What got you here won't get you there
The phrase “What got you here won’t get you there” encapsulates the innovator’s dilemma.
This dilemma, popularized by the 1997 Clayton Christensen’s book: the Innovator’s Dilemma is ever more relevant now that we are at the eve of a sustainability revolution.
Sustainability as a trillion-dollar business opportunity
During the Stanford LEAD* Me2We 2024 conferences at Stanford University, Dean Arun Majumdar, dean of the Stanford Doerr School of Sustainability and Stanford Professor Bill Barnett, invited business leaders to reframe sustainability as a business opportunity rather than an add-on or a mere compliance commitment. An opportunity to start trillion dollars industries…Check the video below.
Strategy Professor Bill Barnett reminds leaders that “when a disruption hits the world, and the sustainability revolution is here, those who do change quickly become the new status quo”. All of this brings up back to the Innovator’s Dilemma.
The Innovator’s Dilemma
The idea that the very skills, products or competitive advantage that you have nurtured to get at your peak could cause your demise was counterintuitive. Yet, it was at the core of the thesis of the 1997 Clayton Christensen’s book: the Innovator’s Dilemma. The Harvard professor, Clayton Christensen argued that good management can be the root cause of a company’s demise. He wrote:
“The very decision-making and resource-allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening carefully to customers; tracking competitors' actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technological change.” (Part 2 - The Innovator’s dilemma: when new technologies cause great firms to fail).
To survive and thrive, companies are bound to innovate in a way or another. There are two types of innovation: exploitative innovation and disruptive innovation. Managing a company requires an equilibrist exercise between these two types of innovation. Companies need to find ways to sustain “what got them here” with innovative practices that help streamline processes or curb costs. And, if they are bold enough, they need to figure out “what will get them there”.
Kodak and Polaroid
The most famous stories of the innovator’s dilemma are Kodak’s and Polaroid’s who failed to embrace the digital camera revolution, and eventually filed for bankruptcy respectively in 2001 and 2012…
KODAK. Kodak’s story is probably the most telling. Kodak was the pioneer who created the digital camera in 1975. In fact, Kodak created the field digital camera in 1975 and the first self-contained DSLR (digital single lens reflex) camera in 1989. However, Kodak management refused to back this new product to avoid cannibalizing their core business: the sale of photo film. See this article.
POLAROID. Despite spending 42% of its R&D funding on digital imaging by 1989, Polaroid still chose to make the bet that people would still want hard print copies of their photos. Why? Because the very profitable instant film business brought a 65% margin: it was the core of Polaroid’s business model. They could not figure out how to replace it. See this article.
This everlasting tension between exploitative innovation and disruptive innovation plays out at different levels. It’s a balancing dance of fine-tuning one’s business model from an operational and an economic perspective. It is a question of investing in new technologies and processes. Finally, it’s also a question of timing. SEGA, which used to dominate the video game world in the 1990s, also saw the opportunity of Virtual Reality (VR) as early as 1994, too early for the public, and it still failed to sustain its dominance in its industry. Now, thirty years later, no-one has yet cracked the code of VR for gaming…
Now is the time of the sustainability revolution. It’s a trillion dollar business opportunity and the time is ripe for corporates to embrace it. What will you do next?
*Stanford LEAD is the online flagship program of the Stanford Graduate School of Business.
