#cookebooks: The Innovator's Dilemma, by Clayton Christensen - when doing the right thing is the wrong thing

Recommended by: Cem Ucan Glen Calvert

Score

4.5 out of 5 (but 10 out of 5 for law firm decision-makers)

What's the premise?

When an established market participant - Kodak, Blackberry, any auto manufacturer that isn’t Tesla - fails to spot the potential of a disruptive technology, that failure is often ascribed to bureaucracy, complacency or risk aversion.??

In fact, the decision-making and resource-allocation processes that are key to the success of established companies - like listening carefully to customers, and allocating resources to build increasingly high-performance products for those customers - are the very processes that cause this failure. In summary: by doing all the right things, incumbents end up doing the wrong thing.

What did I learn from it that I can apply now?

• Be more empathetic about the failures of companies to adapt to disruption - and more aware of how tailoring for today’s customers, and falsely believing their needs to be largely static, drives commercial decision-making (particularly as to market selection).
• “Capabilities [individually and organisationally] are forged within value networks”? >> cue this absolutely evergreen Charlie Munger quote:

“I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it.”

• Incumbents cannot ingest disruptive technologies using an incumbent’s processes and technologies; and, in any event, two models for making money can’t peacefully co-exist in the same organisation.? Instead, incumbents must use existing resources (but NOT existing processes and metrics) to create separate organisations which (a) are small enough to get excited about the size of opportunity/win which typically occurs at the first stages of disruption (and which commonly would not be considered a “success” for a large incumbent) and (b) can adopt new ways of working which allow for the testing and learning of new markets (and new customers) for disruptive products, quickly and inexpensively, in ways that might lead to unexpected success.
• The trigger for disruptive technology is ‘performance oversupply’ (i.e. where the rate of performance improvement exceeds what the market needs or is able to absorb) - this triggers a change in the rank ordering of the criteria by which customers select products (typically from functionality, to reliability, to convenience, and then to cost).
• Don’t keep a disruptive technology “bottled up in the lab”, working to improve it until it’s deemed ready for your existing customers.? Instead, find a market that embraces the attributes of the technology as it is now, create a commercial base, and then move upmarket from there.

Should you read it?

First question: are you a Goodreads 1 star moron?? Or perhaps someone who is inclined to tee off on this book on the basis that “Faith in disruption is the best illustration, and the worst case, of a larger historical transformation having to do with secularization, and what happens when the invisible hand replaces the hand of God”?

(Andy Grove and Steve Jobs (who repeatedly cited the importance of this book) would probably disagree, Jeff, but then I guess they are “in business”.?)?

For airport book morons/ secularisation stans, this is a foundational text.? It’s three years BG (Before Gladwell) - a time when the business book still derived from a lifetime of rigorous, classical study within a storied institution, rather than the more modern/ AG combo of cod-psychology, probably-invented-interactions-with-the-help, straight-up plagiarism of other, prior business books, healthy dollops of bullshit faux-humble anecdata and wacky zig-zags.? To my eyes it therefore presents as weirdly refreshing.??

Second question: what’s your view on Nokia?? Or Blockbuster, or Toys R Us, or GM, or Windows Mobile?? Or maybe even Google today?? I don’t think it’s much of an exaggeration to say that the popular opinion of these companies is that they were run by imbeciles - category kings who saw disruption happening, chose not to pivot out of a combination of laziness and rank strategic incompetence, and deservedly lost it all.? (For Google, add your own helping of anti-DEI culture-war brain rot.) If this is your view, then this book will bring you into a place of (more karmically sound) empathy as to how these companies found themselves structurally and strategically incentivised not to respond to disruptive tech.??

Third question: are you a strategy advisor in a law firm?? If so, please contact me because I am absolutely slavering to discuss this book with you.? Christensen himself wrote this slightly weird sponcon white paper applying The Innovator’s Dilemma to law firms, chirping about cost of litigation, the negative incentives of the billable hour and the cost-related perils of insourcing expertise.? I am on record “advising” (such as I am in a position to do so) law firms, in an inadvertent nod to Christensen’s recommendations, to react to the disruptive potential of AI by spinning out neo-firms to (a) offer services to customers and in markets that would not be of interest to their parent (b) unburdened from the same metrics, processes and billing models as their parent firms.? Perhaps what is blocking disruption is that there is no sense of “performance oversupply” (because ALSPs and AI-driven providers are not perceived to meet reliability thresholds, or because clients in law firms’ core markets (but particularly the US) are less focused on value innovation than they are in having a mega-firm “sign it off” as a prophylactic against litigation risk). ? Either way: hit me up.

Would I read it again?

As this Slate article puts it:?

There are a few key sectors—think of health care—where it seems like the world really would benefit from the cheaper/simpler paradigm of disruption. These are areas where the problem isn’t that the best stuff available isn’t good enough but that it’s too expensive or complicated for most people to get the best stuff most of the time. Yet the idea of deliberately fostering lower-quality alternatives sounds counterintuitive to people.

The moral of the disruption story is that this is often how progress is made. Some new idea really can’t equal the best the status quo has to offer, but that doesn’t always matter. Turning disruption into an all-purpose tech buzzword obscures its importance while simultaneously distracting innovators from real opportunities.

This book is not a firm prediction of what will happen in a given industry.? It is not a definitive statement as to the inevitability of disruption. ? But it is a reminder of what disruption really is: an innovation which results in the reimagining - a complete transformation as to the general understanding - of a market.? And, because of that vital purpose: yes, I would read it again.?