Book Review: The Innovator's Dilemma

CAUTION: Entering business nerd territory! 🤓

I've always wanted to read The Innovator’s Dilemma by Clayton M. Christensen because it’s often highly recommended among the list of must-read business books. Prior to reading it, I thought it was a more general book about business strategy, innovation, and navigating the market to stay relevant, which is why it appealed to me. I'm always looking for information that will help me think better as the leader of several growing businesses. However, had I read the book’s subtitle (When New Technologies Cause Great Firms to Fail), I would've realized that the book focuses on disruptive technologies 🤦🏾‍♂️. Overall, I'm still glad that I read it.

In true Harvard Business School fashion, this book employed a case study approach, looking specifically at the following industries and how established firms and new entrants responded to (or created) disruptive technology:

1. Disk Drive Industry (Ha!, with the invention of the cloud, most youngsters probably don't even know that data used to be stored on various types of disk drives. Let's see, I remember floppy disks [insert emoji or photo], then 3.5-inch hard diskettes, then thumb/flash drives, then portable hard drives, and now I suppose most everything is stored on the cloud.)

2. Excavator Industry (think heavy earth-moving equipment)

3. Steel Industry

4. Auto Industry

Who remembers these?! 😂

The book is somewhat academic in nature, but as a student of business, I enjoyed learning about different industries and examining similarities/differences between those discussed and the industries in which my businesses operate. It also took me back to my days in Corporate America, which allowed me to easily see how companies can fail due to bureaucracy, risk aversion, politics, and moving too slowly.

Chapter 11 provides a good summary of the seven findings of the research, which I won't discuss here. Two quotes at the beginning of the chapter were quite interesting:

1. “One of the most gratifying outcomes of the research reported in this book is the finding that managing better, working harder, and not making so many dumb mistakes is not the answer to the innovator's dilemma..."

2. "We have learned in this book that in their straightforward search for profit and growth, some very capable executives in some extraordinarily successful companies, using the best managerial techniques, have led their forms toward failure."

In summary, the companies didn’t fail because dumb decisions were made by incompetent management. This failure happened because their strategies and execution worked when it came to incremental, sustaining technology with their existing customers in known markets, but failed when it came to disruptive technology. In the face of disruptive technology, one must think differently and act differently, and do so in the face of much uncertainty. Entrepreneurs tend to thrive in these situations. I wonder if entrepreneurs will one day be desired and accepted in Corporate America?

The book’s group discussion guide at the very end also posed three interesting questions:

(7) "Most people think that senior executives make the important decisions about where a company will go and how it will invest its resources, but the real power lies with the people deeper in the organization who decide which proposals will be presented to senior management. What are the corporate factors that lead mid-level employees to ignore or kill disruptive technologies? Should well-managed companies change these practices and policies?

(8) "What are the personal career considerations that lead ambitious employees in large corporations to ignore or kill disruptive technologies? Should well-managed companies change the policies that encourage employees to think this way?"

(12) "The primary thesis of The Innovator's Dilemma is that the management practices that allow companies to be leaders in mainstream markets are the same practices that cause them to miss the opportunities offered by disruptive technologies. In other words, well-managed companies fail because they are well-managed. Do you think what constitutes ‘good management’ is changing? In the future, will listening to customers, investing aggressively in producing what those customers say they want, and carefully analyzing markets become ‘bad management?’ What kind of system might combine the best of both worlds?”

These first two questions caused me to think about the layer(s) of middle management who are responsible for knowing intimate details of the market and customers, often in much more depth than senior executives. It also caused me to think about how fearful and risk-averse the average person is with their personal lives, and likely even more so with their corporate career, for fear of making a wrong decision that could have an adverse impact on one's career progression and compensation. Sheesh, I can only imagine how much opportunity is missed in businesses of all industries because those most knowledgeable are afraid to take a calculated risk and/or make a decision with imperfect information (read: analysis paralysis). How much opportunity is missed because people are too slow to act? You need fresh, objective, outside thinking, from people who aren’t afraid to take bold risks, especially in markets that are being disrupted.

As it relates to question 12, “well-managed" companies analyze the market, listen to customers, and give customers what they want. But with disruptive technology, there's lots of ambiguity, little data exists, the market opportunity is often unknown, and often customers don't know what they want. Now I’m not suggesting that you totally ignore market research, but all decisions should be part science (data) and part art (intuition).

This ambiguity reminded me of a quote by Steve Jobs:

"Some people say, 'Give the customers what they want.' But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, 'If I'd asked customers what they wanted, they would have told me, 'A faster horse!'" People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page."

Lastly, as a student of business, I found the discussion about the RPV Framework to be pretty helpful as I scale my businesses:

"Three classes of factors affect what an organization can and cannot do: its resources, its processes, and its values."

• “Resources are the most visible of the factors that contribute to what an organization can and cannot do. Resources include people, equipment, technology, product designs, brands, information, cash, and relationships with suppliers, distributors, and customers."

• Processes: "Organizations create value as employees transform inputs of resources--people, equipment, technology, product designs, brands, information, energy, and cash--into products and services of greater worth. The patterns of interaction, coordination, communication, and decision-making through which they accomplish these transformations are processes."

• Values: "The values of an organization are the criteria by which decisions about priorities are made. An organization's values are the standards by which employees make prioritization decisions--by which they judge whether an order is attractive or unattractive; whether a customer is more important or less important; whether an idea for a new product is attractive or marginal; and so on."

Again, overall, I'm glad I read this book. However, unless you're a senior leader within your company, you work in the tech industry, or, like me, you're a student of the game of business, then you might enjoy other business books a tad better.