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Book Summary — Innovator’s Solution

Creating and Sustaining Successful Growth


This is a book about how to create new growth in business. Growth is important because companies create shareholder value through profitable growth.

Once growth had stalled, in other words, it proved nearly impossible to restart it.

How to Beat Competitors

Our ongoing study of innovation suggests another way to understand when incumbents will win, and when the entrants are likely to beat them.

But disruptive technologies offer other benefits — typically, they are simpler, more convenient, and less expensive products that appeal to new or less-demanding customers.

Disruption has a paralyzing effect on industry leaders. With resource allocation processes designed and perfected to support sustaining innovations, they are constitutionally unable to respond.

They are always motivated to go up-market, and almost never motivated to defend the new or low-end markets that the disruptors find attractive. We call this phenomenon asymmetric motivation.

It is the core of the innovator’s dilemma, and the beginning of the innovator’s solution.

  1. Is there a large population of people who historically have not had the money, equipment, or skill to do this thing for themselves, and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them?
  2. To use the product or service, do customers need to go to an inconvenient, centralized location?

What products will customers buy?

Predictable marketing requires an understanding of the circumstances in which customers buy or use things. Specifically, customers — people and companies — have “jobs” that arise regularly and need to get done.

Who are the best customers for your products?

  1. The target customers are trying to get a job done, but because they lack the money or skill, a simple, inexpensive solution has been beyond reach.
  2. These customers will compare the disruptive product to having nothing at all. As a result, they are delighted to buy it even though it may not be as good as other products available at high prices to current users with deeper expertise in the original value network. The performance hurdle required to delight such new-market customers is quite modest.
  3. The technology that enables the disruption might be quite sophisticated, but disruptors deploy it to make the purchase and use of the product simple, convenient, and foolproof. It is the “foolproofedness” that creates new growth by enabling people with less money and training to begin consuming.
  4. The disruptive innovation creates a whole new value network. The new consumers typically purchase the product through new channels and use the product in new venues.

Getting the Scope of the Business Right

A widely used theory to guide this decision is built on categories of core and competence. If something fits your core competence, you should do it inside. If it’s not your core competence and another firm can do it better, the theory goes, you should rely on them to provide it.

“What do we need to master today, and what will we need to master in the future, in order to excel on the trajectory of improvement that customers will define as important?”

When the functionality and reliability of a product are not good enough to meet customers’ needs, then the companies that will enjoy significant competitive advantage are those whose product architectures are proprietary and that are integrated across the performance-limiting interfaces in the value chain.

How to avoid Commoditization

Executives who seek to avoid commoditization often rely on the strength of their brands to sustain their profitability — but brands become commoditized and de-commoditized, too. Brands are most valuable when they are created at the stages of the value-added chain where things aren’t yet good enough. When customers aren’t yet certain whether a product’s performance will be satisfactory, a well-crafted brand can step in and close some of the gap between what customers need and what they fear they might get if they buy the product from a supplier of unknown reputation.

Can you disrupt?

Managers whose organizations are confronting opportunities to grow must first determine that they have the people and other resources required to succeed. They then need to ask two further questions:

  1. Are the processes by which work habitually gets done in the organization appropriate for this new project?
  2. And will the values of the organization give this initiative the priority it needs?

Managing the Strategy Development Process

The key is to manage the process by which strategy is developed. Strategic initiatives enter the resource allocation process from two sources — deliberate and emergent.

  1. The first is to manage the cost structure, or values of the organization, so that orders of disruptive products from ideal customers can be prioritized.
  2. The second is discovery-driven planning — a disciplined process that accelerates learning what will and won’t work.
  3. The third is to vigilantly ensure that deliberate and emergent strategy processes are being followed in the appropriate circumstances for each business in the corporation.

Good Money and Bad Money

Be patient for growth, not for profit. Because of the perverse dynamics of the death spiral from inadequate growth, achieving growth requires an almost Zen-like ability to pursue growth when it is not necessary. The key to finding disruptive footholds is to connect with a job in what initially will be small, nonobvious market segments — ideally, market segments characterized by nonconsumption.

The role of Senior Execs

Senior executives need to play four roles in managing innovation.

  1. First, they must actively coordinate action and decisions when no processes exist to do the coordination.
  2. Second, they must break the grip of established processes when a team is confronted with new tasks that require new patterns of communication, coordination and decision making.
  3. Third, when recurrent activities and decisions emerge in an organization, executives must create processes to reliably guide and coordinate the work of employees involved.
  4. And fourth, because recurrent cultivation of new disruptive growth businesses entails the building and maintenance of multiple simultaneous processes and business models within the corporation, senior executives need to stand astride the interfaces of those organizations — to ensure that useful learning from the new growth businesses flows back into the mainstream, and to ensure that the right resources, processes, and values are always being applied in the right situation.

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Goal: Read and summarise one book a week

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