Challenging the 'Innovator's Dilemma'
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A little-known researcher at the London Business School is directly challenging Clay Christensen, author of one of the most influential business books of the past 20 years: "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail." |
Christensen, using data from the hard disk drive industry, wrote that companies can fail to transition to a new technology because they pay attention to existing customers using older technologies. But Kitty Wan-Ting Chiu, also using industry data, says au contraire -- disk drive maker Seagate Technology missed the move to smaller disk drives because it wasn't attentive enough to its existing customers:
In sum, as the case of Seagate shows, the failures of leading incumbents in developing new technologies were not due to the unattractiveness of the revenue structure of the new business or their fears of sales cannibalization of the existing business. It was also not due to their strong ties with the existing customers, as Christensen argued. Instead, this paper argues that their failures were attributed to their sacrifices of product performance for volume production. In the phase of disruptive technological changes, the established incumbents could not progress because of their failures to meet the needs of the existing customers....The established customers of Seagate clearly wanted to switch to the 3.5-inch architect. It was Seagate who failed to maintain the strong ties with its customers by maintaining its product performance to a satisfactory level as required by its customers, thus keeping it from moving to the new 3.5-inch market....
Unlike Christensen who maintains that the established firms' failures are attributed to their over-serving the existing customers thus leaving room for entrants to attack the market in the bottom-up manner, this paper argues that the existing customers' need must not be missed in order for established firms to get over the simple technological changes. Indeed, the notion that firms fail simply by being too close to their customers is counter-intuitive and not evident in any industry.
This could be an interesting controversy...
Chiu, Kitty Wan-Ting, "Commercialization of Disruptive Technologies: Revisiting the Value Network Theory and the Failures of Leading Incumbents in the Hard Disk Drive Industry" (June 21, 2007). Available at the Social Science Research Network.
Comments (2)
The time period chosen by the author is quite limited and is not fully telling of the industry conditions at that time. Yes, Seagate was slow to shift to smaller HDDs, but the demand shift to those drives was still in the nascent stage. Seagate's troubles at that time had little to do with being slow to smaller drives.
Posted by Mark Geenen | July 18, 2007 1:14 PM
Maybe I'm a bit off topic but... Duh. Don't all companies that "fail" do so because they don't evolve? Whatever the reason, it's ultimately the lack of evolution. While the fact is, you can't drive by always looking in the rear view mirror, it's hard to ignore your bread & butter revenue stream(s). After all, who's paying for the gas? Yet at the same time, it's easier for new companies to be more agile (and better financed?) when they are not confined by where they've been. When they are being rated as a start up, or up and coming.
For a publicly traded company, the real question seems to be: How do we look forward without losing what we have? Obvious maybe, but still easier said than done. Sadly, having longer termed vision isn't so simple when being graded on a quarter by quarter basis. As odd as it sounds, it almost seems as if Wall Street creates failure, or at least contributes to it more than one might be willing to admit. But then again, such is the nature of evolution.
Posted by Mark Simchock | July 20, 2007 11:34 AM