Business

At A Glance – The Innovator’s Dilemma

The theory of self disruption for long term survival

The Innovator’s Dilemma is the decision that businesses must make between catering to their customers’ current needs, or adopting new innovations and technologies which will answer their future needs. This is a constant problem for companies and has already claimed a long list of victims. Although the Innovator’s Dilemma was first popularised in a book written by Harvard professor Clayton Christensen in 1997, his warning still rings true today.

Businesses that listen too closely to customer feedback can easily fall into the trap of stagnation, even though they reacted directly to what their consumers wanted – or at least what they thought they wanted. Although market research is a very valuable tool, it can only tell innovators so much because consumers aren’t necessarily the best judges of what they want. American businessman Henry Ford summed this up perfectly when he purportedly said, “If I had asked people what they wanted, they would have said faster horses.” Although it’s uncertain whether or not he actually said this, it emphasises the point that when it comes to new ventures, the customer isn’t always right.

Credit: Readingraphics.com

Credit: Readingraphics.com

This graph shows how disruptive innovation can overtake the established offering when it comes to what customers need (and want). One example of a company which fell foul of the Innovator’s Dilemma is Blockbuster. The film and video game rental company went from an unchallenged empire in 2000 to bankruptcy in 2010. Eventually, Blockbuster was killed off by on-demand streaming sites like Netflix because it refused to adapt its business models. Another example comes from the disc drive industry. Seagate, a company which made 5¼-inch disc drives, were quick to adopt the newer, smaller 3¼-inch drives. However, they dropped the project due to customer apathy. When 3¼-inch drives did indeed develop into a competitive market, Seagate were too late to benefit from it. Businesses are constantly faced with two choices – they can either continue doing what they know is currently working well, or adopt disruptive advancements in an attempt to stay relevant. The predicament is faced by all companies, and is only going to intensify as innovative technology continues to expand.