The innovator’s dilemma is the curious idea that successful companies can be toppled by disruptive innovation despite doing everything right. First coined by Harvard Business School professor Clayton Christensen in his 1997 book of the same name, the innovator’s dilemma says that companies fail because of good — not bad — management.
The decision-making and resource allocation processes at successful companies are focused on incremental improvements, responding to customer demand, and maximizing profits. Meanwhile, disruptive innovators are creating new spaces for new products, anticipating not the demands of the incumbent’s customer base, but of the next generation of customers.
of S&P 500 companies have disappeared in the last 15 years
In short, the processes that work for successful companies are not designed to also foster innovation.
And yet some successful companies have managed to escape the innovator’s dilemma.
Netflix originally won the DVD subscription market, tearing down the Blockbuster behemoth, before pivoting to streaming video. Rather than try to hang on to market share as a distribution platform, Netflix started investing in original content in 2011. In 2017 the company started producing full-length feature films.
Along the way Netflix continuously evolved its user experience on mobile and big screens, mining user data to drive a consistently better experience. Now the company offers offline downloads and other features that have helped it retain its position in the face of stiff competition from Amazon.
WeChat emerged as China’s pre-eminent social network around 2013, but has since evolved into the country’s dominant access point for entertainment, financial transactions, and more. Tencent, the corporate parent of WeChat, knew from its days managing desktop messaging app QQ, that frequency was the key to dominating the enormous mobile opportunity in China.
With a relentless focus on innovation, WeChat added everything from payment services to ride-hailing and even gambling features. Tencent has now branched into television and movies, evolving into one of the world’s most formidable technology companies.
WeChat users in China spend 1/3 of all their mobile device time in WeChat
It’s easy for sports leagues to become complacent, but in the battle for attention across multiple devices and generations, no one has innovated faster than the NBA. By focusing an entire team on digital innovation, the association is driving record viewership with innovative partnerships and digital outreach efforts.
For example, the league pioneered the development of a new technology that allows fans and broadcasters to easily create and share short clips of in-game highlights almost as they happen.
The NBA highlight clips contributed to a record number of 12 billion views in 2018
In 2016, the one-time video game console king looked well past its prime. the Wii U had flopped while Sony and Microsoft surged with their playstation and Xbox consoles. But Nintendo had a few more tricks up its sleeve.
In late 2016 the company released the Nintendo switch, a tablet that doubles as a handheld device and a living room gaming console. In 2018 the Switch became Nintendo’s fastest selling console ever, and Nintendo’s content deals with Universal have extended the brand’s reach to new heights.
Nintendo had a 60 billion yen difference between their profit projections for 2014 (55B yen) and it’s actual losses (25B yen), due to poor sales of the Wii U
Nvidia grew to a $10 billion company by doing one thing and doing it well. The company’s graphics chips and GPUs were the backbone of some of the most successful video game systems in history. In 2015, the company saw a radical new opportunity – to use its knowledge of processing power to support the emergence of AI and machine learning.
In just a few years, Nvidia had opened up hugely successful new revenue lines by selling specialized data center services to AI-focused software companies, and by partnering with forward-thinking automotive companies like Toyota to support the development of autonomous cars.
Surviving the innovator’s dilemma is about rethinking the way your organization tackles not only its decision-making, but also how it allocates resources to continuous innovation initiatives. Organizations like Netflix and Nvidia succeed not only because they saw their markets evolving, but because they were agile enough to put the right resources toward the right initiatives quickly.
Catalant helps organizations get critical work done more intelligently, by providing a platform for prioritizing initiatives, defining workstreams, identifying skills and expertise, and accessing the right talent both inside and outside of the organization.
Contact usto learn more about what Catalant can do for your organization.
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Steven is the Vice President of Product Marketing at Catalant. When he's not at work, he's spending time with his young family on the North Shore of Massachusetts, working on his antique home, or dusting off old guitars for a quick jam.