The Innovators Dilemma

The Uncomfortable Idea You Cannot Unsee

Here is a sentence that should bother anyone who runs a company, advises one, or works for one. The well-managed firms that died in the past forty years did not die from sloppiness. They died from doing exactly what every business school, every consultant, and every shareholder told them to do.

Clayton Christensen, a professor at Harvard Business School who spent years inside the hard disk drive industry trying to figure out why its champions kept getting destroyed by its rookies, built his entire career on that uncomfortable claim. He called it the innovator's dilemma. Doing the right thing turns out to be the wrong thing, and the more disciplined you are about the right thing, the faster the wrong thing kills you.

Take Sears Roebuck. In its prime it accounted for more than two percent of all retail sales in the United States. It invented modern supply chain management, catalogue retailing, and credit cards. In 1964, Fortune magazine described it as an extraordinary powerhouse of a company where everyone simply did the right thing easily and naturally. The exact moment Fortune wrote those words, Sears was missing discount retailing and letting Visa and Mastercard walk off with the credit card business. Three decades later its merchandise group was hemorrhaging more than a billion dollars a year.

Or Digital Equipment Corporation. In 1986, Business Week wrote that taking on DEC was like standing in front of a moving train. DEC had created the minicomputer industry and was crushing its rivals. A few years later, DEC was a triage patient, the desktop personal computer had eaten its lunch, and the company was on its way to being absorbed into Compaq.