the innovator’s dilemma

Review From User :

This is a great book on innovation and how start-up and entrepreneurs ought to fashion their company to go against entrenched incumbents.

The gist of the book is an interesting trend the author found when analyzing the industry. He found that certain innovations were "disruptive" -- meaning they changed the way a market worked, and some were "sustaining" -- meaning they were really just improvements on existing products.

The author traces disruptive innovations through the steel industry, where it took $100M + to build an integrated steel mill. Someone one day discovered a way to make steel with a much cheaper furnace -- a "mini-mill". This mini-mill made steel that was ugly and weak, compared to the integrated steel mills -- but it was good enough for one type of steel: rebar. It could make rebar about 10x cheaper than the integrated steel mills, and it didn't matter that it was ugly.

The integrated mills could not compete with the mini-mill due to costs. But, more importantly, they did not *want* to compete. Rebar was the lowest quality of steel, the most commoditized, and the customers were the least loyal and most price-sensitive (read: difficult). They were happy to walk away from that business...they really made no money in that market anyway. So the mini-mills experienced almost no competition from the incumbant.

After a few years the mini-mills all experienced decreasing profits due to more mini-mills entering the market. Soon, someone discovered how to make the next level of steel -- I forget what it was, elbow joints or something. The same cycle happened...the integrated mills walked away from a fight and the mini-mills saw huge profits for a few years until they all caught up.

Slowly, innovation after innovation ended up eating away all of the business from the integrated mills -- who never once tried to compete for the business they were losing. Today there are no integrated mills in existence.

This is the gist of the book: if you are going to create a new company, you ought to learn from history and fashion a product that will have the existing leaders gladly walking away from the business you are fighting for.

Anyway, this is a long review. Great book, very thought provoking.

Media Size : 1.4 MB