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Disruptive Technologies- Innovator’s Dilemma
Whereas innovation might be helpful and give an organization a competitive advantage, big companies face difficulty in innovating by trying to sustain their market dominance. The situation of the inability to switch to the new disruptive technology has been referred to as “Innovator’s Dilemma.” This paper discusses various aspects of the innovator’s dilemma, highlighting why it is challenging for big companies to innovate, citing Kodak as an example. The report also gives an example of a group, in my opinion, which might fall in the next ten years due to disruptive technology.
The innovator’s dilemma is a term used to describe a situation where disruptive technologies cause big companies to fall. The concept was forwarded by Harvard Business School Professor, Clayton Christensen, where he explained a theory of how large corporations, the companies that have been doing well can fail “by trying to be perfect” (Christensen, 2016). According to the Professor, innovator’s dilemma describes companies whose successes and abilities can turn to be hindrances when new technologies and markets emerge.
Most large companies prefer sustaining technologies in place of disruptive technologies (Christensen, 2016). Sustaining technologies improve the product performance by changing the technology, and most large firms prefer them because it just enhances a product that already has market roots. According to innovators dilemma, large businesses have problems with disruptive technologies, which are described as innovations that lead to worse product market influence, particularly in the short-run. They prove cheaper, faster, and more convenient to apply. Disruptive technologies rarely happen, but when they do, they can cause the death of large and dominant organizations that were not prepared for them but had stuck with the sustaining technologies.
Disruptive technologies are not attractive because they do not initially meet the requirements of the high end of the customers. Because of that, the large corporates choose to ignore the disruptive technologies to a time when they appear profitable. However, disruptive technologies often overtake the sustaining technologies in meeting the market needs at reduced costs. When this occurs, the large corporations which had overlooked the disruptive technology are left behind and sometimes; they are forced to exit the industry. According to Christensen, the act of a more prominent company being kicked out of an industry by the disruptive technology is what is known as the “Innovator’s Dilemma” (Christensen, 2016).
Innovator’s Dilemma in Big Firms
When not prepared for the disruptive technologies, the big firms are likely to fall in case it happens so, because there are specific barriers to large companies innovating. Being sector leaders mean that they have well-established ways of adopting innovations. Their structured administration and bureaucracies such as processes and tools inhibit faster reaction to disruptive technology. Large companies also have an established base of clients to whom they are responsible, and it is interesting that customers prefer an improved version of an already existing product instead of entirely new ones. Therefore, customers become the primary inhibitors of disruptive technology. Further, the companies make innovative decisions by the network value place or their position in the market. An example is an of Teradyne company Innovator’s dilemma. The company had a sustaining technology of Bipolar and UNIX, and then a disruptive technology on CMOS and NT. The barriers to its innovation are as a result of its industrial dominance and customer-driven strategy (The Aurora Project, 2017).
The innovator’s dilemma explains the big companies’ failure in that when new startup energy with new ways of delivering the same product, which might be comparatively high quality, they are faced with a challenge and might be reduced to nothing by small companies. These companies are faced with a predicament; to sustain the market when they have been doing well (like Nokia) but overlook some great chances, or focus on these disruptive opportunities that might not show results within a short period, where the future is not even guaranteed. The issue is not with the innovation in itself, but these large companies are void of innovation plan. Large corporations operate under maturity horizons of the industry. The systems in the mature businesses support the existing business models, where all things seem clear and visible. When companies reach the maturity horizon, they become dormant, and they establish long-term strategy, and changing it might lead to its death. According to Christensen therefore, technological revolution presents an intractable dilemma to big organizations. However, big companies’ failure to Innovator’s Dilemma is not a managerial incompetence, but it is a structural issue (Clayton Christensen: “The Innovator’s Dilemma”, n.d.).
Kodak Company failed due to several reasons, but the primary cause of such an abrupt failure, according to me, was due to the emergence of the disruptive technology of digital photography. Kodak management failed to recognize digital photography as a disruptive technology (Anthony, 2016). A few decades ago, Kodak had dominated the photography industry that anyone knew about it, it was the only company that was recognized to offer the best quality pictures, but it failed to take action when it was shaken by the new technology which gave the industry a new face. The company’s core business was selling the film, and therefore when digital cameras were introduced, their business became irrelevant and outdated.
With the introduction of cell phones with cameras, people had to shift to this new technology that allowed them to store the images of themselves in digital format and to share them online instead of just printing them (Anthony, 2016). This saw the company tread on losses upon losses, and in 2012, it was forced to file a bankruptcy protection and sell all its patents. When the firm reemerged again in 2013, it came as a small company, and once a giant company could only be used to teach companies a lesson about taking technological changes seriously.
When the digital photography was being introduced, Kodak Company was so blinded by their dominance that they couldn’t see the emerging disruptive technologies (Anthony, 2016). The concept of digital imaging was introduced by an engineer who was working for Kodak almost two decades before its downfall. However, the camera was not attractive, slow, and the image quality was compromised, and it required complex connections to the television screen for viewing; but it still had the massive disruptive potential. Therefore, the company invented something which it didn’t invest in it.
In business, doing something and doing it right are two different things, and I think that Kodak did the former. It can also be said that the company misappropriated its investment on digital cameras, overrunning the customers by attempting to compare the performance of traditional film instead of embracing the disruptive nature of digital photography (Anthony, 2016). Also, the real disruption was realized with the introduction of phones with cameras, and individuals no longer had to print photos as they could share them over the internet and phone applications; Kodak missed that too. However, the company was characterized by inventing and neglecting. In 2001 the firm acquired an image sharing website, whose primary purpose was to encourage people to share and print the photos. People were fast moving from this technology of printing photos, and the company could not contain the pressure, and it had to quit the industry. Therefore, to me, Kodak had all the potential of becoming the giant digital photography company, but instead, it became a victim of disruptive technology.
The Future of Microsoft Inc.
Some companies are at high risk of falling in the new future due to disruptive technology. One of such companies is Microsoft Inc., a once tech giant and the wealthiest organization in the world (Rick, 2012). For the last a so a decade and a half, the company has been facing stiff competition from the likes of Apple, Google, and Facebook; and it has been floored in every dimension it had once dominated. The company serves as an example of the disadvantages of success. Microsoft started as a lean, competitive company headed by visionary and innovative young people, but has matured to become a bloated, bureaucratic-inclined culture. The company can actually be argued to be at the edge of rewarding the leaders who thwart innovative ideas that might disrupt the “normal” operations of the now mature company.
One notable instance that proves that the company is trying to compete and not to innovate was the making of the surface tablet. Instead of innovating, Microsoft chose to play safe and to compete in the tablet technology, and it blew its only chance to innovate. The Microsoft Surface tablet competes with Android tablets, Amazon Kindles, Apple’s iPad, but it came with a traditional keyboard and desktop operating system. By opting to compete rather than innovating, the company wasted a chance that could be used to make a Tablet to challenge the Apple’s iPad. And as per the current situation of things, it might be too late for the once-great company to make any move to recapture its market dominance, and its future is bleak if a radical move is not taken.
Overall, a disruptive technology is a radical revolution of an industry that sees a transformation of an industry faster and cost-efficiently. However, big companies have been found to be unlucky when it comes to innovation, and as the paper has identified, disruptive technology might be the reason for the demise of many businesses. The inability of the large organizations to innovate is what has been referred to as “Innovator’s Dilemma”.