For decades, the United States has been the bastion of great Capitalist Innovation. With the American system, it was thought, you had the greatest chance to take a great idea to tremendous wealth and power. What does that really mean? It means having a great education system, a great financial system, and a great patent system. When you finally take your widget to the market, your accountant might even tap you on the shoulder and ask you about taking the company public. An IPO (Initial Public Offering). Taking the company public is a great way to motivate your employees (they can be paid in stock), and allows the company to grow rapidly in value, based on public perception. A few years later you're issuing quarterly reports and the stock price is bouncing up and down based on the contents of that report. After a few years, the company begins to stall out: your widgets are more advanced than they ever were, but you latest model hasn't done so hot in the market. Your loyal customers are content with last year's model, so the growth prospects are middling, and the stock starts to slide.
What the hell just happened?
The Innovator's Dilemma reveals the true source of groundbreaking and game-changing technologies, and why the Modern Corporate System works against real innovation. If you can understand why certain companies and entrepreneurs stall out, you can understand how to avoid it.
Notice the word Dilemma in the title. These are failed companies. They're enormously successful ones. Once you understand that these companies are very smart and very successful (and still subject to this effect), you get a hint of cause. Having an army of loyal customers sounds like a great place to be right? This book is about how those very same customers, if you listen to them, if you focus group them, if you beg them for feedback, will probably run your company into the ground.
There are two forms of Innovation mentioned in this book: sustaining and disruptive. Sustaining technologies are essentially evolutionary upgrades: taking the same product and bumping up the specs, giving it a bigger screen, or a faster processor. Shallow things like `new colors' also fall into this category. And these sustaining innovations are exactly the kind of things that customers want, and will ask for, if you're listening. Customers look at the widget and ask, "Can you make it smaller? Can you make it so there's no noise? Can you do one in gun metal grey?" The technologists in the company declare, "Sure we can! Because it's been about 9 months since we released a new model, and in that time, the price of those high end chips has come down, and they're even smaller. Here you go." And the next version is released. If you listen to your customers, you will keep putting out tiny evolutionary upgrades like this. As we learned in Lean Startup, most of the time focus groups lead you astray. But listening to your actual customers...as a bad thing? What happened to `Customer is King' or `The Customer is always Right?' I suspect those little sayings were actually cooked up years ago by bosses told to their employees, especially in retail operations, to cut down on complaints. That is not a very good mantra for R&D Labs. If the customer was `right', he'd be working at Boeing, Microsoft, or 3M.
The Customer isn't an expert. Rather than let them boss your around, maybe you should start to take away a little bit of their power. Sometimes the customer isn't the end user, but the retail store. Retail stores like Walmart won't be eating the food your company makes, or wearing the clothes. They just want your stuff a dirt cheap prices, and will push you do make uncomfortable compromises to hit those price targets. Are you sure you want to let these guys ruin your flagship product? Sometimes, like Enterprise computing, the customer is the IT department. They want your stuff to be cheap and modular, and they don't care about the User Experience, because they're not the ones using the product. To get around this, many companies have done their own distribution channel (open your own retail stores, or just quit retail altogether and go to the web directly), or fired their customers (by killing a product that wasn't part of the company's core competency). As a result, these companies are leaner, better branded, and more focused (and more profitable).
So what if you can ignore the customer for a few minutes, and consider developing a disruptive technology. What is that anyway? Intuitively, if sustaining technology is evolutionary, then disruptive must be revolutionary, right? Not quite. Disruptive technologies take a current technology and apply them to a new market. This is like when Nintendo released the Wii. They found a way to make Videogames less expensive, and more fun, to a broader market (everyday people, women, girls, seniors,etc). The result was the most dominant era in Nintendo's history. Little did they know that they would be disrupted a few years later by ... mobile phone gaming. Part of the reason why disruptive technology is so great is that it takes really long to copy. When Microsoft set about copying the Nintendo Wii, first they had to wait a few quarters to see if it was successful (because it was a brand new gaming experience, no one knew if it would take off). For the first 18 months of release the Nintendo Wii was sold out everywhere. Microsoft decided to start copying them. To make up for lost time, they looked around and acquired (link) a company with similar tech, that didn't even require a controller. While they set about integrating the `Kinect' into Xbox, Sony was doing their own copycat device (Sony Move Controllers). All this time, Nintendo is reporting amazing financial numbers. They were in the Blue Ocean, and making billions. When the Sony and MS devices came out, they were very late, and the response was middling at best: while the Nintendo tech camed bundled with every Wii, the Sony/MS versions would be add-ons, which meant developers had a very small market to develop for this new gameplay. Who wants to sell a game aimed at 15 million users, when they can sell almost the same thing on a Wii, and hit 85 million users? The result is almost no Kinect/Move games are being made, and tech isn't really being used. Kinect is currently being developed for Windows.
The Sony and Microsoft technologies didn't fail because management was arrogant; the management team was just being conservative, and smart. They failed because the technology (which had been available for years and years) didn't make sense until it was too late (when Nintendo showed them the way). You can't get their by copying, you can only get there by having a visionary leader who looks at the technology and says, "We need to invest in this, even if it doesn't make sense right now. This is where the industry is going." The Nintendo Wii, launched in late 2006, had been in development since 2001.
Disruptive technologies can also evolve. This is where you start to see amazing changes in the Industry. The iPod was disruptive at the low end, but eventually evolved into the iPhone, and later the iPad. The iPad sell about 25 million units per quarter now, and is reason both Apple and Microsoft are drastically redesigning their OSes. Mac OS X Lion released this year, has many touch elements, fullscreen mode and even an iOS-style launcher. Many expect Apple to ship iPads running OS X within the next 5 years. Windows 8, due out next year, will be Microsofts answer to iOS for iPad. It will have an App Store and fully touch interface. Can you imagine back in 2001, when Bill Gates first gawked at the iPod, he ever thought his company would redesign their cash cow Windows business because of it's disruptive powers? Amazon did the same thing with the Kindle. Disrupt at the low-end, fine tune it, then move it up the market (in price and features). In just a few years, I expect Kindle to be putting out some very beautiful Kindle Fires, to give Apple fits.
It's obvious how the innovators dilemma works for companies. Rather than listen to the customers, ignore them and try to make the best products you possibly can, by eliminating assumptions about what a product should have. I wonder though, if that same lesson can be applied to people. How can people be rapidly innovative and creative? By ignoring the career that makes us the most money, and follow our instincts about what a ideal lifestyle looks like? Why do I have to be married? Why do I have to own a home? Maybe I live in a new city every year, and rent beautiful apartments. Maybe I live with friends and couchsurf for a few years. Maybe I spend ten years mastering my favourite languages and living in various countries around Europe. Or maybe, I'm constantly changing jobs, looking for new work, emulating Howard Roark-an idealist a snob, who falls ass backwards into money and repute? Or maybe, just maybe, following your own path, will lead you to tremendous wealth and power (and just maybe, those white collar guys who told you to get a `real' job, will find themselves sideswiped by disruptive technology).
After all....what could be more replaceable (either by software, or machinery, or outsourcing) than a passionless, unoriginal, hopelessly conservative and painfully average employee?
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In The Innovator’s Dilemma written by Clayton Christensen, the author focuses on external forces that affect the consistency of technological industries. While reading the book, it can be said that it would be most effective mainly to people in managerial positions, marketing positions, and for people who have a great interest for the technology industry. As a result of the technology industry being so volatile, it can be studied in depth to better understand which factors play an important role in the success of an industry. Another highly observed topic by the author is figuring out when to enter a market. Christensen observes the technology industry; he comes up with hypotheses and tests theories that are analogous to the rise and popularity of certain gizmos.
A large portion of the book focuses on the disk drive industry. It does this because the disk drive industry spanned for about thirty years. Throughout the thirty years disk drivers had many technological changes. While disk drives are starting to become obsolete, because personal computer devices can download software from the internet and save information on cloud services, the life span of disk drives is large enough to compare to any long lasting market. There were many variables that changed in disk drivers which oscillated sales, such as: weight, size, cost, and material (Christensen 11). One hundred twenty nine entered this dense market but out of those companies one hundred nine of them failed (Christensen 4). As a result this industry can be studied and analyzed carefully. Disk drivers have had a comprehensive and cases relatable history. Nonetheless reading about them in depth is not the most astonishing topic, and becomes mundane.
Another main focus is on consumers, because essentially they are the ones buying products. Companies receive feedback from their met objectives given to them by their consumer population. This allows the company to maneuver their product goals in the desired direction. The consumer population serves as a great importance because their buying allows the company, “to effectively control what it can and cannot do,” (Christensen 117). Christensen discusses personal hypotheses and general theories that affect the business world. A particular theory that was interesting is called resource dependence, which deals with customer’s wants (Christensen 117). The theory describes several things including, companies that succeed in industries are the ones that gives customers what they want (Christensen 118). Although controversial, it also states that regardless of what manager’s want for their company they are powerless towards what consumer’s desire (Christensen 118). Even if managers want to change the course of the company it would be unwise to do so if the consumer wants something else, because it will risk the company’s success in the business environment. Regarding this theory I have heard the first part of it several times, but the question that always comes to my mind is how do consumers know what they want, especially when new products are introduced. This theory also correlates to the disk drive industry, because in the mid 1970’s the fourteen inch disk drives were the main type of drivers (Christensen 17). Within five years eight inch drivers started emerging but the fourteen inch were still more prominent (Christensen 17). However, some companies that were succeeding with the fourteen inch drivers were reluctant to enter the eight inch drive market. Because of their solid performance with fourteen inch drivers, they were late to join the market when eight inch drivers became the money makers. Because consumer behavior changed in the mid 1980’s, it was the new eight inch driver that consumers wanted (Christensen 17). What is being described here by Christensen is the timing of product life cycles.
The book describes a perfect example of a company listening to consumers, and giving consumers what they want. The once popular dot-matrix printer was disrupted in its success by Hewlett Packard (HP). In the mid 1980’s HP showed its market dominance because they became known not only for their computers but for their printers too (Christensen 133). HP had two main printer types that they were producing, which was ink jet and laser jet. Experts lined up both HP printers and compared them. The ink jet printer was slower, its resolution was worse, it had a higher price per page, but its overall price was cheaper (Christensen 134). Ultimately, it was seen that the laser jet would be more successful in long run, but then how did HP make the laser jet make it out as still as a success (Christensen 134)? HP separated their printer types into two separate businesses which allowed the ink jet printer to survive. They moved their ink jet printer sector to Vancouver, Washington to allow the two printer types to market to their desired consumer populations (Christensen 134). Because of that pivotal decision the ink jet survived, since it was targeted towards a different audience such as, students, professionals, and people using desktop computers for simple purposes (Christensen 134). It was said that if HP ended their ink jet printer than it could have been a possibility that Canon killed them off (Christensen 135). HP displayed a self-benefiting marketing strategy where they created something consumers wanted and needed to benefit themselves, and HP benefit equally.
Christensen essentially discusses the product life cycles, extensively. Throughout the book there are many graphs displaying overlapping and peaks of technologies, since primarily timing is paramount. It can be the difference between succeeding and failing in a market. Performance oversupply is another theory discussed, which fortifies the strategies of entering technology markets (Christensen 211). It discusses a situation when a product is in its maturity state and there are many competitors like it, a new and unforeseen product can disrupt an already established market by creating a new market (Christensen 212). Another reason explained why it can be a good strategy to enter a technology market at that point is because performance supplied can become performance demanded (Christensen 211). Meaning that when the consumer population is aware of a general product that most of the population has, soon consumers will find problems with the product just from over usage. It is desirable of companies to track these over usage problems and change them in the next generation of the product. In the midst of the change, performance oversupply changes the competitive market when new products breakthrough. Consumers will use the rank-ordering system when a new product comes to the market because it interrupts the lifecycle of previous products changing the lifecycle phase (Christensen 212). This ends up proving that new emerging products have a great possibility of becoming popular when entering new markets unexpectedly.
All of the author’s ideas and arguments were clear and therefore making the reading easy to understand. Since his ideas were fairly simple, I do not think there is a reason to necessarily disagree with them, I treated them more like guidelines to a successful marketing and managing career in the tech industry. He introduced new ideas that most people, who are not in the industry, would not know and explained his interpretation using graphs. Christensen always tied his main arguments with the disk drive industry which became repetitive fairly quick, but he did give other examples. It would have probably been easier, primarily to the new generation, to grasp the information if he used a different industry as his main example. The reason I decided to read this book was because I find myself obsessed with tech industry and follow new technologies religiously. However, this book was different than what I was expecting, and while it was informative and provided a plethoric amount of information, I would use it more as an information source and not for leisurely reading.
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