Clayton Christensen, a Harvard Business School professor, coined the term “disruptive innovation” in his 1997 book, “The Innovator’s Dilemma.” The term refers to a process in which a product or service starts as a niche offering, targeting a specific market segment, and then gradually gains momentum until it disrupts the mainstream market.
In his book, Christensen presents a dilemma that many established companies face: How can they continue to innovate and grow while maintaining their current business model? He argues that the very factors that make a company successful can also make it vulnerable to disruption.
To better understand the innovator’s dilemma, we must first understand two types of innovation: sustaining and disruptive.
Sustaining innovation refers to incremental improvements to existing products or services. These improvements help companies maintain their current customer base and competitive advantage. Examples of sustaining innovation include:
- Adding new features to a product
- Improving product quality
- Reducing costs
- Improving customer service
Disruptive innovation, on the other hand, refers to a new product or service that disrupts the existing market. These innovations often start as niche offerings and gradually gain momentum until they disrupt the mainstream market. Examples of disruptive innovation include:
- Netflix disrupting the traditional video rental market
- Uber disrupting the taxi industry
- Airbnb disrupting the hotel industry
The Innovator’s Dilemma
The innovator’s dilemma occurs when a company’s focus on sustaining innovation prevents it from pursuing disruptive innovation. Christensen argues that companies often fall into this trap because of several factors, including:
- A focus on short-term financial results
- An emphasis on existing customers and markets
- An aversion to risk and uncertainty
- A reluctance to cannibalize existing products or services
These factors can make it difficult for companies to recognize the potential of disruptive innovation and pursue it. Instead, companies may continue to focus on sustaining innovation, which can eventually lead to their downfall.
Christensen argues that to overcome the innovator’s dilemma, companies must embrace disruptive innovation and take risks. This means accepting short-term losses in pursuit of long-term growth and being willing to cannibalize their own products or services.
Examples of companies successfully navigating the innovator’s dilemma:
- Apple, which disrupted the music industry with the iPod and iTunes
- Amazon, which disrupted the retail industry with its online marketplace
- Google, which disrupted the search engine industry with its algorithm
In conclusion, the innovator’s dilemma is a significant challenge that companies face as they strive to innovate and grow. By understanding the difference between sustaining and disruptive innovation and the factors that contribute to the innovator’s dilemma, companies can take steps to overcome this challenge and pursue long-term growth. The key is to be willing to take risks, embrace uncertainty, and focus on long-term goals rather than short-term financial results.
Christensen, C. M. (1997). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Review Press