Innovation: A Narration of Successes Built on Preventable Failures

Clayton M. Christensen’s book entitled Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail is not a brand new book; however, technology challenges with cybersecurity, AI, and unknown breakthroughs over the horizon make this book a timeless treatise on how to deal with innovation and avoid historical pitfalls.

Christensen (2000) opens his book with a detailed description of how Sears Roebuck and Co. basically disproved the slogan of “too big to fail.”? Christensen emphasizes that the fate of Sears was actually just one of many examples of how industry shifts such as the mainframe, to mini computers, to PC computers, to laptops, to smartphones has left a cemetery of formerly great companies that have disappeared or evolved into a merged or restructured survivor.? Extracting principles from what the author and his fellow Harvard professors have described as “fast history,” Christensen formulates five primary facets of the Innovator’s Dilemma:

Principle One: Businesses depend upon customers and investors (a timing dilemma).

Principle Two: Small markets are initially too small for large companies (size does matter; another timing dilemma).

Principle Three: New markets are too small to generate convincing data for market research (data matters, but the lack of data can cause delays; another timing dilemma).

Principle Four: New technologies require new capabilities; existing capabilities may be a poor match for the new needs (a skills gap; a knowledge dilemma).

Principle Five: Supply and demand signals and lagging data may conceal product life cycle shifts (data dilemma; also another timing dilemma).

This mini essay takes a brief look at each innovation principle.

Principle One: Businesses depend upon customers and investors.

Christensen’s first principle describes how customers tend to react to new technology. Buyers and sellers perform a sort of symbiotic dance where customers can easily get out of step with what sellers expect.? According to Digital Marketing (2024), innovators comprise about 2.5% of the market, early adopters 13.5%, early majority 34%, late majority another 34%, and laggards 16%.? Christensen highlights the timing dilemma between the early activity of consumers taking risks with new technologies that companies have historically been reluctant to adopt. First Mover and Fast Follower companies have to make a leap of faith into a new market, which often appears to be too risky, and Late Movers might make the move only to find that they have been too late of garner market share.? Investors are likely to exacerbate the timing equation as they might also be reluctant to invest early in a cycle and ultimately too late.? As the adage goes, banks are reluctant to lend money when you need it but willing to lend when you no longer have the need.

Principle Two: Small markets are initially too small for large companies (size does matter).

Christensen’s second principle is similar to his first and all five principles are interrelated.? Large companies are traditionally less agile than startups and other small companies.? Christensen sites the example of IBM having a giant share of the mainframe market, but Digital Equipment Corporation (DEC) created a brand-new market for mini computers.? Data General and Wang exploited this market successfully for several years, but IBM viewed the mini market as an annoyance (what Christensen calls a disruptive technology).? The U.S. auto industry basically ignored the emerging market for small cars like the Volkswagen Beetle (bug), until international auto makers such as Toyota jumped into the market gap with competitive economical models like the Toyota Camry in 1992 and Corolla in 1966.

Principle Three: New markets are too small to generate convincing data for market research.

In many ways, Market Research has been addressing this shortcoming with advances in the science of data analytics and with relatively new approaches such as lateral thinking. The field of Business Ethics has added new emphasis on acquiring adequate data and using models and statistics to analyze business trends and insights. Diaz Ruiz (2022) describes a marketing movement toward an “Insights Industry” with a focus on performativity whereby marketing professionals maximize available quantitative data and employ other research methods such as qualitative methods and models such as the Black-Scholes model, SWOT, and PESTEL.

Principle Four: New technologies require new capabilities; existing capabilities may be a poor match.

Christensen (2000) makes a subtle distinction in his description of the fourth principle. Individuals can be adaptable and extrapolate their skills from one technology to another.? Organizations, however, are not as flexible, especially with values and processes.? “The very processes and values that constitute an organization's capabilities in one context, define its disabilities in another context” (p. xxvii). In other words, even with the best insights and marketing research data, a corporation may find that its culture has been "hard coded" for one industry segment and often cannot pivot quickly to an emerging segment.? In 2025, AI is a good example; many individuals and organizations are still mystified about Generative AI and how best to employ AI or paranoid about the risk of ignoring AI.

Principle Five: Supply and demand signals and lagging data may conceal product life cycle shifts.

Christensen’s fifth principle may be the most counter-intuitive of all.? As many of us learned in Social Studies or similar classes in our early school days, business fundamentals include “the laws” or law of supply and demand. Christenson describes a supply and demand gap as follows: “In their effort to stay ahead by developing competitively superior products, many companies don't realize the speed at which they are moving up-market, over-satisfying the needs of their original customers as they race the competition toward higher performance, higher-margin markets” (p. xxviii).? In other words, competing companies create a vacuum between existing and emerging technologies and this vacuum often invites a new technology to fill the gap with a healthy window for price increases.? Mini-computers, for example, had a huge price gap between new mini marvels and gradually becoming obsolete mainframes.

Recovery Example

As Jim Collins (2009) points out in his book entitled, How the Mighty Fall and Why Some Companies Never Give In, some companies can decline to the brink of disaster and somehow muster the grit to reverse a downward spiral and survive. Collins gives the example of Nordstrom.? In the 1990s, Nordstrom experienced a dramatic decline, which reached a pivotal precipice in 2000.? Basically, with remarkable leadership and an innovative inventory system, fourth generation Blake Nordstrom took the helm of the company and led a dramatic comeback.? Collins used the following “Good to Great” principles to summarize Nordstrom’s recovery (Collins, 2001):

** Level 5 Leadership: From answering his own phone to inverting the hierarchy of the company to place customers and sales people at the top? with executives at the bottom, Blake basically reestablished their traditional culture, which they had strayed away from.

** First Who, Then What: Blake Nordstrom made a very interesting observation, which makes a lot of sense in a customer facing business: “We can hire nice people and teach them to sell, but we cannot hire sales people and teach them to be nice” (p. 174). With this principle in mind, Nordstrom made necessary employee changes to get he best people in the right positions.? Collins famously describes this process as getting the right people on the bus.

** Confront the Brutal Facts: As noted above, Blake invested in and modernized their inventory system essentially with a customer focus to “increase the chances that a salesperson could easily locate the exact item a customer desired” (p. 175).

** Hedgehog Concept: Nordstrom reaffirmed its commitment to being the best “department store chain in the world” while improving background systems such as their inventory.? With a renewed emphasis on nice salespeople they emphasized the importance of developing lasting relationships with customers.

** Culture of Discipline: Nordstrom’s turnaround involved empowering their sales team to make decisions “using good judgement” as needed.

** Flywheel; Not Doom Loop: Nordstrom made incremental improvement steps, but one notable improvement was to kill a $40 million campaign to “Reinvent yourself” (p. 176).? Blake focused on building upon Nordstrom’s traditional strengths rather than looking for dramatic changes.

In addition to the above, Blake Nordstrom made sure that others were empowered to make decisions if he as CEO was not available.? Collins summarized the turnaround as “service to the customer above all else, a passion for improvement, entrepreneurial work ethic, excellence in reputation ..” (p. 176) along with improved support systems such as ?better inventory management and more disciplined buying practices.

Concluding Thoughts

As noted above, Christensen’s (2000) five principles combine to form five facets of the singular Innovator’s dilemma.? The factors of customer and investor dependence, small markets that “explode,” markets that start so small that data is hard to crunch until the data is too obvious to need crunching, a skills gap that creates human resources challenges, and a corporate culture gap that is harder to change than the challenge of hiring new employees with newly needed skills. Data Analytics and ?Market Research improvements with insight and performativity focus have helped to fill the innovation gap; however, AI and cybersecurity seem to be the most recent technology challenges that have put many companies into a virtual tailspin as they train current employees, hire skilled subject matter experts, and brace for competitive races to the next set of hurdles..? The example of Nordstrom’s turnaround was more of a basic business recovery, but employing an innovative inventory system was a key leadership decision. Innovations drive surviving and thriving businesses; however, false claims and unethical practices can give marketing and business leaders bad reputations and can destroy rather than perpetuate good business practices.

References

Christensen, C. M. (2000). Innovator’s dilemma: When new technologies cause great firms to fail. Harvard Business Review Press. https://books.google.com/books?id=lURBCgAAQBAJ&printsec=frontcover&dq=innovator%27s+dilemma&hl=en&newbks=1&newbks_redir=0&sa=X&ved=2ahUKEwiUs7TAwuOIAxXKEVkFHTbUADIQ6AF6BAgMEAI#v=onepage&q=innovator's%20dilemma&f=false

Collins, J. (2009). How the mighty fall and why some companies never give in. HarperCollins. https://books.google.com/books?id=jRJKtxLbUDEC&printsec=frontcover&dq=How+the+Mighty+Fall&hl=en&newbks=1&newbks_redir=0&sa=X&ved=2ahUKEwjByJjj5OaIAxWznokEHdqSGUkQ6AF6BAgOEAI#v=onepage&q=How%20the%20Mighty%20Fall&f=false

Collins, J. (2001). Good to great: Why some companies make the leap and others don’t. HarperCollins. https://books.google.com/books?id=pJNt2ZFFT3sC&printsec=frontcover&dq=Good+to+great:+Why+some+companies+make+the+leap+and+others+don%E2%80%99t&hl=en&newbks=1&newbks_redir=0&sa=X&ved=2ahUKEwjQ9PiH4OiIAxXXEFkFHevFE4gQ6AF6BAgPEAI#v=onepage&q=Good%20to%20great%3A%20Why%20some%20companies%20make%20the%20leap%20and%20others%20don%E2%80%99t&f=false

Diaz Ruiz, C. A. (2022). The insights industry: Towards a performativity turn in market research. International Journal of Market Research, 64(2), 169–186. https://doi.org/10.1177/14707853211039191

Digital Marketing. (2025). The 5 customer segments of technology. https://ondigitalmarketing.com/learn/odm/foundations/5-customer-segments-technology-adoption/

Link to an article about AI and Expert Systems:

https://www.dhirubhai.net/pulse/expert-systems-traditional-branch-artificial-ma-ms-dba/?trackingId=EOMAkohSSy6oGKuuNGYROA%3D%3D

?