as a service (SaaS) companies - including Google, Adobe, Slack, MailChimp, and Shopify - make it possible to rent CRM, CMS, HR, and other software in a way that has altered the dynamics of operations. "It's been a tidal wave that has affected everything. It doesn't lock you in. It allows for rapid changes and deploying updates," Kagan said.
To Kagan, the in-vogue "lean startup" methodology follows in the lineage of the ideas outlined within "The Innovator's Dilemma." Quickly launching a shop on Spotify, testing campaigns with marketing software, rapidly creating prototypes - moving fast and breaking things owes a debt to Christensen.
Takeaway #5: Disruption may be more rare exception than broad ruleEveryone I spoke with pointed to certain limitations of the theories espoused in Christensen's book - among them, the fact that the process by which incumbents are toppled is limited to a handful of examples. Some critics claim that Christensen cherry-picked companies and data, ignoring information that didn't fit his theory. FitzGerald, the Wharton lecturer, also suggested that the kind of game-changing disruptive innovation described by Christensen is "still limited to basically five people per decade."
Disruption, like the passing of some capitalistic comet, is a generational phenomenon.
"Everything has gotten faster in the startup world. But the speed to exit or the speed to become a household name: That's still the same time frame," FitzGerald said. "We always think about those overnight successes. But the average innovator or entrepreneur, people still look at them like they're insane."
And becoming Jeff Bezos? "That's not going to happen to 99.9999% of people," he said.