Book: 20250703 to 20250815, "The Innovator's Dilemma" by Clayton M. Christensen

20250705 - Introduction

Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use. p xix

Not in early stage. How to recognize the potential of a new product? Based on physics?

First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. And third, leading firms’ most profitable customers generally don’t want, and indeed initially can’t use, products based on disruptive technologies. By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.  p xxi

While managers may think they control the flow of resources in their firms, in the end it is really customers and investors who dictate how money will be spent because companies with investment patterns that don't satisfy their customers and investors don't survive. p xxiii

As a consequence, the larger and more successful an organization becomes, the weaker the argument that emerging markets can remain useful engines for growth. p xxv

Two problems here.

1. For each one small company's rise, there are 100 small companies fall.

Even the large organization invest resource in the disruptive technology, they may need to try it 100 times to succeed finally.

2. It's not easy for lions to catch rats or even worms as food. Unless they are starving.

For large organization, it's much easier just purchasing the new small companies to join the game.

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. p xxv

The basis of product choice often evolves from functionality to reliability, then to convenience, and, ultimately, to price. p xxvii

Let's analyze AI model, smart phone and BEV cars. Functionality -> reliability-> convenience(maintenance)-> price.

Roughly correct.

Part One: Why Great Companies Can Fail

20250706 - 1. How Can Great Firms Fail?

From the first principles point of view, the hard disk potential is decided by two factors.

1. Vibration.

The smaller the disk, the less vibration it has. So it can spin faster and be more reliable.

It also make it easier to make, and easier to improve the performace.

2. The smaller the disk, the bigger the market.

If each hard disk is two tons, then only mainframe computer can use it.

But if each hard disk weights only two grams, then it can be used everywhere.

The hard disk manufacturers paid too much attention to profit, and too less to the first principles.

20250707 - 2. Value Networks and the Impetus to Innovate

The real competition happen among different value networks. However , there are two factors.

1. We don't really know which value network is more valueable in the near future.

2. We don't know which disruptive innovation will progress faster than current sustainable innovation.

For example, 14 inch hard disk's performance improved around 14% per year, 8 inch one improved around 22% per year, 5.25 inch one improved 50% per year. But no one knew this when 8 inch hard disk was just invented.

Yes, smart phone beated traditional mobile phone, but battery car didn't beat ICE car 100 years ago. It seems that we only know which value network would win retrospectively.

Most of the potential "disruptive" innovations died unnoticed.

All CEOs need to ask themselves:

1. How can I change the world more by extending our production line?

2. What is the Idiot index of our products?

3. What performance/feature is limited by physics?

Their different value networks are decided by those questions.

20250718 - 3. Disruptive Technological Change in the Mechanical Excavator Industry

They failed because hydraulics didn't make sense - until it was too late. p73

Not true. I think it's because they don't want to lower their profit rate, and use volume growth to generate more profit. They don't understand that the economy growth means new products will keep popping up.

Mainframe computer and PC, which one can bring in more profit?

20250717 - 4. What Goes Up Can't Go Down

It is very difficult for a manager to motivate competent people to energetically and persistently pursue a course of action that they think makes no sense. p84

How did Elon Musk solve this problem? He set up a extremely high, but epic goal.

20250719 - Part Two: Managing Disruptive Technological Change

20250719 - 5. Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them

The trend is always same: reduce the speed of entropy growth.

So we need to do three things at the same time:

1. Lower the cost of products and services;

2. Increase the revenue;

3. Make sure that 2. is faster than 1.

All business go this way, including both sustainable innovations and disruptive innovations.

20250729 - 6. Match the Size of the Organization to the Size of the Market

20250729 - 7. Discovering New and Emerging Markets

......a stunning difference in the posterior probabilities of success between firms that entered new, emerging value networks(37%) and those that entered existing value networks(6%). p154

Not really 37%. Most of the firms that entered wrong emerging value networks simply failed, just like the 1.3 inch hard disk. They are not likely counted, although there might be hundreds or even thousands of them.

Those that run out of resources or credibility before they can iterate toward a viable strategy are the ones that fail. p155

Verify the idea at minimum cost. This is critical.

Plans to Learn vs Plans to Execute p156

Product like iPhone cannot be done this way. Even making a barely usable iPhone needs huge financial investment. We have to use the first principles to analyze the disruptive technology.

This is why Steve Jobs and Elon Musk are so rare.

20250730 - 8. How to Appraise Your Organization’s Capabilities and Disabilities

The core problem of this dilemma is caused by the interest conflict between individuals and organization.

For a company with $10B revenue, everyone in the company, from CEO to executives to engineers to investors, all want to put the resource into some business or improvement which can bring in extra 10% ($1 billion). But for the company, it's better put the same resource into some emerging business with $5 million revenue, zero profit in the near term and huge potential in the future.

However, whoever pursue the latter will not get pay rise or bonus, and the share price is not going to rise up in the next few years.

Incentive mechanism is the key!

Is this the reason that Tesla share price went so strange?

To allocate too much resource to disruptive innovation, surely cause slow growing revenue and profit.

20250813 - 9. Performance Provided, Market Demand, and the Product Life Cycle

But differentiation loses its meaning when the features and functionality have exceeded what the market demands. p189

Then the only feature left is "price". What if the price is so low that it's not important either? Then it depends on how much time the product can save for users.

Time is the ultimate resource.

Functionality, reliability, convenience, price.

Early adopters, early majority, late majority. p190

Let's compare these characteristics/attributes with BEV, USB drive and AI.

To BEV, convenience means the power charger everywhere. So it's valid.

To USB drive, convenience means that USB slot is supported everywhere. Valid.

At the moment, NAND is so cheap, reliable and with high density, it's way above the need from market. What's next? It has been turned into commodity.

With the help of SoC technology, CPU is also reaching this level.

Can we integrate tiny computer with everything else where sensor is needed?

NAND is only useful to computer, but computer can be part of camera and circuit breaker.

To AI, it's still struggling with the second feature: reliability. Convenience means AI can communicate with AI directly. Then AI doesn't need human anymore.

20250814 - 10. Managing Disruptive Technological Change: A Case Study

If there is no lithium battery, then BEV have to rely on lead acid battery.

BEV will be very expensive, with poor performance.

Instead of the market for teenagers, I think the better choice is electric scooter, or plugin cars.
1khw power can last for 30km, and the lithium battery is around 5kg, the lead acid battery is around 30kg.
Energy efficiency is critical if the overall energy is too limited.

Of course this is retrospective.

20250815 - 11. The Dilemmas of Innovation: A Summary

The pace of progress that markets demand or can absorb may be different from the progress offered by technology. p226

What if the technology progress doesn't catch up?

If lithium battery was not invented, then battery powered vehicle could only be electric scooter.

The book got wrong about randomness and natural selection.

For each successful disruptive technology, there could be more than 100 failed ones. But general direction is clear: the growth of entropy.

Price, efficiency, functionality, reliability, etc. are all important.

How to find them? Any inconvenience in daily lives which might get solved by that new technology.

The same technology can be used in many industries. For example, integrate SoC computer into camera.

With the rise of AI, this trend will expand quickly.

If CEO want to push for the disruptive technology, he/she only need to provide proper incentive.