The Innovators Dilemma: Christensen
The final model I am presenting to describe technology adoption is from Clayton Christensen called the Innovators Dilemma. He also has a follow on book called the Innovator’s Solution that expands upon his basic premise:
The Innovator’s dilemma:
The logical, competent decisions of management that are critical to the success of their companies are also the reason why they lose their positions of leadership.
“In sustaining circumstances, when the race entails making better products that can be sold for more money to attractive customers – we found that incumbents almost always prevail. In disruptive circumstances – when the challenge is to commercialize a simpler, more convenient product that sells for less money and appeals to a new or unattractive customer set – the entrants are likely to beat the incumbents. This is the phenomenon that so frequently defeats successful companies. It implies, of course that the best way for upstarts to attack established competitors is to disrupt them.”
Sustaining technologies can be discontinuous or radical or incremental. They improve the performance of established products, per historic values of mainstream customers. One can easily argue that CDMA is a sustaining technology. It vastly improved (by most peoples benchmarks) the wireless spectrum to pack more calls into a given spectrum and improves the users experience in terms of voice and service quality.
Whereas a Disruptive Technologies provides a near-term worse product performance. It introduces a different value proposition and has certain features that fringe customers value – cheaper, simpler, smaller, more convenient, etc.
The transistor radio is an example of a disruptive technology. Versus the home stereo system, the transistor radio was inferior in terms of what the market had identified as the key competitive attributes, fidelity and power. Therefore, it had no appeal for the mainstream market (the attractive customer). But what it could do is enable a new market opportunity by providing a highly portable radio to allow teenagers (the unattractive customer set) to leave the family room and listen to their own music in their own space with friends.
Overtime, the core technology of the transistor radio, the transistor, increased performance along the audio and power attribute to a point where it matched and eventually surpassed the tube (I know some of you will disagree but most of us can’t hear the difference!) but also provided other new performance attributes: better power efficiency, size, and price, that far surpassed the performance of the tube and ultimately displaced the tube. Tube manufacturers where left in the dust and could not competitively respond.
Christensen graphically represents the dilemma (page xix in Innovator’s Dilemma – figure I.1 – The impact of Sustaining and Disruptive Technological Change) by plotting product performance over time. In every market there is a rate of improvement that customers can utilize or absorb. This is shown by a range of two parallel upward moving lines with the lower line depicting the performance demand at the low end of the market, and the upper line depicting the performance demand at the high end of the market.
As long as new innovations stay within these boundaries, the market can absorb new product innovations. However if the innovation exceeds the upper boundary, the user can not take advantage of the innovation. Stated differently the innovation has diminishing returns in the user experience. It’s the “good enough syndrome” that many new products experience. For example faster micro processors for the average PC user will not provide perceived better performance and thus the user will not pay more for this attribute.
The lower line defines the minimal entry point. If the product or innovation is below this line, the market will not accept the innovation. Stated differently the product is not competitive. Christensen suggests though that the innovation may be sufficient for a totally new market for non-served or underserved users, for example teenagers and the transistor radio.
Over time the disruptive innovation may improve and eventually cross the lower boundary point at which time it becomes an acceptable alternative with potential other advantages and benefits, and that over time, the performance trajectory may cross the upper boundary totally rendering the incumbent technology obsolete.
Before ending my blog journey on diffusion theory I leave you with these two basic ideas:
Characteristics of an Attractive Product Opportunity
What are the characteristics that make a new product opportunity attractive? The following attributes provide a promising benchmark that if you meet, you have a good chance of product success:
• Timely – current need or problem exist • Solvable – in the near future with accessible resources • Important – the customer deems their problem or need important • Profitable – customer will pay for the solution at a price the company can be profitable • Context – a favorable regulatory and industry situation
Apply all the theories that I have presented so far, one must still be reminded by the common reasons products fail in the market:
Common Reasons for Product Failure • Product wasn’t need • Product did not work as promised • Value proposition was not understood or communicated effectively —- Bleeding edge —- Lack of marketing and distribution • Cost structure could not support the value proposition —- Pricing strategy ineffective —- Execution problem —- Market opportunity too small
No matter how good the theory predicts success, if you ignore these four basic facts of new product success, then you may be in for a very expensive lesson. It is my goal and objective to share with you my knowledge and the body of knowledge from the thought leaders in helping you define winning new products. I encourage you to share your thoughts with the iNPD Center community and may all your new product introductions be successful!