I spent some time recently reading Clayton Christensen’s “The Innovator’s Dilemma”, which considers, using case studies of actual industries, how disruptive technologies overtake otherwise well managed and visionary businesses. While this book came out in 1997, some truths remain worth revisiting.
The innovator’s dilemma is illustrated where a technology becomes successful and takes on imitators and where its ongoing leadership in sustaining the original innovation is no longer competitively important. The followers do as well as the leaders since the technology becomes understood, business plans routine, and customers expectations clear. First mover advantages only occur in new technology and where disruptive innovation provides a new market and defines a new customer base.
How can one predict when a innovation will be disruptive? One of the main lessons is that when a disruptive technology’s performance improvement strikes a trajectory that exceeds the pace of improvement demanded by the market, it will overtake the existing technology and replace it. This may at first appear unlikely. However Professor Christenson profiles three industries to provide analytical illustration of his principles at work in the marketplace. Most interesting to me, he chooses to apply his theorems to a new technology in Chapter Ten as a case study. For this he chooses electric vehicles.
Not really wishing to be a spoiler, I suggest you read his book. However, in 1997, EVs looked very different than they do in 2011. As a result, Christenson concludes that EVs cannot be used for mainstream applications because they don’t satisfy basic performance requirements. He also suggests that no one can learn from market research what the early markets for EVs will be– because they are new and with as yet to be determined customer needs. The only useful information will come from forays into the marketplace and testing of ideas through trial and error and by selling products to people who pay real money. Business plans must then remain flexible, tied to learning rather than a preconceived strategy. What might emerge as the initial value network for EVs? One in which its weaknesses will be seen as strengths- small parcel delivery, taxis, teenagers commuting to school, islands. In all the likelihood the winning design will be characterized by simplicity, convenience, and reliability. It must be capable of being designed with features, functions and styling that can be changed quickly and at low cost. It must hit a low price point. Clearly Professor Christenson has a lens to the future. EV innovators would do well to consider how 1997’s premonition has borne out in 2011 reality.
Okay, now you need to read the full version.