In “The Innovator’s Dilemma,” Clayton Christensen, a professor at Harvard Business School, demonstrates how a large, successful business can do seemingly everything right, yet still fail. The book discusses a situation where a large company invests in what Christensen refers to as “sustaining technologies”: improvements to the performance of a product that already has a well-established role in the market, in order to better meet the needs of its customers.
When other companies enter the market with their own sustaining technologies, they are unable to compete because the large companies already have many advantages such as more capital, established trust and reputation, etc. However, large companies often have issues when it comes to “disruptive technologies:” an innovation that displaces an earlier technology by being so much less expensive that they create a new market, or by starting in a segment that the larger companies don’t perceive as a threat (but that eventually grow and come to overtake the market).
Christensen offers an example of the floppy disk drive market. In 1981, Seagate introduced new 5.25 inch drives were introduced, which turned out to be disruptive innovations. The traditional 8 inch drives were far superior, yet they were also very expensive and only used in minicomputers. People in the newly emerging market for desktop computers wanted less expensive drives, willing to sacrifice speed and disk space. These smaller drives were able to improve at a faster rate because their technology was simpler than their larger counterparts, which allowed them to encroach into the minicomputer market. The companies that made 8 inch drives had tried to focus on meeting the needs of their minicomputer customers, yet ended up going out of business. The advice to “focus on the customer” can sometimes become counterproductive and end up hurting the company.
Christensen has also published a sequel, “The Innovator’s Solution,” in which he changes the name from “disruptive technologies” to “disruptive innovations” and describes ways companies can overcome this issue.
Article by Elena Johnson, Economic Development Intern for the City of Galesburg & the EBI Network.