I was saddened today to read of the death of Clayton Christensen. For me, he was one of the great business thinkers of the last 100 years.
I remember finding his wonderful book, "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail", on the shelf at City University in London and devouring it on the way home on the tube. I only recommend a handful of business books and Christensen's book is number one on my list.
Christensen was fascinated by technology disruption, especially how industry leaders are caught out by change and why they don't respond in time. The two big examples in his book are steam shovels and disk drives.
The hydraulic shovel was a cheap and cheerful innovation that didn't seem to threaten the incumbent steam shovel makers. If anything, it was good for their profitability because hydraulic technology addressed the low end of the market where margins were poor, leaving the high-end more profitable market niches to steam shovels. Unfortunately for the steam shovel makers, the hydraulic shovel makers kept on innovating and pushed their technology into more and more niches. In the end, the steam shovel makers were relegated to just a few small niches and it was too late to respond.
The disk drive industry is Christensen's most powerful example. There have been successive waves of innovation in this industry as drives increased in capacity and reduced in size. The leaders in one wave were mostly not the leaders in subsequent waves. Christensen's insight was, the same factors were at work in the disk drive industry as in the steam shovel industry. Incumbents wanted to maximize profitability and saw new technologies coming in at the bottom end of the market where margins were low. Innovations were dismissed as being low-end technologies not competing with their more profitable business. They didn't respond in time as the disruptive technologies increased their capabilities and started to compete with them.
Based on these examples, Christensen teases out why incumbents didn't respond in time and what companies can do to not be caught out by these kinds of disruptive innovations.
Company culture is obviously a factor here, and Christensen poked into this more with a very accessible 2000 paper where he and Overdorf discussed the factors that can lead to a company culture that ignores disruptive innovation.
I never met Christensen, but I heard a lot of good things about him as a person. My condolences to his family.Further reading
"The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" - Clayton Christensen
"Meeting the Challenge of Disruptive Change", Clayton M. Christensen and Michael Overdorf, Harvard Business Review, https://hbr.org/2000/03/meeting-the-challenge-of-disruptive-change