Why great companies fail to innovate

Clayton Christensen’sThe Innovator’s Dilemma” is arguably the most important and influential book on innovation.

Contrary to what some of us might believe, when market leaders fail, it isn’t necessarily because these companies are badly managed. The irony is that more often than not, the same sound management principles that lead to an incumbent company’s success are what cause it to fail in the face of disruptive technologies.

Mainstream organizations are great when it comes to creating sustaining innovations — incremental improvements to existing products and processes — but fail miserably in embracing disruptive innovations.

As Christensen put it:

 “What this implies at a deeper level is that many of what are now widely accepted principles of good management are, in fact, only situationally appropriate. There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.” 

“The Innovator’s Dilemma” seems to explain why it’s impossible for big companies to “think like a startup”. The better route seems to be to spin off a smaller company from the mainstream organization, so that it will not be constrained by the processes and values of the incumbent. This would explain the trend of conglomerates spinning off their own startups focused on disruptive innovations and new markets.

What other books on innovation would you recommend?

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