The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail

Christensen briefly discusses the history of the excavator industry, which widely used cable-actuated systems from the time of its invention. After World War II, innovators developed the hydraulically actuated system that would grow to dominate the industry by the 1970s. Entrant firms created a value network with the residential sewage construction market, which cable shovels could not easily penetrate because of their size. When this network assessed hydraulic excavators, also called backhoes, they employed different metrics from the ones used to evaluate cable shovels. Over the next 30 years, hydraulics firms endeavored to integrate sustaining innovations to backhoes. The rate of improvement in hydraulic technology accelerated much more quickly than the rate of improvement demanded in mainstream excavator markets. This acceleration brought the technology upmarket.

To respond to the disruption, leading cable shovel firms entered the hydraulics business but found that the product could not be marketed to their primary customer base. In 1951, they introduced new products that combined hydraulic and cable-actuated technologies to appeal to the needs of their customer base. Still, this product did not succeed in their native value network. Because entrant firms discovered the market that would value the capabilities of hydraulic technology, they gained a strong position that enabled them to attack established firms.