Chapter 5. Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them. From: The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail,
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CHAPTER 5 | PART 2:
MANAGING DISRUPTIVE TECHNOLOGICAL
CHANGE
Give Responsibility for
Disruptive Technologies
to Organizations Whose
Customers Need Them
FROM
The Innovator’s Dilemma
When New Technologies Cause Great Firms to Fail
y Clayton M. Christensen
HARVARD BUSINESS REVIEW PRESS
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Contents
In Gratitude
Preface
PART TWO: MANAGING DISRUPTIVE TECHNOLOGICAL CHANGE
5 Give Responsibility for Disruptive Technologies to Organizations
Whose Customers Need Them
About the Author
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In 1990 I began asking the two questions that would eventually help shape this
ook. First, “Why is success so difficult to sustain?” And second, “Is successful
innovation really as unpredictable as the data suggests?” By that time I’d been
a strategist at the Boston Consulting Group, where I’d had unusual opportuni-
ties to see at every level how companies competed, and I had cofounded CPS
Technologies to commercialize advanced-materials technology developed in
MIT labs. But neither career path had yet to fully answer those two questions
that were keeping me up at night.
So, at thirty-eight, with the support of my wife and months before our
fifth child was born, I became a doctoral student and made those questions
my life’s work. I’m happy to say I got the answer to the first, and—with the
continued help of tremendous colleagues drawn to the subject over the last
two decades—I’m still homing in on the second. In this new edition of The
Innovator’s Dilemma, I’ll show you some of the exciting new research we’ve
conducted since the book was first published two decades ago.
Why is success so difficult to sustain? This was, and still is, an import-
ant question, because when you look across the sweep of business history,
most companies that once seemed successful—the best practitioners of best
practice—were in the middle of the pack (or, worse, the back of it) a decade
or two later. And we discovered something unsettling and counterintuitive.
What often causes this lagging behind are two principles of good manage-
ment taught in business schools: that you should always listen to and respond
Preface
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to the needs of your best customers, and that you should focus investments
on those innovations that promise the highest returns. But these two princi-
ples, in practice, actually sow the seeds of every successful company’s ultimate
demise. That’s why we call it the innovator’s dilemma: doing the right thing is
the wrong thing. This dilemma rears its head when a type of innovation that
we’ve termed disruptive technology arises at the low end of the market, in the
simplest, most unassuming applications. Explaining this paradox is the pur-
pose of this book.
Incidentally, another scholar who subsequently joined me in the study of
this phenomenon, Michael Raynor of Deloitte Research, has noted that dis-
uptive technology is probably the cause behind the “creative destruction” that
economist Joseph Schumpeter observed to be the primary engine of economic
progress more than half a century ago. I think Michael is right.
And what about that second question, the one about successful innova-
tion really being as unpredictable as the data suggests? Here’s an illustra-
tion that I think helps show what I mean: all venture capitalists convince
themselves—to various degrees—that the companies they’re investing in
will succeed. Otherwise they wouldn’t invest in them in the first place,
ight? But they are co
ect in only 10 to 20 percent of the investments they
make, so they have structured their whole industry on hedging their bets
against the alleged unpredictability of innovation. (The amounts of their
financial commitments, for example, vary greatly depending on statistical
assessments of the risks involved.) The track record of innovators inside
established companies is roughly the same.
But think about it: if we could determine that innovation is inherently
unpredictable—and not just a risk to manage like venture capitalists do—then
it would lead us down a very different path, and research done by my colleagues
and me seems to be indicating that this is, in fact, the case. For example, before
World War II, if you were in the business of drilling for oil, 90 percent of the
wells you drilled would be dry. Just like a venture capitalist’s, your instincts
told you there might be oil in those places, but you spent 90 percent of your
working life drilling dry holes. In the subsequent seventy-five years, however,
geological researchers have developed theories that tell them what data to seek
about structures deep in the earth, and those theories help them give meaning
to that data. Now they can predict with much more accuracy whether oil is
present before they start drilling. There’s no guaranteed guide to oil drilling yet,
ut today over 60 percent of the wells drilled strike oil.
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Today, my colleagues and I are striving to
ing to innovators, entrepreneurs,
and the people who invest in them the same kinds of useful theories that those
geologists
ought to oil drilling. We want to help them know which pieces
of information they need to collect, and how to interpret that information, so
that they can become predictably successful at a rate that wasn’t possible in the
past. And I’m thrilled to report that, since this book was first published, we
have made substantial progress with these theories.
It might seem audacious to assert that hard-headed, data-driven, results-
oriented managers can benefit from using theories—indeed, the terms theory
and theoretical connote impractical in modern business speak. But theories are
statements of cause and effect—which actions yield which results, and why. As
such, a good theory is consummately practical. The truth is, every time man-
agers take an action or make a plan, they do it with the belief that if they take
the actions they envision, they’ll get the results they need. So managers are in
fact voracious consumers of theory. The problem—the reason why succeeding
at innovation has seemed so unpredictable—is that researchers to date haven’t
provided a body of theory that is valid and reliable enough to give innovators a
solid sense of whether there is “oil down there” before they start drilling.
Some who have read this book have been bothered that the examples I used
to illustrate the effects of disruption are all drawn from the past. But perhaps
that’s because those readers have been misled as to what theory actually is, and
how it is built. Let me explain. Data only exists about the past. Theory must
e derived, therefore, from careful observation of the past; then by categoriz-
ing those observations and co
elating those categories with the outcomes of
interest; then by understanding what causes those outcomes; and finally by
showing how that causal mechanism can produce different results in different
circumstances. Theory is then improved by using it to predict: retrospectively
to predict what should have happened in the past, and prospectively to predict
what will happen in the future. That being said, the theory of disruption con-
tinues to yield predictions that are quite accurate, in an astounding range of
industries and applications—from satellites and national defense to computers
and telecommunications; from retailing software to national economic devel-
opment; and from health care to education.
Hundreds of students, consultants, investors, executives, and academ-
ics have joined with me to continue testing the theory of disruption and to
esearch the problems of innovation. In many ways this book has become a
common platform of understanding upon which we have gathered, and I’m
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incapable of expressing how grateful I am for all they have taught me since
the first publication of this book. I can think of no professional pursuit more
ewarding than joining with such kind, selfless, and intelligent people in the
pursuit of light and truth.
Countless articles and books have been written on this shared platform.
I invite you to dig into this body of work, some of which is listed under my
name on the Harvard Business School website. In doing so, I hope you will
notice that The Innovator’s Dilemma, published two decades ago, is the last
piece for which I was the sole author. All subsequent scholarship has been with
dozens of