The Innovator's Dilemma by Clayton M. Christensen is a fine book. It is about a problem that faces the giants of industry and innovation, and talks about how to over come this problem.#

The thesis of the book is that the practices of "good" managers- listening to customers, aggressively pursuing larger markets, and investing in new technology-that cause the initial success of a company are the same practices that bring the downfall of a company faced with competition from disruptive technologies. This is called "the innovator's dilemma."#

The author defines two types of technologies, sustaining and disruptive.

A sustaining technology is a technology change, whether incremental or radical, that sustains a business' current market and customers.

A disruptive technology is a technology change, whether incremental or radical, that is initial useless to a particular market but has an improvement trajectory that will eventually supplant the sustaining technologies of another market.

The author takes this idea and applies it to many case studies (disk drives, mechanical excavators, steel mills, insulin shots, etc) and builds a set of rules and one coherent theorem. (By the end of the book the ideas are very intuitive in that 20/20 hindsight way.) After defining the theories and rules, the author talks about how to run a hypothetical company facing disruptive technological change. He compares the current situation to early aeronauts, they wanted to fly but didn't understand the rules. Once you understand the rules you can do what you need to get off the ground.#

In the beginning of the book Christensen sets the stage for the results of the research,#

The research reported in this book [...] shows that in the cases of well-managed firms such as those cited above, good management was the most powerful reason they failed to stay atop their industries. Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership. [pg. xv]

Similarly, the crux of the problem with disruptive products is spelled out early as well.#

[D]isruptive products are simpler and cheaper; they generally promise lower margins, not greater profits. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. And third, leading firms' most profitable customers generally don't want, and indeed initially can't use, products based on disruptive technologies. By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and growth are rarely able to build a case for investing in disruptive technologies until it is too late. [pg. xx]

Christensen makes an interesting point about resource allocation. The only group that controls how you can allocate your resources is your customers. Even though executives decide what gets funded, out of what gets to their level, middle managers will never bring up things that will not succeed in the market the company is alright in.#

Hene, middle managers-acting in both their own and the company's interest-tend to back those projects for which market demand seems most assured. They then work to package the proposals for their chosen projects in ways geared to win senior management approval. As such, while senior managers may think they're making the resource allocation decision, many of the really critical resource allocation decision have actually been made long before senior management gets involved: Middle managers have made their decisions about which projects they'll back and carry to senior management-and which they will allow to languish. [And these middle managers are influenced by the values of the firm with relation to its market and the customers of the firm.] [pg. 95]

Later Christensen notes that the idea that customers control resource allocation policies of company really mean that managers are merely symbolic...

It is forces outside the organization, rather than the managers within it, that dictate the company's course. Resource dependence theorists conclude that the real role of managers in companies whose people and systems are well-adapted to survival is, therefore, only a symbolic one. [pg. 118]

In defining some of the qualities of disruptive technological change, the author writes something that is right up the alley of software developers,#

The ultimate uses or applications for disruptive technologies are unknowable in advance. Failure is an intrinsic step toward success. [pg. 113]

This point is drilled in throughout the book...

Markets that do not exist cannot be analyzed. Suppliers and customers must discover them together. 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 changes, therefore, should be plans for learning and discovery rather than plans for execution. [pg. 165]

And...

Guessing the right strategy at the outset isn't nearly as important to success as conserving enough resources (or having the relationships with trusting backers or investors) so that new business initiatives get a second or third stab at getting it right. [pg. 179]

This is something that Peter tries to apply to many situations. The importance of exploration rather than execution.

The finale of the book contains this gem:#

One of the most gratifying outcomes of the research reported in this book is the finding that managing better, working harder, and not making so many dumb mistakes is not the answer to the innovator's dilemma. This discovery is gratifying because I have never met a group of people who are smarter or work harder or are as right so often as the managers I know. If finding better people than these were the answer to the problems posed by disruptive technologies, the dilemma would indeed be intractable. [pg. 257]