Innovator’s Dilemma

Clayton Christensen’s book “The Innovator’s Dilemma (Harper, 2000) is certainly one of the most important business and strategy books from the last two decades. If there is one chart and concept that summarizes his theory on disruptive innovation, it’s the chart on the evolution of the disk drive industry.

Christensen spent years analyzing the industry in minute detail, looking at every aspect of the industry, from the performance of new products coming out to the demand of the various sectors of the computing industry. The disk drive industry had a number of specific advantages which made it a perfect case study for innovation: A global industry, with lots of data, relatively homogeneous product performance elements, and a dynamic of growth and innovation.

At the core of Christensen’s theory is that technological innovation has a way of outstripping demand. A set of suppliers who have perfected the art of the 14 inch disk technology, serve a set of customers in the mainframe computer industry. These suppliers do everything right: they serve their customers well, listen to their needs, continue to develop better and better products, etc. Along comes a new technology, such as the 8 inch disk technology. Originally, the leading suppliers don’t take this technology seriously. The new technology is far from achieving the same performance as the established technology, it cannot fulfill the needs of their core mainframe customers, and the emerging market for minicomputer is small and irrelevant in comparison to their main market.

But then two things happen: First, the minicomputer market grows rapidly, at the expense of the mainframe market. And secondly, the new technology rapidly gets better, and pretty soon is good enough to fulfill the demands and requirements of even the most demanding mainframe customers.

The chart which combines the technology evolution curves and the demand curves beautifully shows how these disruptive technologies catch up, and ultimately even surpass the older core markets.