In this post, I continue my review of The Innovator’s Dilemma by Clayton Christensen and what I learned from it. As you may remember, he was writing primarily about the development of the computer disk drive industry as an example of a disruptive business; that is, a business that used new technologies or ideas in their business models, causing older models to gradually become irrelevant or less important. He compares them to disruptive businesses to sustaining businesses, businesses that know who their customers are and how to pitch new products to them. The book seemed relevant to me because I have a couple of ideas related to my application that might pay off, even though they are different than current models.
There are several key ideas I got from The Innovator’s Dilemma:
- The customer isn’t always right. The customer may not want what you have at first, because they don’t necessarily understand it and the market for it isn’t developed yet. Therefore, you may have to find new customers, perhaps even develop whole new industries. For example, Henry Ford once said that if he had asked people what they wanted, they would have said “faster horses”. Instead, he gave them something they hadn’t wanted because they had never thought of it.
- Disruptive technologies or ideas may not be very efficient or cost effective at start, like SSD computer drives, as described in the precious post. At the start, there are no economies of scale to bring down prices.
- Rapid deployment of new technology counts, to be the first in the market with completely new ideas. This was demonstrated empirically in the course of Christensen’s research in writing the book.
- The best product may not be the “best” product, i.e., the most refined. Therefore, you need to create the MVP (minimum viable product), creating it quickly and testing what people use and how they use it. What’s the point of endless refinement of a product when you don’t even know who the users are yet?
- Disruptive products are a problem of marketing, not technology – you need to find the right market for your product. The only way to do that is to release it and see who adopts it, since there is no marketing data for it.
- Traditional distributors will not understand the new strategy, since it cannibalizes a currently profitable business model. You will have to seek alternate distribution channels.
This led Christensen to creating Three Design Principles for a disruptive product:
- It must be simple, reliable and convenient. In software terms, it would not be full-featured (an MVP).
- It must be possible to modify it rapidly at low cost. As information about users rolls in, you must be able to pivot and create for new users if the first idea doesn’t pan out.
- It must hit a low price point. At the start, it doesn’t matter if the product is not as full-featured or as cost-effective as other solutions. A lower price point will be achieved by accepting lower margins on your product and keeping your overhead costs low.
I still have some questions about Christensen’s topic and there were a few things not clear to me – like how to hit a low price point when you don’t have economies of scale – but overall it was a useful book that I will have to “read, mark, and inwardly digest”. Recommended.