May 6, 2010

Innovators Dilemma [Solved]

A friend of mine forwarded this link to me from http://mondaynote.com, and while reading through it a different train of thought started chugging.

In the book Innovator's Dilemma, Clayton Christensen talks about Disruptive Technologies. He talks about various well established companies in various industries failed to adapt themselves to the disruptive technological changes and which led most of them to fail in longer run. These kind of changes keep happening all the time around us, and once we map it to disruptive technology, suddenly we see reason.

When I applied it's principle to my previous company (SiRF), I suddenly could see why the company failed. SiRF had established market leadership in GPS chips being used my navigation devices and in other niche segments. Profit margin in these industries was close to 50% and the company thrived in this market. Market for GPS chips in mobile phone was quite small then, and the profit margin quite low (30%-40%) for SiRF to address this market. But the market for GPS chips did change drastically in favor of mobile phones, where the requirements were completely different (low profit margin, low power etc..) and SiRF could not hold on to its leadership position.

While I was reading the article on MondayNote, a similar thought ran through my mind in the PC market space. That article clearly highlights that the PC market has reached the maturity of its technological S curve.



Smartphone is not really a disruptive technology to PC's, but the technology market today is disruptive in favor of smartphone. I think Apple successfully made this transition from PC market to smartphone market with iPhone. The defining moment was when Steve jobs in his keynote announced that Apple Computers Inc is now being changed to Apple Inc. He clearly saw that the PC market has evolved to it's maturity and for any PC company it only makes sense to ride the next technology wave, if they have to survive. That was 2008, and this is 2010 when HP goes and buys Palm.

I don't know if HP's attempt to enter the smartphone market through Palm will help it successfully transition to the new market. I am sure Dell must also be considering to enter this market one way or other. But clearly Apple, under Steve Jobs leadership has emerged a true winner in this transition.

I was quite puzzled while reading that book, that the reason for big company to fail is actually quite simple. Yet none of the company he talks about in his book could successfully make the transition. With that thought in the back of my mind, I think now I have even more respect for Steve Jobs.

He has solved Innovators Dilemma.

2 comments:

Dreamer said...

Yes, cells and smartphones are at the center of an amazing wave of innovation, both hardware and software. At the lower end the innovation is in cost cutting, value analysis and boosting volumes.
At the top end, it is new applications, more power, better batteries and see/ hear/ touch/ feel.
The PC market will keep up with it's normal growth rates. No one yet makes a choice between a PC and a phone.
But smartphones market will grow. There is now a tug of war between functionality and form. Buyers have to make this choice. And the killer app of last year is the standard across all this year !!

hga said...

Excellent article and generally good analysis, but I have one quibble:

He has solved Innovators Dilemma.

I think it's more accurate to say that he's recognized the Innovators Dilemma and has what he thinks are solutions to it.

Time will only tell if he and Apple will be successful. E.g. Apple is being attacked by the disruptive "open" innovation, e.g. Android. Whether that or Apple's walled garden win (or both) is to be determined.