The Innovator's Dilemma

disruptive technologies that may underperform today, relative to what users in the market demand, may be fully performance-competitive in that same market

Simply put, when the best firms succeeded, they did so because they listened responsively to their customers and invested aggressively in the technology, products, and manufacturing capabilities that satisfied their customers’ next-generation needs.

When a threatening disruptive technology requires a different cost structure in order to be profitable and competitive, or when the current size of the opportunity is insignificant relative to the growth needs of the mainstream organization, then—and only then—is a spin-out organization a required part of the solution.

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.

Disruptive technologies bring to a market a very different value proposition than had been available previously. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are typically cheap

Philosophies such as management by objective and management by exception often impede the discovery of new markets because of where they focus management attention.

Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable. The strategies and plans that managers formulate for confronting disruptive technological change, therefore, should be plans for learning and discovery rather than plans for execution.

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

As a result, these companies find it very difficult to invest adequate resources in disruptive technologies—lower-margin opportunities that their customers don’t want—until their customers want them. And by then it is too late.