This was a very engrossing book. I’ve started taking these business sorts of book with a grain of salt, but the book presents an interesting way of thinking that I’m pretty sure is right some of the time.
The basic idea is: established companies are great at coming up with “sustaining” innovations, which are innovations that improve on their existing technology. They are terrible at investing in “disruptive” innovations, which produce products that are worse than their existing products in ways that their customers care about, but better in a few that are crucial for customers they don’t have yet. The example the book uses is disk drives in the 70s-80s – companies that made 14 inch drives were successful at increasing the density of those drives, but few/none made the jump to 8 inch drives. These 8 inch drives were more expensive per megabyte and smaller, but they were cheaper overall and more rugged, which their customers didn’t care about but emerging products did.
This is combined with the trend that often technology improves faster than the market cares about, so eventually 8 inch drives caught up in capacity with what the existing market needed and soon after nobody bought 14 inch drives anymore.
The tricky part is that often established companies had the ability to make these disruptive innovations, but when they’re being developed they generally have smaller margins since they’re cheaper, so there’s a strong incentive for companies to keep investing in the technologies they’re familiar with and get higher margins. This works for a while until the disruptive innovation becomes good enough, and then the market collapses. Even if the company then tries to make the disruptive innovation, the companies that have been doing it for years are much better at it.
The author suggests that the only way established companies can successfully adopt a disruptive innovation is to basically let a group work on it that is guaranteed resources to continue their work and isolate them from the existing company, so the people can have the freedom to experiment without being pulled in to working on existing products.
Anyway, it’s a fairly light read but very interesting!