The Innovator's Dilemma: A Startup's View

Clayton M. Christensen’s “The Innovator’s Dilemma” explains why big companies fail at innovation despite their best efforts. Let’s apply this model to startups.

Startups often face the question: “What if a tech giant starts competing with you?” The common answer, “execution,” suggests startups can outpace established firms by iterating faster. This is true, but incomplete.

Startups creating disruptive technology have a key advantage: established competitors are captive to existing customers, finances, and culture within their value network – “the context within which a firm identifies and responds to customers’ needs, solves problems, procures input, reacts to competitors, and strives for profit”.

Established companies cater to loyal, profitable and equally established customers to meet Wall Street’s expectations. Startups, however, should target less profitable customers who want simpler, simpler and more convenient products.

Big firms plan based on market research and current customer feedback. But new markets defy analysis; suppliers and customers must discover them together. Startups should probe the market through rapid, low-cost experiments, selling real products to real customers. They must plan to learn.

While established companies have more resources, their processes and values hinder adopting disruptive technologies. Their managers fear failure, and disruptive technologies often conflict with profit goals. Startups, in contrast, embrace small markets and can operate on lower margins.

Established firms often see their challenge as technological: improving a disruptive technology for known markets. Successful disruptors, however, see it as a marketing challenge: finding or building markets where the disruptive product’s attributes become strengths.