Innovator’s Dilemma
● Drivers of Chaos:
○ Global connectivity
○ Trade liberation ‘
○ Technology
○ Buyer power, inequalities, etc.
● Managing advantages → Managing Disruption
● Scaling laws: sublinear scaling and super-linear scaling (doubling infrastructure
can increase the number of socio-economic output)
● The average lifespan of companies: 40-50 years but it has recently decreasing
● Why the company's life-span decreasing:
○ Victims of their success
○ Just focus on generating profit
○ Neglecting potential innovation
● Sustaining vs Disruption Innovation
○ Sustaining → maintaining market leadership through improving,
augmenting, iterating
○ Disruptive → pioneering through exploring, inventing, and niche (new
market)
■ Bring new value
■ Rejected by high-end customers and irrational to invest in them
■ Undervalued big companies and low margins
● New entrants
○ Nothing to lose
○ Initially no threat → niche
○ But will facing the market threat later → gains competitive performance,
moves to higher-margin markets, etc.
● Principles of Disruptive Innovation
○ Firms depend on customers and investors for resources
○ Small markets don't solve the growth needs
○ A firm’s capabilities define its disabilities
○ Tech supply may not equal market demand
,Properties of Balance
● Emergent strategies
○ Develops over time through continual strategizing as a business balance
○ Unplanned actions and initiative
○ Needs learning, adaptation, and collaboration
● Entrepreneurship = Approach to management
Stevenson (1983)
● Pursuit of opportunity without regard to resources currently controlled
● Stevenson’s Conceptualization
○ Entrepreneurial Focus (Promoter)
■ Driven by the perception of opportunity
■ Revolutionary with short duration
■ Many stages with minimal exposure
■ Episodic use or rent
■ Management flat
■ Based on value creation
○ Administrative Focus (Trustee)
■ Driven by controlled resources
■ Evolutionary with long-duration
■ A single stage with complete commitment
■ Ownership or employment
■ Hierarchy
■ Based on responsibility
● Corporate Entrepreneurship
○ Entrepreneurial behavior in an established larger organization
○ Encourage entrepreneurial intensity → scale, frequency
○ Outcome: continuous innovation — products, process, business model
,● Exploitation vs Exploration
● Failure trap – trial and error → exploration
○ Most innovations are unrewarding
○ Innovation is likely to perform poorly until it's developed
○ Cycle: search → change → failure
● Competency trap – monitoring and control → exploitation
○ Self-destructive product of learning
○ Competence comes with experience
○ Cycle: competence → returns → doing the same
● Complex Adaptive System
○ Able to adapt
○ Many independent agents
○ Continuous change
○ Unpredictable outcome
● Adaptation through self-organization
○ Requirements:
■ Common identity and purpose
■ Free flow of knowledge and information
■ Strong personal relationship
● Stability → adaptability
● Entrepreneurial Architecture
○ A strategic alignment of corporate resources to encourage entrepreneurship
and innovation on a sustainable basis
, ○ Contains: leadership and management, culture, structure, and
strategies
○ Internal architecture
■ Employees create a distinctive culture
■ Collectivism
■ Attracts like-minded people
○ External architecture
■ Other stakeholders
■ Trust → sharing info with other resources
● Haier’s Success Factors
○ Flat organizational structure (decentralization)
○ Customer-responsive innovation
○ Operational excellence → Improvement and internal competition
○ On-demand production and delivery
● Balance
○ Strong architecture
■ Sense of belonging and trust-based relational contracts
■ Tacit → difficult to copy
○ Highly competitive, complex, fast-changing markets
○ Cognitive skills and innovation are important
● 3M Strategic Thrusts
○ Close to customer
○ Dominating market
○ Diversify
○ R&D!!
○ Organization-wide knowledge sharing
○ Encourage achievement through reward
● Entrepreneurial Orientation
○ Sustained pattern of entrepreneurial behavior
● Drivers of Chaos:
○ Global connectivity
○ Trade liberation ‘
○ Technology
○ Buyer power, inequalities, etc.
● Managing advantages → Managing Disruption
● Scaling laws: sublinear scaling and super-linear scaling (doubling infrastructure
can increase the number of socio-economic output)
● The average lifespan of companies: 40-50 years but it has recently decreasing
● Why the company's life-span decreasing:
○ Victims of their success
○ Just focus on generating profit
○ Neglecting potential innovation
● Sustaining vs Disruption Innovation
○ Sustaining → maintaining market leadership through improving,
augmenting, iterating
○ Disruptive → pioneering through exploring, inventing, and niche (new
market)
■ Bring new value
■ Rejected by high-end customers and irrational to invest in them
■ Undervalued big companies and low margins
● New entrants
○ Nothing to lose
○ Initially no threat → niche
○ But will facing the market threat later → gains competitive performance,
moves to higher-margin markets, etc.
● Principles of Disruptive Innovation
○ Firms depend on customers and investors for resources
○ Small markets don't solve the growth needs
○ A firm’s capabilities define its disabilities
○ Tech supply may not equal market demand
,Properties of Balance
● Emergent strategies
○ Develops over time through continual strategizing as a business balance
○ Unplanned actions and initiative
○ Needs learning, adaptation, and collaboration
● Entrepreneurship = Approach to management
Stevenson (1983)
● Pursuit of opportunity without regard to resources currently controlled
● Stevenson’s Conceptualization
○ Entrepreneurial Focus (Promoter)
■ Driven by the perception of opportunity
■ Revolutionary with short duration
■ Many stages with minimal exposure
■ Episodic use or rent
■ Management flat
■ Based on value creation
○ Administrative Focus (Trustee)
■ Driven by controlled resources
■ Evolutionary with long-duration
■ A single stage with complete commitment
■ Ownership or employment
■ Hierarchy
■ Based on responsibility
● Corporate Entrepreneurship
○ Entrepreneurial behavior in an established larger organization
○ Encourage entrepreneurial intensity → scale, frequency
○ Outcome: continuous innovation — products, process, business model
,● Exploitation vs Exploration
● Failure trap – trial and error → exploration
○ Most innovations are unrewarding
○ Innovation is likely to perform poorly until it's developed
○ Cycle: search → change → failure
● Competency trap – monitoring and control → exploitation
○ Self-destructive product of learning
○ Competence comes with experience
○ Cycle: competence → returns → doing the same
● Complex Adaptive System
○ Able to adapt
○ Many independent agents
○ Continuous change
○ Unpredictable outcome
● Adaptation through self-organization
○ Requirements:
■ Common identity and purpose
■ Free flow of knowledge and information
■ Strong personal relationship
● Stability → adaptability
● Entrepreneurial Architecture
○ A strategic alignment of corporate resources to encourage entrepreneurship
and innovation on a sustainable basis
, ○ Contains: leadership and management, culture, structure, and
strategies
○ Internal architecture
■ Employees create a distinctive culture
■ Collectivism
■ Attracts like-minded people
○ External architecture
■ Other stakeholders
■ Trust → sharing info with other resources
● Haier’s Success Factors
○ Flat organizational structure (decentralization)
○ Customer-responsive innovation
○ Operational excellence → Improvement and internal competition
○ On-demand production and delivery
● Balance
○ Strong architecture
■ Sense of belonging and trust-based relational contracts
■ Tacit → difficult to copy
○ Highly competitive, complex, fast-changing markets
○ Cognitive skills and innovation are important
● 3M Strategic Thrusts
○ Close to customer
○ Dominating market
○ Diversify
○ R&D!!
○ Organization-wide knowledge sharing
○ Encourage achievement through reward
● Entrepreneurial Orientation
○ Sustained pattern of entrepreneurial behavior
