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Introduction, Part One

In their efforts to provide better products than their competitors and earn higher prices and margins, suppliers often overshoot their market... disruptive technologies that may underperform today... may be full performance-competitive in that same market tomorrow.

The usual answers to companies' problems - planning better, working harder, becoming more customer-driven, and taking a longer-term perspective - all exacerbate the problem. Sound execution, speed-to-market, total quality management, and process re-engineering are similarly ineffective.

The highest-performing companies have well-developed systems for killing ideas that their customers don't want. These companies find it very difficult to invest adequate resources in disruptive technologies until their customers want them. And by then it is too late.

The only thing we may know for sure when we read experts' forecasts about how large emerging markets will become is that they are wrong.

Chapter 1

Generally disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches.

Chapter 2

The S-curve: the essence of strategic technology management is to identify when the point of inflection on the present technology's S-curve has been passed, and to identify and develop whatever successor technology rising from below will eventually supplant the present approach.

Chapter 4

An important strategic implication of this rational pattern of upmarket movement is that it can create vacuum in low-end value networks that draws in entrants with technologies and cost structures better suited to competition.

Introduction, Part Two

The five principles understood by companies that survive disruptive technologies:

1) customers control patterns of resource allocation in well-run companies
2) small markets don't solve growth needs of large companies
3) applications are unknown in advance; failure is an intrinsic step toward success
4) organization capabilities reside in process and values - which also define disabilities when confronted with disruption
5) supply may not equal market demand in that disruptive technologies often have greatest value only in emerging markets

To make these work to your advantage:

1) embed projects to reach the right customers
2) the owning organization is small enough to get excited about small wins
3) fail early and inexpensively: iterative trial and error process
4) utilize resources of mother company, but not process or values
5) seek to develop new markets rather than technological breakthroughs

Chapter 5

Resource Dependence

...it is the customers, rather than the managers, who really determine what a firm will do.
...the real role of managers... is only a symbolic one.
...customer-focused resource allocation and decision-making processes of successful companies are far more powerful in directing investments than are executives' decisions.

Look at DEC and IBM for failure and success: "It seems to be very difficult to manage the peaceful, unambiguous coexistence of two cost structures, and two models for how to make money, within a single company."

Chapter 6

Leadership in sustaining technologies may not be essential, but leadership in disruptive technologies creates enormous value.

Firms that sought growth by entering small, emerging markets logged twenty times the revenues of the firms pursuing growth in larger markets. When companies stop growing, they begin losing many of their most promising future leaders, who see less opportunity for advancement. But large and successful companies find maintaining growth to be progressively more difficult. It is precisely when emerging markets are small that they are unattractive to large companies, and yet that's when entry is so critical.

Chapter 7

Markets that do not exist must be discovered by customers and suppliers together. Market applications for disruptive technologies are unknown and unknowable. Experts forecasts will always be wrong.

DTs demand a fluid, exploratory approach to product design with resources left untapped for program redirects.

The vast majority of successful ventures abandoned their original business strategies when they learned what would not work in the market. Guessing the right strategy at the outset isn't nearly as important as conserving enough resources (or relationships with backers) so that new business initiatives get a second or third stab at getting it right. Those that run out of resources or credibility are the ones that fail.

Chapter 8

Organizations have capabilities and core competencies, just like people. Organizational capabilities are defined by resources, processes, and values. P and V combine to determine how R can be turned into value.

Disruptive technologies emerge intermittently so no company has a process to handle them; their promise of lower profit margins leads them to be incompatible with a large company's values.

Once members of the organization begin to adopt ways of working and criteria for making decisions by assumption, rather than by conscious decision, then those processes and values come to constitute the organization's culture. Culture enables employees to act autonomously and causes them to act consistently. When capabilities reside in the people, change to address new problems is simple. When capabilities reside in processes and values (especially culture) change can be very difficult.

Processes are not nearly as flexible or train-able as are resources, and values are even less so. If an organization is found to be a mismatch to a new task, you have three options:
1) Acquire an organization with processes and values to match
2) Try to change the processes and values of the current organization
3) Spin off an independent organization to develop the required processes and values

In acquisition, assess whether the target is desirable for its processes/values, or it resources. For P/V it should be left alone. For R, it probably makes sense to integrate.

Chapter 9

Performance oversupply creates an opportunity and climate for a disruptive technology. It also triggers a shift in the basis of competition. A product becomes a commodity within a specific market segment when the repeated changes in the basis of competition completely play themselves out - i.e. market needs on each attribute have been entirely met by multiple suppliers. Another way to describe this: there is no more differentiation in offerings.

One suggested model for the phases of product evolution is functionality, reliability, convenience, price.