The Innovator’s Dilemma: A Tablet of Key Messages for Entrepreneurs and Managers

Guest post today. I assigned the Innovator’s Dilemma to my undergraduate Consumer Behavior class. I also gave them an assignment:

Write a blog post that describes the important takeaway messages from the Innovator’s Dilemma for A) managers and B) entrepreneurs. (Hint: those conclusions are different.) Motivate your message with an example of a disruptive technology that was not discussed in class or in the book.

I told the class that I would publish the best post on my blog. Congratulate Jared Leventhal. Enjoy his post:

The Innovator’s Dilemma: A Tablet of Key Messages for Entrepreneurs and Managers

Clayton Christensen explains in The Innovator’s Dilemma1 that well-managed companies fail because the very practices that previously lead to success also hinder the development of disruptive technologies that ultimately steal away their markets. Disruptive technologies are characterized as simpler, cheaper, lower performing innovations that promise lower margins and profits when compared to current or sustaining technology. Leading firms’ most profitable customers generally cannot use

and do not want disruptive technologies, which are usually first commercialized in emerging or “insignificant” markets. Several key messages result from Christensen’s work, both for entrepreneurs and managers.

A recent example of a potential disruptive technology will be used as illustration: Datawind’s Aakash tablet computer (commercially known as Ubislate), which was introduced in 2011 amidst dominance by the likes of Apple Inc., Samsung Electronics Company, and Amazon.com2

tablet
Datawind’s Aakash (Ubislate) tablet3.

Messages for Entrepreneurs

– The pace of progress that markets demand may differ from the progress offered by the technology. The trajectory of technological progress typically outstrips the demands of current customers. While Apple’s iPad and Amazon’s Kindle compete on all levels of technical specifications, the Aakash lags in nearly every category, such as: processor speed, random access memory, flash memory, and camera capabilities4. Yet, the Aakash tablet has been successful in emerging markets, even as its own technology has improved over three generations of the device5.

Matching the market to the technology presents a challenge. Disruptive technologies succeed in new emerging markets that value the characteristics offered. Disruptive technology should be framed as a marketing challenge, not technological. Datawind cannot compete head-on with the goliaths of the tablet industry. However, an emerging market was identified early in Aakash’s product life cycle: the 220 million students residing in India5, with the Indian government being one of Datawind’s largest customers. Datawind responded to the Indian government’s desire to enable this demographic, and by doing so has realized the potential of the untapped market. A challenge faced by industry leaders is price, creating a barrier to entry.

A significant barrier to entry and mobility is that small markets of disruptive technologies, the crucial opportunity for investment, do not solve large companies’ growth needs. Large companies need significantly larger profits to realize equivalent growth when compared to smaller firms. In this regard, the commercial version of the Aakash tablet began retailing for USD$54, and is currently priced at USD$625, which varies widely from Apple’s USD$499 entry level price for its iPad6. Industry leaders cannot compete with Datawind on price, creating the opportunity for the entrepreneurial firm to position itself within the market.

Messages for Managers

-Managing innovation mirrors the resource allocation process: only innovation proposals that receive sufficient funding and manpower may succeed. Established firms invest in what existing customers demand, rather than the disruptive innovations that tomorrow’s customers expect. Improving today’s technology through sustaining innovations deceptively appears more financially attractive than investing in a disruptive technology.

Organizations’ capabilities are more specialized than most managers are inclined to believe. Organizations inherently have capabilities to take certain new technologies into certain markets. Datawind specializes in low-cost devices, exactly where Samsung or Apple simply do not focus their attention. The larger firms have moved upmarket with more advanced technology in pursuit of higher margins.

The information required to make large and decisive investments in the face of disruptive technology simply does not exist. Markets that do not exist cannot be analyzed. Only managers who allow for iterations, failures, and learning quickly can succeed at developing the understanding of customers, markets, and technology needed to commercialize disruptive innovations. In the case of Datawind, unless its larger competitors spin off independent organizations insulated from quarterly earnings and corporate groupthink, the disruptive technology maker will continue to realize success.

It is not wise to adopt a blanket technology strategy to be always a leader or always a follower. Adopt different postures depending on whether addressing disruptive or sustaining technology. From a managerial perspective, this translates into flexibility. Samsung, Apple, and Amazon are leaders in the realm of sustaining technology, where Datawind must be a follower, but in India, Datawind’s managers must take the leadership stance in order to solidify its competitive advantage.

In conclusion, disruptive technologies as represented by the Aakash tablet are not immune to competition from established firms and sustaining technologies. However, there is hope, as Christensen states, “The dilemmas posed to innovators by the conflicting demands of sustaining and disruptive technologies can be resolved.” For entrepreneurs and managers alike, go forth and sustain disruption.

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References

[1] Christensen, Clayton M. (2011). The innovator’s dilemma: The revolutionary book that will change the way you do business. New York: Harper Business.

[2] Yahoo! (2012). Top 5 manufacturers of tablet computers in 2011. Yahoo! Retrieved from http://finance.yahoo.com

[3] Passion in Roots Group. (2013). What is the current price of the Aakash Tablet? Aakash Tablet|Ubislate Tablet. Retrieved from http://aakash.org

[4] NDTV Convergence Limited. (2011). How the Aakash compares to other tablets. NDTV Gadgets. Retrieved from http://gadgets.ndtv.com

[5] Datawind. (2013). Aakash low cost tablets. Datawind. Retrieved from http://www.akashtablet.com

[6] Apple Inc. (2013). Shop iPad. Apple Store. Retrieved from http://store.apple.com

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