Good management was the most powerful reason many well-managed companies failed to stay atop their industries. (Page 12)
Existing vs. Future Customers Want Different Products
Most profitable customers don’t want, and generally can’t use products based on disruptive technologies. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies till it’s too late. (Page 17)
Building New Tech Isn’t Hard
Established firms confronted with disruptive technology change did not have trouble developing the requisite technology: Prototypes of new drives had often been developed before management was asked to make a decision. Rather disruptive projects stalled when it came to allocating scarce resources among competing product and technology development proposals. (Page 42)
Established Firms Erroneously Try to Minimize Failure
Typically when performance falls short at a large organization, systems encourage management to close the gap between what was planned and what happened. That is, they focus on unanticipated failures. Markets for disruptive technologies often emerge from unanticipated successes...Such discoveries often come by watching how people use products, rather than by listening to what they say.
Emerging Tech/Markets Too Small for Big Companies
Because growing companies need to add increasingly large chunks of new revenue each year just to maintain their desired rate of growth, it becomes less and less possible that small markets can be viable as vehicles through which to find these chunks of revenue. (Page 121)
But Small Firms Need Small Gains To Make Investor’s Happy
Because emerging markets are small by definition, the organizations competing in them must be able to become profitable at small scale. This is crucial because organizations or projects that are perceived as being profitable and successful can continue to attract financial and human resources. (Page 132)
New, Lower Margin Companies Will Go Upmarket
The established firm’s views downmarket and the entrant firm’s views upmarket were asymmetrical. In contrast to the unattractive margins and market size that established firms saw when eyeing the new, emerging markets for simpler drives, the entrants saw the potential volumes and margins in the upscale, high-performance markets above them as highly attractive. (Page 46)
Orgs Have Personalities Like People
One could take two sets of identically capable people and put them to work in two different organizations, and what they accomplish would likely be significantly different because organizations themselves, independent of the people and other resources in them, have capabilities. (Page 164)
Established Firms Are Good At Scaled Repetition
Processes are established so that employees perform recurrent tasks in a consistent way, time after time. This means that the very mechanisms through which organizations create value are intrinsically inimical to change....The processes that render good companies incapable of responding to change are often those that define how market research is habitually done, how such analysis is translated into financial projections; how plans and budgets are negotiated and how those numbers are delivered. (Page 164)
As long as the organizations continue to face the same sorts of problems that its processes and values were designed to address, managing the organization is relatively straightforward. But because these factors also define what an organization cannot do, they constitute disabilities when the problem facing the company changes. (Page 169)
However, Disruptive Innovation Is Intermittent
On the other hand, the disruptive innovations occurred so intermittently that no company had a routinized process for handling them. Furthermore, because the disruptive products promised lower profit margins per unit sold, they could not be used by their best customers. (Page 167)
Processes Are Hard to Change
Despite beliefs spawned by popular change-management and reengineering programs, processes are not nearly as flexible or 'trainable' as resources—and values are even less so…The processes that make an organization good at outsourcing components cannot simultaneously make it good at developing and manufacturing components in-house. Values that focus an organization’s priorities on high-margin products cannot simultaneously focus priorities on low-margin products. (Page 171)
Only the CEO Can Shepherd Powerful Change
We have never seen a company succeed in addressing a change that disrupts its mainstream values absent the personal, attentive oversight of its CEO—precisely because of the power of processes and values and particularly the logic of the normal resource allocation process…Only the CEO can ensure that the new organization gets the required resources and is free to create processes and values that are appropriate to the new challenge…CEOs who view spinouts as a tool to get disruptive threats off of their personal agendas are almost certain to meet with failure. We have seen no exceptions to this rule. (Page 176)
Established Firms Shouldn’t Be Failing
The problem with asking the mainstream organization to be more tolerant of risk-taking and failure is that, in general, we don’t want to tolerate marketing failure when, as is most often the case, we are investing in sustaining technology change…The mainstream organization is involved in taking sustaining technological innovations into existing markets populated by known customers with researchable needs. Getting it wrong the first time is not an intrinsic part of these processes. (Page 201)
