The Dichotomy of Innovation …

“… outstanding companies can do everything right and still lose their market leadership -- or worse, disappear completely…..”

http://innovationzen.com/blog/2006/10/04/disruptive-innovation/

Prof. Clayton Christensen's work from Harvard Business School lays its foundation in the dichotomy of Sustained and Disruptive Innovation.

An innovation strategy can be sustained only if it improves the performance of existing products along the dimensions that mainstream customer’s value.

Most companies, however, follow the disruptive innovation model whereby they stay on the innovation trajectory and keep investing in R&D until they fall off the efficiency value curve and start producing new products in a quality dimension and speed that the market cannot absorb. This is where the incumbents gain a foothold by providing products cheaper and better which the marginal segment values more creating a bigger market and eventually replacing the mainstream. A major example is IBM which started in mainframe hard drive space and kept innovating in the same segment while the OEMs gained foothold in smaller storage drives for desktops and eventually drove IBM out by creating a new market underneath.

Michael Raynor from Deloitte has carried Christensen’s work a step further and suggested the Innovators Solutions in his book (http://www.theinnovatorssolution.com/)where the case of Intel innovating beyond the market absorption capacity of the market. The chips from Intel today are good enough for our computer needs for the next two decades. The incumbent being AMD provides cheaper and faster chips which suit present needs. The innovative solution from Intel comes in the form of Celeron chips which preempt AMD and still keep innovations flowing.

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