Chapter 8: Part 1 – The innovator’s dilemma

Earlier we mentioned Clayton Christensen’s disruptive innovation. In his famous book “The Innovator’s Dilemma,” he systematically expounded this idea. At the time we praised his ideas for influencing the development of management and a large number of companies. Indeed his work has had a huge impact including Steve Jobs Bill Gates and many other entrepreneurs who highly praised this book. “The Innovator’s Dilemma” was later named one of the 20 most influential business books of the 20th century by Forbes and Christensen himself won the “McKinsey Award” twice for this book and was named the most influential business thinker of contemporary times by Harvard Business Review in 2011.

Why is this book so influential? We can see some clues from the development history of the IT industry. We already know that as early as the late 1970s Jobs and others began to introduce personal computers especially their development of Apple II which was a huge success. However this also attracted the attention of the real giant in the IT industry at the time: IBM. IBM at the time was the “blue giant” of the entire IT industry although its main business was expensive mainframes and workstations. But they realized that PCs had unlimited prospects. So in 1980 IBM launched its first PC. The IBM PC as a landmark product sparked the first technological revolution in the IT industry.

However IBM made a serious mistake at the time. Although it paid for the development of a PC operating system it left the product’s intellectual property rights to a small company at the time: Microsoft. This mistake resulted in most of the wealth created by the entire PC industry being ultimately captured by Microsoft. And IBM could only pick up some leftovers and eventually had to sell its entire PC division to Lenovo.

Although Microsoft was successful in the PC era it didn’t achieve the same success in the mobile internet era. In 2007 when the first generation iPhone was released Microsoft watched as Apple which was almost bankrupt in the PC era rose again and consumers’ main devices for accessing the internet changed from PCs to mobile phones and tablets.

However Apple didn’t really enjoy its success for long either. A small company called Android after being acquired by Google adopted a free strategy and within a few short years pulled iOS down from its market-leading position and once had an Android market share of over 90%.

Looking back at this development history of the IT industry we see that many of its protagonists were once just small companies. They once challenged and toppled big manufacturers who were in their prime as challengers. But when they themselves became giants they were knocked down by new challengers using the same methods. Is this an infectious disease or a curse or a reincarnation?

Clayton Christensen’s “The Innovator’s Dilemma” answers this question. In this first edition published in 1997 he proposed theories of “sustaining innovation” and “disruptive innovation” and explained why “disruptive innovation” always comes from small companies while big companies have always been helpless in dealing with it.

In 1995 when he was still an assistant professor at Harvard Business School Christensen had already proposed an early prototype of this theory in one of his articles. Initially he called it “sustaining technology” and “disruptive technology.” But later Christensen realized that few technologies are inherently “disruptive” or “sustaining.” Instead new technologies often come with new “business models.” And these new “business models” led to disruptive consequences. So he began to use “disruptive innovation” instead of “disruptive technology.”

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