The Innovator's Dilemma

Hence, it is not just the customers of an established firm that hold it captive to their needs. Established firms are also captive to the financial structure and organizational culture inherent in the value network in which they compete—a captivity that can block any rationale for timely investment in the next wave

that companies’ organizational structures typically facilitate component-level innovations, because most product development organizations consist of subgroups that correspond to a product’s components. Such systems work very well as long as the product’s fundamental architecture does not require change. But, say the authors, when architectural tec

What often causes this lagging behind are two principles of good management taught in business schools: that you should always listen to and respond to the needs of your best customers, and that you should focus investments on those innovations that promise the highest returns. But these two principles, in practice, actually sow the seeds of every

Discovering markets for emerging technologies inherently involves failure, and most individual decision makers find it very difficult to risk backing a project that might fail because the market is not there.

But the company is able to crank out high-quality work year after year because its core capabilities are rooted in its processes and values rather than in its resources. I sense, however, that these capabilities of McKinsey also constitute its disabilities. The rigorously analytical, data-driven processes that help it create value for its clients i

This means that the very mechanisms through which organizations create value are intrinsically inimical to change.

The highest-performing companies, in fact, are those that are the best at this, that is, they have well-developed systems for killing ideas that their customers don’t want.

the location of the most powerful factors that define the capabilities and disabilities of organizations migrates over time —from resources toward visible, conscious processes and values, and then toward culture.

When the performance of two or more competing products has improved beyond what the market demands, customers can no longer base their choice upon, which is the higher performing product. The basis of product choice often evolves from functionality to reliability, then to convenience, and, ultimately, to price.