This is a fascinating and frightening book for anyone who works in an industry where a product can become obsolete quickly. Christensen uses computer disk drives to tell his story, but the principle is basic. Public companies can’t afford to abandon profitable old technologies for newer generation products, but will lose market share later if they don’t. Christensen provides all the graphs and tables you could want to make his point.

Professor Christensen showed the real business world, and how hard is change things and minds. IBM, DIGITAL, SEARS and SEAGATE faced with new technologies and they didn’t know how to deal with it. And your company, they will know?

What more can be said about this book that hasn’t already? Even an individual contributing developer like myself in a non-management role benefits from it, as there are great examples of how new products move from niche to mainstream and upset their competitors. After reading it, you should understand why it’s so dangerous to keep your head down and *only* listen to your current and up-market growth customers.

The only downside to the book is the lack of practical advice on how to avoid being out-innovated, and Christensen’s follow-on book, _The Innovator’s Solution_, nicely addresses even that.

I advised my professor to add this book to his reading list and contemplate making this required text. Filled with examples, this book helps open one’s eyes. Another tool to avoid marketing myopia. A very enjoyable read.

With the Innovator’s Dilemma, Clayton Christensen delivers a very powerful analysis of the role of innovation in gaining market leadership. The question raised is whether market leadership can be sustained through innovation alone. Indeed, the core of the Innovator’s Dilemma illustrates how successful companies with established solutions, marquee customers and a valued brand keep being threatened and at time vanquished by start-ups. A recent example would be how established enterprise software vendors have been shaken up by disruptive startups: Remember Salesforce.com vs. Siebel Systems? Christensen addresses a difficult problem that most successful customer focused companies face. Precisely, because it is a formidable challenge for an established company to bring disrupting technology to its own installed base of customers.

I am a Marketing Manager at a hard drive company — my second hard drive company. This book explains EXACTLY why paradigm shifts occur in our business.

The author focuses on the hard drive industry because our products have six-month market life cycles where being one week or $1 behind the competition can be the difference between selling 10-million units or selling next to zero.

Hard drives are the most complicated technology inside a computer. Hard drive companies are run by PHD’s and Stanford MBA’s. But, in the last year our industry has lost hundreds of millions of dollars. We are on the verge of our next paradigm shift and several companies will be forced out of business in the next few years.

Read this book and understand how our crazy business works. Then apply the lessons in your humdrum everyday industry.

Christensen looks at the business trajectories of the disk drive and steel industries from a biological perspective and discovers a kind of universal punctuated equilibrium he calls "disruptive technological change." He convincingly demonstrates how great companies that do everything "right" will stumble if they don’t recognize and address the forces of disruptive technological change. While his thesis (that the best business practices will lead to failure) is initially counter-intuitive, Christensen provides a simple frame for explaining how the forces of innovation fundamentally direct the course of industry success and failure.

Having just re-read this book, I admire it even more now than I did when it was first published. In his Introduction, Christensen makes his objective crystal clear: “This book is about the failure of companies to remain competitive when they confront certain types of market and technological change….the good companies — the kinds that many managers have admired for years and tried to emulate, the companies known for their abilities to innovate and execute….It is about well-managed companies that have their competitive antennae up, listen astutely to their customers….invest aggressively in new technologies, and yet they still lose market dominance.” Why? For Christensen, the answer is revealed in what he calls “the innovator’s dilemma”: the logical, competent decisions of management which are critical to the success of their companies are also the reasons why they lose their positions of leadership.

In Part One, Chapters 1-4, Christensen builds a framework that explains why sound decisions by great managers can lead to failure. In Part Two, Chapters 5-10, he attempts to resolve the dilemma by examining why and under what circumstances new technologies have caused great firms to fail. He makes an important distinction between sustaining technologies and those which are disruptive. He offers four “laws or principles” of disruptive technology:

#1: Companies depend on customers and investors for resources (Chapter 5)

#2: Small markets don’t solve the growth needs of large companies (Chapter 6)

#3: Markets that don’t exist can’t be analyzed (Chapter 7)

#4: Technology supply may not equal market demand (Chapter

Actually, these four could also be viewed as guidelines as well as check-points by which to detect early-warning danger signs. Unless and until, however, it becomes obvious that a given technology will create sustaining rather than only temporary disruption. One of the book’s most important points seems to confirm what Pogo the Possum once said: “We have met the enemy and he is us.” Nearly all of the corporate wounds which Christensen examines are self-inflicted. If not in all instances avoidable, at least the damage done could at least have been reduced.

For example, Christensen examines companies in which (a) disruptive technologies were first developed internally, (b) marketing personnel then sought reactions from lead customers, (c) the pace of sustaining technological development was accelerated, (d) disaffected employees created new companies and (by trial and error) located markets for disruptive technology, (e) moved upmarket in direct competition, and (f) caused established firms to respond in defense of their own customer base. In essence, well-established companies (“incumbents”) thus become threatened by “entrants” and a disruptive technology change. In response, they re-allocate resources away from those technologies which address their customers’ needs.

When reading this book, note in particular Christensen’s detailed analysis of a disruptive technological change in the mechanical excavator industry (Chapter Three) and the correlations between value networks and characteristic cost structures (Chapter Four). Once again, he reveals how and why sound management decisions can often be “at the very root of [a 'good' company's] impending fall from industry leadership.”

In Part Two, Christensen describes in detail HOW managers can address and harness four principles by which to prevail against disruptive technologies. Once again, he asserts that a company’s customers effectively control what it can and cannot do. Managers who deny or ignore this do so at great peril. To support his assertion, Christensen examines several quite different companies: Quantum, Plus Development, Control Data, Micropolis, DEC, IBM, Kresge, Woolworth, and Hewlett-Packard. In some of these companies, the innovating managers who were faced with disruptive technologies created organizations whose cost structures enabled them to make money in the value network where the disruptive technology was taking root, and where customers’ power and the managers’ intentions were aligned. The emphasis is on alignment. In Chapter Six, Christensen insists that managers must be leaders, not followers, in commercializing disruptive change. Hence the importance of a strategic decision: To be a leader or a follower? It is often prudent for “incumbents” to be followers, resisting pressure from customers, until opportunities to commercialize disruptive technologies are sufficient and appropriate. As Christensen suggests, “In sustaining technologies, in fact, evidence strongly suggests that companies which focus on extending the performance of conventional technologies, and choose to be followers in adopting new ones, can remain strong and competitive.”

Chapter Ten summarizes various key points. By now Christensen has offered dozens of examples of “some very capable executives in some extraordinarily successful companies, using the best managerial techniques, who have led their firms toward failure.” Lest this brief commentary suggest otherwise, managers in every organization (regardless of size or nature) eventually must resolve “the innovator’s dilemma.” Christensen’s book provides invaluable assistance to completing that immensely difficult process. It remains for each of his readers to answer questions such as these: Which customers do we want? Which technologies will help us to get and then keep them? For each technology, which strategies will be most effective to sustain it? Should we attack competitors with disruptive technology? How can we best defend ourselves against it? How should our resources be allocated? What about timing? Should we lead or follow? If we follow, should we prepare to lead later?

Finding the correct (i.e. most appropriate) answers to questions such as these will obviously help to clarify today’s realities and to suggest strategies for an uncertain future. But beware of taking anyone or anything for granted. As Christensen explains so eloquently and compellingly, the process of resolving one major dilemma may well reveal others. Hence the importance of alertness, speed, flexibility, and (yes) passion.

I actually read this a year or two ago, and I have found myself regularly referring to lessons presented in Clayton’s excellent book, without having to reference or photocopy anything.

Of particular value was the examples used to illustrate the book’s core points. Examples were great because I have been able to easily recall them when explaining why the path I recommend is probably the right one, in a way that never fails to impress the point upon the listening audience.

Case in point: the book uses the hard drive industry a great deal as an example of how companies easily overlook the potential of what the author calls "disruptive technologies."

In this case, technology advancements enabled hard drives to get smaller, and the sales/marketing forces within the respective manufacturers’ repeatedly failed to see the use or value in a product that begins as simpler, cheaper, and easier to use.

You can almost hear the objections: "Our drives have X storage space. No one is going to buy one with half the storage capacity, even if it is smaller and cheaper." No one gets excited about small sales when they are facing big ones with their current product line.

So the technology’s strategic value is overlooked, and the innovation ends up being capitalized upon by smaller competitors who can plant and grow an emerging market because they get excited about smaller volume sales. They have the energy and drive to find markets that don’t necessarily need the rich feature set associated with the current product.

Inevitably, of course, these smaller sales dwarf the originating technology and its associated marketing and sales efforts, by cannibalizing the market and becoming the mainstream product.

Clayton’s book outlines excellent strategies for companies seeking to capitalize upon disruptive technologies developed within their walls. They make sense, and are easy to grasp.

In all, one of the better books I’ve read, in terms of short and long term impact to my ability to present solution. Well worth the money.

This book takes the radical position that great companies can fail precisely because they do everything right. It gives examples of outstanding companies that have lost their market leadership when confronted with disruptive changes in technology and market structure. Drawing on patterns of innovation in a variety of industries, including computers, retailing, pharmaceuticals, automobiles and steel, the author shows how breakthrough innovations are initially rejected by mainstream customers because they cannot currently use them.

This rejection can lead firms with strong customer focus to allow strategically important innovations to languish. An excessive customer focus prevents firms from creating new markets and finding new customers for the products of the future. As they unwittingly bypass opportunities, such firms can clear the way for more nimble, entrepreneurial companies to catch the next great wave of industry growth.

Using the lessons of successes and failures of leading companies, The Innovator’s Dilemma presents a set of convention-defying rules on the phenomenon of disruptive innovation. This, then, is the innovator’s dilemma: when to apply the rules of disruptive innovation that goes so much head-to-head against the conventional wisdom.

Clayton M. Christensen is an associate professor of business administration at the Harvard Business School. His research and writing focus on the management of technological innovation, the problems of finding new markets for new technologies, and the identification and development of organisational capabilities.

Reviewed by Azlan Adnan. Formerly Business Development Manager with KPMG, Azlan is currently Managing Partner of Azlan & Koh Knowledge and Professional Management, an education and management consulting practice based in Kota Kinabalu, Malaysian Borneo. He holds a Master’s degree in International Business and Management from the Westminster Business School in London. He may be contacted at Tel: +6088-383 526 E-mail: azlan@azlan.org