Solving the Innovator’s Dilemma?

When I started working on Innovation some years ago, one of the first and best readings that I had the chance of enjoying  was the book “The Innovator’s Dilemma”, from Clayton Christensen. If you work in the innovation world, you most probably have already read this book, but if you haven’t, I certainly recommend you to do so.

A lot has been written about the innovator’s dilemma and disruptive innovation, a term coined by Clayton Christensen, which he defines as “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors” (see more at: http://www.claytonchristensen.com/key-concepts/)

To make a long story short, the book develops the thesis that incumbents, or established companies, have great difficulties to react when “disruptive” innovation comes into their market. When these innovations are in their early stages, they do not pay attention to them because the new offerings cannot compete with the current standards which the incumbents are focussed on  to provide the best return to their shareholders, improving them by means of “sustainable innovations”. The problem comes when these disruptive innovations improve and “quickly” become better than the existing products, taking over the market, allowing for no reaction time or capacity from incumbents. The innovator’s dilemma comes from the fact that incumbents are almost helpless to avoid this “creative destruction” cycle as they do what they have to do, focus on making money out of their stronghold on the market, being unable to react until it is too late.

This is a very strong idea which had a profound impact in my understanding of what innovation was. If you are an incumbent, you are doomed to keep improving your product and making money out of it, until suddenly “some nobody” comes in and steals the show. Of course this is a bit melodramatic and the story doesn’t always end badly for the incumbent, although we all know about the famous cases I will not name here out of respect for the innovation knowledge of my readers. But if you are an incumbent, what can you do to avoid this situation happenning to your company?

I had the chance to read a few days ago a very interesting article from McKinsey Quarterly which I feel provides a very good and very well explained roadmap of what incumbents should do to avoid or to adapt to disruption in their markets. The article is titled “An incumbents’ guide to digital disruption”, by Chris Bradley and Clayton O’Toole, and it is published in the McKinsely Quarterly May 2016 (http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/an-incumbents-guide-to-digital-disruption). It is focussed on digital disruption (you know, digital is the new “must” word), but I think its recommendations could be well adapted to disruption in other fields. I certainly recommend the read, specially if you are an incumbent worried about these things.

By the way, if you are interested about the term “Disruptive innovation” and how it relates to Uber, as an example, I recommend you a couple of related posts from Clayton Christensen (https://hbr.org/2015/12/what-is-disruptive-innovation) and Robin Chase (https://hbr.org/2016/01/we-need-to-expand-the-definition-of-disruptive-innovation) which have different points of view and also make for an interesting read.

Enjoy the reading!

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