Lecture 1 Setting up the playground: Innovator’s Dilemma
There are also many failures in corporate entrepreneurship, but they don’t talk about failures a lot
because it’s easier to talk about successes.
Sometimes don’t only project fails, but also entire companies fail.
The fall of Nokia
Nokia was world market leader in 2007, but in 2014 they shrunked dramatically in its market share
and is passed by Samsung and Apple. This happens to many large firms, not only Nokia.
Corporate entrepreneurship is not easy, it is way more complex.
Large firms missing the boat
Typologies of technological change:
• Old vs. new (Cooper and Schendel, 1976)
• Competence-enhancing vs. competence-destroying (Tushman and Anderson, 1986)
• Incremental vs. radical (Utterback, 1994)
• Sustaining vs. disruptive (Christensen and Bower, 1996)
It is especially the latter types of change (sustaining vs. disruptive innovation) that large established
firms have difficulties coping with.
Big business do sustaining innovation. The disrupter (disruptive innovation) takes over the market.
Disruptive innovation
You see that even the leaders are threatened, although they have established positions.
,Why? The Success Syndrome
Is inertia always bad?
• Inertia may result from accountability and reliability.
Challenge:
• How to protect the traditional successful business and to engage in radical innovation at the
same time?
How can you possibly look at the past and in the future at the same time?
Innovator’s Dilemma
According to clayton Christensen:
failure to adapt to disruptive innovation is not the result of bad management, but a result of good
management.
Innovator’s Dilemma
• Large companies depend on their existing customers and investors for resources.
• They listen closely to these customers and investors and kill ideas for which there is little
need.
Disruptive technologies typically have (at least initially):
• Lower profit margins
• Small markets
• No reliable market statistics
,Sustaining innovation satisfies customers current needs. Disruptive models evolve customer’s needs.
Course map
, Lecture 2 Disruptive innovation
Recap from lecture 1
• Many companies: unprepared for disruptive innovations, even if these companies have been
world market leaders.
➔ As a result, these companies lose their competitive advantage and market position.
• Why successful companies, even market leaders, are unprepared for disruptive innovation?
➔ The Success Syndrome
Established companies tend to focus on their existing products (since they are
successful), and develop new features but not new products. They stick to their strategy
because it is successful, but they focus on their existing clients and existing products →
they overlook a market (of small companies). However, smaller companies develop the
same product for a lower price.
➔ The main challenge facing innovative companies is the Innovator’s Dilemma.
The Innovator’s Dilemma is closely related to the Success Syndrome. Companies that are
established innovators and established market leaders are facing dilemma’s when
making decisions about new products or innovations.
The existing innovators/companies are only looking at the upper end of the market and
overlook/don’t serve the lower end of the market. Then newcomers are entering and are
going to serve the lower end of the market. Therefore is the result that the established
big companies are unprepared for disruptive innovation.
Competitive advantage
• It’s crucially important for each company if they want to develop and maintain a competitive
position in the market, they need to develop competitive advantage. It’s a central strategic
task for every company.
Competitive advantage is something that:
• makes the company unique;
• is difficult to imitate by competitors;
• distinguishes the company in the market from its competitors (Porter, 1985).
Is it easy to develop a competitive advantage in the current business landscape?
➔ No, the most difficult component is to be not difficult to imitate by competitors.
➔ It’s also hard to make a company really unique.
➔ Even if a company invests a lot of money and is the first one, they really need a lot of
money to create a competitive advantage.
The current business landscape is more dynamic and competitive than 10 years ago due to internet
and the technological business environment. Companies are facing competitors all around the world
(not only in your own country).
Creating products and innovations is nowadays way more complex. Its nowadays more about the
electronics, 20 years ago was it only the ‘hardware part’ (example washing machine).
• Companies create competitive advantage by offering better and greater value to their
customers.
How?
➔ 3 generic strategies.
There are also many failures in corporate entrepreneurship, but they don’t talk about failures a lot
because it’s easier to talk about successes.
Sometimes don’t only project fails, but also entire companies fail.
The fall of Nokia
Nokia was world market leader in 2007, but in 2014 they shrunked dramatically in its market share
and is passed by Samsung and Apple. This happens to many large firms, not only Nokia.
Corporate entrepreneurship is not easy, it is way more complex.
Large firms missing the boat
Typologies of technological change:
• Old vs. new (Cooper and Schendel, 1976)
• Competence-enhancing vs. competence-destroying (Tushman and Anderson, 1986)
• Incremental vs. radical (Utterback, 1994)
• Sustaining vs. disruptive (Christensen and Bower, 1996)
It is especially the latter types of change (sustaining vs. disruptive innovation) that large established
firms have difficulties coping with.
Big business do sustaining innovation. The disrupter (disruptive innovation) takes over the market.
Disruptive innovation
You see that even the leaders are threatened, although they have established positions.
,Why? The Success Syndrome
Is inertia always bad?
• Inertia may result from accountability and reliability.
Challenge:
• How to protect the traditional successful business and to engage in radical innovation at the
same time?
How can you possibly look at the past and in the future at the same time?
Innovator’s Dilemma
According to clayton Christensen:
failure to adapt to disruptive innovation is not the result of bad management, but a result of good
management.
Innovator’s Dilemma
• Large companies depend on their existing customers and investors for resources.
• They listen closely to these customers and investors and kill ideas for which there is little
need.
Disruptive technologies typically have (at least initially):
• Lower profit margins
• Small markets
• No reliable market statistics
,Sustaining innovation satisfies customers current needs. Disruptive models evolve customer’s needs.
Course map
, Lecture 2 Disruptive innovation
Recap from lecture 1
• Many companies: unprepared for disruptive innovations, even if these companies have been
world market leaders.
➔ As a result, these companies lose their competitive advantage and market position.
• Why successful companies, even market leaders, are unprepared for disruptive innovation?
➔ The Success Syndrome
Established companies tend to focus on their existing products (since they are
successful), and develop new features but not new products. They stick to their strategy
because it is successful, but they focus on their existing clients and existing products →
they overlook a market (of small companies). However, smaller companies develop the
same product for a lower price.
➔ The main challenge facing innovative companies is the Innovator’s Dilemma.
The Innovator’s Dilemma is closely related to the Success Syndrome. Companies that are
established innovators and established market leaders are facing dilemma’s when
making decisions about new products or innovations.
The existing innovators/companies are only looking at the upper end of the market and
overlook/don’t serve the lower end of the market. Then newcomers are entering and are
going to serve the lower end of the market. Therefore is the result that the established
big companies are unprepared for disruptive innovation.
Competitive advantage
• It’s crucially important for each company if they want to develop and maintain a competitive
position in the market, they need to develop competitive advantage. It’s a central strategic
task for every company.
Competitive advantage is something that:
• makes the company unique;
• is difficult to imitate by competitors;
• distinguishes the company in the market from its competitors (Porter, 1985).
Is it easy to develop a competitive advantage in the current business landscape?
➔ No, the most difficult component is to be not difficult to imitate by competitors.
➔ It’s also hard to make a company really unique.
➔ Even if a company invests a lot of money and is the first one, they really need a lot of
money to create a competitive advantage.
The current business landscape is more dynamic and competitive than 10 years ago due to internet
and the technological business environment. Companies are facing competitors all around the world
(not only in your own country).
Creating products and innovations is nowadays way more complex. Its nowadays more about the
electronics, 20 years ago was it only the ‘hardware part’ (example washing machine).
• Companies create competitive advantage by offering better and greater value to their
customers.
How?
➔ 3 generic strategies.
