What is the innovator’s dilemma?

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Christensen (2013) attempts to answer the following questions: how can great companies fail when they get everything right? And explained why certain companies collapse despite having an important role in their market. To completely understand the core of the innovator’s dilemma, it is important to point out typical successful companies in question. why is that the most recent companies such as Uber, Airbnb, Tesla, Spotify among others, are the ones at the top of the food chain? What makes them unique? Part of the innovator’s dilemma is the reason behind their success.  Christensen (2013) described sustaining innovation and disruptive innovation as an innovator’s dilemma. Sustaining innovation is driven by the already established markets that dictate the demands which can fail due to the unforeseen expectations of customers while disruptive innovation is driven by unknown nor proven markets but it is more likely to impact the future of the organization. Organizations are confronted with complex challenges today and as a result, are constantly changing.

The world of work today is unlike the one of the past, with rapid technological advancement, organizations operating in a global space, outdated business models, highly competitive environment, newly emerging markets, customers constantly changing their preferences (Žitkienė & Deksnys, 2018). Organizations need to constantly sense and respond to these ever-changing challenges. Therefore, companies often fail because there are fixated on sustaining innovation without considering disruptive innovation. Organizations adopt an open system approach which includes their relationship with the market and external environment such as suppliers, shareholders, customers, and other related stakeholders. In a disruptive era such as technological change and advancement, customers change their needs and expectations. Although organizations keep track of the needs and requirements of customers, it is imperative that organizations keep an open mind and expect the unexpected. According to Christensen (2013), the following are the principles of a disruptive dilemma:

  1. Customers can greatly impact resource allocation by the organization
  2. Company size should match the market size, thus, small markets do not solve the growth needs of large companies
  3. The market of disruptive innovation is unknown and unproven, and as such, cannot be analyzed
  4. The existing capability of the organization to determine or define organization disability when confronted with disruptive innovation.
  5. Technology supply may not be equal to the market demands, thus, disruptive innovation is a marketing challenge rather than a technological one

Organizations that adopt sustaining innovations often fail because their philosophy exists in a valued network that shapes leaders’ decisions, and consequently, makes it impossible to foresee future opportunities (disruptive innovation). In addition, big organizations are often slow to react to change. On the other hand, although disruptive innovators’ products may not be valued by the mainstream market, they constantly strive to find a niche market by trial and error. As their products improve, they grow their market niche and penetrate into sustaining innovators’ market.

References

Christensen, C. M. (2013). The innovator’s dilemma: when new technologies cause great firms to fail. Harvard Business Review Press.

Žitkienė, R., & Deksnys, M. (2018). Organizational Agility Conceptual Model. Montenegrin Journal of Economics, 14(2), 115-129.

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