The Innovator's Dilemma
by Clayton Christensen
Established firms are displaced not through mismanagement but through good management: serving existing customers and protecting margins rationally leads them to ignore cheaper, worse technologies until those technologies improve enough to take the market.
What it teaches
Christensen's puzzle is why competent incumbents lose to inferior products, and his answer separates two kinds of innovation. Sustaining innovations make an existing product better along the dimensions current customers already value, and incumbents almost always win those battles. Disruptive innovations begin worse on those dimensions but better on some other — cheaper, smaller, simpler — and so appeal only to customers the incumbent does not want or to a market that does not yet exist. Every internal incentive then argues against pursuing them: the margins are thinner, the market is too small to matter to a large firm, and the best customers say they do not want it. The disruptive technology improves along its own trajectory, eventually becomes good enough on the original dimension, and the incumbent discovers the market has moved beneath it — the mechanism by which whole industries are creatively destroyed by rational decisions. His prescription is structural rather than exhortative: house the disruptive effort in an organisation small enough to be excited by a small market, because the constraint is the resource-allocation process, not the intelligence of the people inside it.
The ideas this book explains
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