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

One of the pervading issues that Clayton M. Christensen points out across different industries is the failure to appreciate the long-term value of an emerging market. He explains that this is, for the most part, a sensible management decision. These markets are unable to satisfy the business requirements of large companies. Likewise, these companies must obey the principle of resource dependence in order to survive. However, given the patterns that result from innovation, that survival is ultimately short-lived, and the strategy is likewise myopic. Established firms can only delay the arrival of entrant firms in their market, and by then, it will be too late for them to stay abreast of the changes. Christensen therefore suggests that one of the best investments an established firm can make is found in an undiscovered market.

By their very nature, undiscovered markets are underserved. Christensen implies this idea when he refers to the need to create a new market or value network. When he discusses Honda’s success story in the North American market, he frames it as a discovery on the part of both the supplier and the customer. Before Honda arrived, there was simply no market for off-road dirt bikes.