Review: The Innovator’s Dilemma


image The Innovator’s Dilemma

Clayton M. Christensen

Before I went to EMC World and marveled at how the management was missing the boat on the cloud and was diving wholesale into Case Management, I was told that I had to read this book.  After EMC World, I broke down, purchased it, and then fought to find time for it.  The book is over a decade old, so what was the rush? Let me tell you, I am glad I found the time.

I was told before I read the book that it was going to make me a little sad and despair for the future of Documentum.  It did in a way, but it also helped explain everything that was happening.  It actually increased my opinion of some people at EMC.  I am going to talk about the specifics to EMC, and other legacy Content Management vendors, in a subsequent post.  For now, let’s dive into the book itself.

Pass the Disk Drive

Christensen starts by explaining the basic problem.  Well managed companies have no problem keeping up with sustaining technologies in the market.  Need better performance?  We can innovate that for you.  The issue is around disruptive technologies.

He observed that no matter how good management was, there was an inherent inability for companies to respond for disruptive technologies.  In fact, it was because they were good managers that they were unable to respond effectively to the disruptive technologies.

Disruptive technology, by there very nature, do not fit in existing markets.  They start small and do not provide the capabilities required by existing customers or the profit-margins required by companies.  They don’t lead to double digit growth so they don’t get picked for investment.

When evaluating sustaining technologies these market and profit concerns are dead on, but they lead to very smart companies missing the boat on the technologies that will one day supplant them as leaders.

This point is driven home, ad nauseum, by Christensen using the disk drive industry.  I now know more about that industry than I ever wanted.  I also know that this is a problem that can impact any company, and will likely impact all companies.  Starting from a disruptive technology past does not immunize you from the risks.

To be sure, more examples from other industries are used as well.  It doesn’t matter if the innovation is fast (disk drives) or slow (excavators), disruptive technology has a way of wiping the previous generation off of the playing board.

One reason is quite simple.  Products add more functionality and capability with each new version.  Typically this occurs faster than change in the minimum consumer requirements.  This change does lead to more customers that need more, but adds capabilities that go unused by most of the market.  While leaders are making products better, the disruptive technology appears and offers lesser functionality, but in a more convenient and reliable package.  This new product finds a new market, which allows the the product to evolve and gain functionality until it hits the minimum requirements of the mainstream market.

When this happens, it is too late for the existing leaders.  If they haven’t successfully attacked an upper market, the attack from below may wipe them out completely.  Regardless, they will lose their mainstream market lead.

I’m over-simplifying quite a bit and leaving out details, but that is why there is a book.

Do We Just Quit Now?

So the obvious question is, What can be done? Well, that depends on the nature of the disruptive technology.  How does it fit in the organizations values and processes?  How accepting will the value network (suppliers and distribution network) be to the change?  There are a lot of questions to be answered before deciding on the appropriate action.

The simple, generic solution seems to be to create a spin-off or to acquire a company to run as a subsidiary, thought this approach is not always the answer.  With a little Enterprise 2.0 mythos, Christensen says that the resulting organization needs to be able to fail, and in fact, it will fail along the way.  The key is to not fail so big so there are enough resources remaining to take the lessons learned and make course corrections.

The book is relatively light on recommendations and spends more time talking about the perils and less upon the remedies.  I guess that is why he wrote more books later.  That said, if you can’t identify a problem, the solution will do you no good.

Who Needs to Read This?

Simple.  If you run (i.e. in management) an established product company, physical or software in nature, you need to read this.  If you are in Marketing in one of those companies, you need to read it.  If you are in Sales, it wouldn’t hurt.

If you are running a start-up, I wouldn’t worry too much at this time.  Just keep in mind that if you are successful, then it will apply to you one day unless you take a buyout before it matters.

If you are in a leadership position at a legacy Content Management company, and you haven’t read this book already, go buy it from your local bookstore or download a copy Now!  Don’t wait for shipping, it is too important.

In my next post, I’ll tie this more directly into the Content Management industry, with a focus on EMC because I am most familiar with them.  Keep in mind, every first-generation Content Management company is in the same situation.

12 thoughts on “Review: The Innovator’s Dilemma

    • @Tim Seeing how it took Pie 13 years to get to the original let’s not pressure him to read the sequel. At this pace he does have until 2016. 😉

      Agree Both books are great!

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  1. Pie, while the situations described by the author are realistc, I am not in agreement as to the cause and solutions. I read it some time ago and don’t care for the book too much.

    As I hinted in one my recent posts, the art of management is mostly seen as using certain organizing principles, recipes and procedures for people and project management. Given that, no manager wants uncertainty caused by disruptive technology. The point is that all technology is disruptive unless the people of the organization are agile enough to assimilate it. The ‘better’ the management is, the more predictive but less agile the organisation, the more disruptive is anything new. And just improving performance IS NOT innovation.

    And if something new has to be done, good management will not take the risk to do something creative but it uses copycat best practices that may not even fit the situation, but because it is ‘best practices’ it can’t be wrong.

    And then there are those that believe that innovation can be automized into processes as well. Innovation is not hindered by the market or by anyone. Just look at Apple. it is hindered by the limited mindset of risk averse executives. It is influences by similarly weak executives in B2B markets.

    The problem for any vendor with a large customer base is upward compatiblity demanded by existing customers because they don’t want change. And if a vendor then comes out with new and different technology to head off the competition the analysts won’t see that as a good thing but as risky step out of the established market fragment they had put this vendor in and will slap it.

    If on the other hand a vendor like us finds a way to consolidate a lot of technology and allows the business to configure it any way they want, so they can have a light racecar or a heavy truck as they desire, analysts rate that as a muddy strategy. It is not ‘simple enough’ and that’s why a new but limited and therefore apparently simple product is rated high.

    So clearly ‘the market’ is not created by the vendor, but by market conditions, user expectations and those that analyze it. Like on the stock market, it is dangerous not to hit the analyst’s expectations. Ten years ago I introduced consolidated inbound and outbound content management and one analyst said: ‘No one understand why ISIS wants to merge scanning and printing.’ Yes, it is true that the solution wasn’t simple enough regardless of the huge benefits it can bring. At the time the idea that one would buy a ‘best of breed’ and integrate was still around. Now it is rather buying SAP or Oracle all the way. So, I also don’t agree with the assessment that the small innovative vendors will easily take the business from the global vendors. They they grow by acquisitions and take those unpleasant innovators off the market.

    Yes, one solution is to have ‘Googlettes’ who get the freedom to innovate rather than creating ever bigger and more complex products to install and maintain. Will EMC take that leap? They shouldn’t need to because all their technology is acquired and they have many little companies already. The problem with that is that businesses NEED ONE CONSOLIDATED SOLUTION and not an integration programming mess. Many little innovations disruptive or not won’t make it their either as it turns into a maintenance nightmare. Shoot from the hip solutions hardly ever hit a target that is a little further off …

    Regards, Max J. Pucher Chief Architect ISIS Papyrus
    http://www.adaptive-process.com

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    • Max, your comment would have made a fine blog post. In fact, my next post is going to apply concepts from the book to the industry. With all that said…

      – You are right, innovation is not NECESSARILY performance. Really depends on what they do to achieve it. In general, you can innovate and improve your product along many lines that include performance. Encouraging innovation in the company is different and not really what this book was about. Many companies innovate sustaining technologies, i.e. enhancements, but they did not innovate disruptive tech because of a slew of other issues, one of which was not because they didn’t conceive of the idea.

      – The problem for a large vendor that you describe is exactly like one of the problems described in the book. The vendors do not create the market. Customers, and in our industry, analysts create it, as you indicate. You almost have to step outside of your own company to attack a related, yet separate, market.

      – Never said small vendors will do it easily. They have to have something truly disruptive, not just evolutionary. ISIS is not disruptive. They can succeed because they are ignored for a while, allowing them to get their footprint. They may be acquired, but that doesn’t necessarily spell their end, that depends on the intent of the acquiring company.

      – Consolidated solutions are not realistic today given the mish-mash of existing systems and the sheer migration effort. That is why standards such as CMIS, which dramatically ease the ingegration effort, are so important.

      Read my next post.

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    • Brian, consolidated is a tricky word. There are many scopes to consider that we have to take into account. My response here is going to be brief, but I think there is a much longer discussion to take place…

      I do not see ECM funtionality being consolidated into SAP or Oracle, or SharePoint for that matter. There is a lot of content in the world that exists outside any business solution or business area. Those applications are ideal for provided business solutions, but they don’t offer all of the needed capabilities for ECM at this time. That may change, but they don’t now.

      The issue is that there is content that is required in many different areas of the business. If you only store it in one location, you hit the issue of key metadata and content separation. If you store it in each location, then you have lots of other issues, not the least of which is keeping content up-to-date across many different repositories.

      To be honest, this is going to require a discussion before we reach consensus. Trading comments is unlikely to get us there. I think I need a whiteboard. That said, more than willing to keep discussing it. I’ll just make sure I am fully caffeinated before responding.

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  2. Pie, so ERP as offered by SAP or Oracle is not a consolidated solution? Consolidated can not succeed? I am sorry but exactly the opposite is true! Anyway, otherwise we do agree what is going on. Max.

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    • The consolidated was ECM specific. For some Enterprise Apps it does work. In ECM, consolidated is ideal, but not often feasible at this point.

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  3. Brian Shin says:

    I would agree with Max rather than Pie on this. ECM doesn’t live alone outside of the eco system. It has been sheltered in its own small space for quite a long time. Originally, EMC acquired Documentum thinking it could help to make its Object System (not file system) strategy work. Remember, EMC previously acquired an object addressable storage system. I don’t know whether EMC has the critical mass or will power to achieve this successfully. As we all know, the current ECM system stores its metadata in a separate database and stores its file to a separate location. I believe this is not ultimately the natural way to address any object. Look around you, for example, an Apple or orange doesn’t store its characteristics or metadata in some powerful iPhone10. It is right there on the fruit itself. One can say SAP or Oracle is not relevant to ECM. On the contrary, it is more relevant than you think. The current trend of virtualization by Oracle and SAP will eventually eat up the ECM world whether you like or not!

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    • Brian, consolidated is a tricky word. There are many scopes to consider that we have to take into account. My response here is going to be brief, but I think there is a much longer discussion to take place…

      I do not see ECM funtionality being consolidated into SAP or Oracle, or SharePoint for that matter. There is a lot of content in the world that exists outside any business solution or business area. Those applications are ideal for provided business solutions, but they don’t offer all of the needed capabilities for ECM at this time. That may change, but they don’t now.

      The issue is that there is content that is required in many different areas of the business. If you only store it in one location, you hit the issue of key metadata and content separation. If you store it in each location, then you have lots of other issues, not the least of which is keeping content up-to-date across many different repositories.

      To be honest, this is going to require a discussion before we reach consensus. Trading comments is unlikely to get us there. I think I need a whiteboard. That said, more than willing to keep discussing it. I’ll just make sure I am fully caffeinated before responding.

      Like

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