How do you escape the Innovator’s Dilemma?
Consulting for companies that are successful — and precisely therefore vulnerable.
The Dilemma
“Good companies do not fail although they do everything right — they fail because they do everything right.” after Clayton M. Christensen, The Innovator’s Dilemma, Harvard Business School Press, 1997
The Innovator’s Dilemma describes a pattern that Clayton M. Christensen traced in 1997 through the disk-drive industry and beyond: established companies improve their products along the criteria of their best customers — so consistently that performance eventually outgrows what the market can absorb. At precisely that moment they become vulnerable. Disruptive technologies start below the corridor: worse, cheaper, simpler — at first interesting only to niches. But they improve faster than usage grows, reach the mass market from below, and finally intersect the curve of the established technology.
The unsettling part: rational, well-run managers cannot simply switch this pattern off. Resource allocation rewards projects with demonstrable demand and attractive margins — neither of which a disruptive venture can offer at the outset. Customer orientation, otherwise a virtue, ties development to the needs of those who value the old value proposition. And margin logic makes small, uncertain markets structurally unattractive for a large firm: a market that feeds a startup does not even move a corporation’s planning rounding error.
The dilemma is therefore not a question of competence but of structure. The same processes, metrics and decision rules that make a company successful in its existing business lead it systematically to the wrong decision when facing disruption. Escaping the dilemma does not require replacing the managers — it requires changing the structures in which they decide.
The Way Out
Four principles that take the structure out of the dilemma
1Separate units for disruptive businesses
Disruptive ventures starve in the resource allocation of the core business. They need an organisational unit of their own, sized to the target market and freed from the processes of the legacy business — while keeping access to the parent company’s resources. How both go together is the subject of organisational ambidexterity.
2Discover markets instead of planning them
For markets that do not yet exist there are no reliable data. Classical planning necessarily fails here; the appropriate stance is discovery — testing assumptions early and cheaply before scaling. The methodical toolkit comes from Lean Startup and the principle of the minimum viable product.
3Take small markets seriously
Disruption begins in markets that corporate planning cannot see. Whoever enters only once the market is big enough for the company’s growth arithmetic is structurally too late. Disruption analysis shows which edges of your own business deserve that attention.
4Different yardsticks for new businesses
Measuring a young business by the revenue and margins of the core ends it before it can begin. New businesses need metrics of their own — learning progress, validated assumptions, option value — and a portfolio that evaluates exploration and exploitation separately, as in innovation portfolio analysis.
Consulting
Two formats, one goal: get ahead of the dilemma
Dilemma Assessment
Focused engagement
A compact format for locating your position: where is your organisation vulnerable, which disruptive developments touch your business, and how do your structures respond? The result is a memo with findings, priorities and concrete next steps.
Escape Project
Consulting project
The full format for organisations ready to act: building separate structures for disruptive businesses, rebalancing the innovation portfolio, and accompanying the implementation — until the new units carry their own weight.
Behind these formats stands a portfolio of innovation strategy, innovation portfolio audits, foresight and scenarios — the latter AI-assisted via picturesoftomorrow.com — as well as workshops and executive education.
Toolbox
20 instruments of innovation management
From disruption analysis via Jobs to be Done to corporate venturing: a curated overview of the twenty instruments that actually carry weight in innovation practice — each with origin, procedure, limits, and its relation to the Innovator’s Dilemma.
Contact
If you would like to talk about your organisation’s exposure — informally and in confidence:
Responsible: Prof. Dr. Ulf Pillkahn — Innovation Management, FOM University of Applied Sciences / Technical University of Munich.