Sometimes they win,; sometimes they fail— but there’s no evidence of executives shrinking from the big decisions and avoiding risk. Those with limited time might want to consider skipping Dilemma altogether and going directly to Solution, as the latter book summarizes the information presented in the previous work. Initially, the basis of competition is performance. The executive must also be alert for signs of changing circumstances. Once you understand the underlying mechanics, however, you can understand the patterns. It’s heavily influenced by the company’s cost structure; it’s also influenced by what sized projects customarily are funded. Once that foothold is gained, the process of product improvement can begin. The latter are an important part of an organization’s culture. Some of the techniques listed in The Innovators Solution: Creating and Sustaining Successful Growth may require a sound knowledge of Hypnosis, users are advised to either leave … The authors describe the “discovery driven planning” process for strategy development. This results in a demand for increased performance from these once commoditized subsystems, decommoditizing the industry at the subsystem level. The majority of new products never make it out of development. Retailers and distributors also have to grow by moving up market. A company focuses solely on core business— no new growth enterprises are started— and it moves upmarket, where the money is. Processes relate to specific tasks. Expenses pile up and losses mount; the stock price goes south. By way of example, in the old way of doing things, if you’re trying to sell milkshakes, you’d identify existing milkshake customers. His advice is general enough to apply to different companies without becoming so generalized as to lose its usefulness. Few companies exist in a pure state at one end of the scale or another. Disruptive innovation targets lower performance but at a price point that is appealing to the low end of the market. The company tolerates loss because that’s the game, but that puts it in the hole until the new product pays off. The Innovators Solution by Clayton Christensen 1. If a product meets these qualifications, there is one more test: is the innovation disruptive to all the important players in the industry? Christensen charts a path to successful disruption by looking at the histories of several innovative companies. In order to succeed at this game, a senior executive must determine which resources and processes to apply to the new enterprise and must guide the creation of a disruptive growth engine (a system of processes that engenders and nurtures disruptive growth). Companies should create a growth engine that is run by policy, so it gets funding and projects are started, not because of immediate needs, but rather because it is part of the day-to-day business. This groundbreaking book reveals that innovation is not as … As people work together successfully to address recurrent tasks, processes become defined. The authors discuss the process of creating and iterating on a theory. Interdependent architecture optimizes performance, but the resulting products and processes aren’t so flexible. It’s not helpful to try and copy the attributes of successful companies, you need to understand the circumstances that led to the success to identify the causal mechanism behind the success.Â, “Theories built on categories of circumstances become easy for companies to employ, because managers live and work in circumstances, not attributes”, “We can trust a theory only when its statement of what actions will lead to success describe how this will vary as a company’s circumstances change.”. Please Note: There are links to other reviews, summaries and resources at the end of this post. Like someone in debt to a loan shark, a company stuck in this growth gap reflexively does what it must to raise money, without addressing the underlying issues. Their traditional competitors often don’t bother defending the low end of the market. As companies become large, they literally lose the capability to enter small emerging markets. Interdependence and modularity can be thought of as existing on a continuum. Sales people will make decisions based on how they’re compensated. It’s important to be flexible and adapt the architecture to changing circumstances. And we all know that when investors are unhappy, managers are fired and the status quo is reasserted. The customer is trying to solve a problem, so to find out what that problem is, segment the market by circumstance. Failure is common among disruptive technology firms; only a small percentage succeed. It sells well and makes money for the company. This person decides which processes should be borrowed from the parent company and which processes need to be created fresh. Test whether the critical assumptions are reasonable, and then implement the strategy. Entrant firms are better at dealing with disruptive change. Business plans should be designed to test critical assumptions with tools like discovery- driven planning. Start by making targeted financial projections, and figure out what needs to be true to meet the projections. Get commitment from top management by framing innovation as a threat, and then put the new product in an organization or department separated from the core business, treating it like an opportunity to be nurtured. Incumbents are much better at this since their resource allocation process is optimized for this type of innovation.Â. HowDo provides bespoke innovation services and free self-guided innovation training. They try to use the same strategy that brought them success before, and they end up overshooting on performance. Below are some of my key takeaways from reading the book, “The Innovator’s Solution” by Clayton Christensen and Michael Raynor. It takes some discipline to get the good money. Sometimes disruptive technology comes along to help them do this. The very best time to invest in new growth projects is when the company is still growing. Those that do face an uphill climb to profitability. A better basis for understanding and predicting success can be found in the author’s previous work, The Innovator’s Dilemma. That being said, the … In trying to increase performance, designs become more proprietary and interdependent. It will expose products to real customers; force the company to keep costs low. '' The Innovator's Solution The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, generally referred to as The Innovator's Dilemma, first published in 1997, is the best-known … Companies that focus on sustained growth get good at it over the years, but they don’t develop the wherewithal to manage disruptive growth. Strategy changes depending where you are in the cycle, so resource allocation must change over time. This makes it hard to differentiate. As a follow up to The Innovator’s Dilemma, this piece rehashes quite a bit from the previous work. Innovators who target these new markets are said to be competing against non-consumption. The focus is on identifying key assumptions and creating a plan to test those assumptions as quickly as possible. The same process applied to a new task, however, is likely to be inefficient and ineffective. It’s essential to understand how to identify the customers that will constitute a good foundation for a disruptive business. The industry becomes dis-integrated. The activities that don’t seem to be core today might become critical in the future. They are just as glad to focus on higher market levels and they don’t recognize the disrupters as a problem until it’s too late. Two processes define strategy in a company: Ideas are filtered through resource allocation. Together, they outline an … Then, consider whether your product offers a solution that’s adequate or beyond adequate. The continued improvements are overshooting the mark. Each summary is … The focus is on identifying key assumptions and creating a plan to test those assumptions as quickly as possible. This, however, is a mistake, as new products should start down-market. In the startup stages of a business, much of what gets done is attributed to its resources, particularly its people. Investors don’t seem to care so much about a company’s assets or how much money it makes today—they want to see growth. This should be someone with experience managing a disruptive growth business. This classic work shows just how timely and relevant these ideas continue to be in today’s hyper-accelerated business environment. Christensen tackles practical issues: identifying customers that make for a good foundation for the business; deciding which processes to keep in-house and which to outsource; and determining appropriate product architecture. At least until a new enterprise has developed stable processes, it’s also important to establish direct oversight by a senior executive— someone with the authority and the knowledge base to take care of a myriad of issues, from ethics to product development. In the startup stages of a business, much of what gets done is attributed to its resources, particularly its people. Managers who can anticipate the movement of profitability along the value chain can give their company the ability to sustain growth and capture high profits. Once the products are differentiated and proprietary, the profits are good, bringing us back to where we started. Using examples from numerous different companies, the author develops a framework to help executives create disruptive products and services that will maintain growth for their firms… The Innovator's Solution: Creating and Sustaining Successful Growth provides solutions to that dilemma. Figure out how to catch this group’s attention and make a profit at what’s probably a low price-point. This can be an impediment for managers who should be focusing on running the company. They understand the consumer through frequent contact, and they often see opportunities before those who are higher in the company’s hierarchy. Demand early success. To get funded, they need to go through what’s usually a complex and unruly process. Michael E. Raynor is a director at Deloitte Research. … The company needs lots of money at this point, so they position their new product up-market. “The Innovator’s Solution is an intelligent, perceptive (and frequently counterintuitive) look at innovation, and well worth the time it takes to read and digest it to gain a greater … They create new markets and reach people who previously weren’t consumers. Once growth stalls, they’re extremely unlikely to reach those lofty heights again. But there is a problem with this approach. More than 50 years ago, Peter Drucker described the power of provocative questions. Growth is important. This is when modular architecture comes into play. When something becomes commoditized in a value chain, something else in the chain becomes de-commodified. There are many tasks that people do routinely; people are always looking for things that will do those jobs or help them do those jobs.