** This seems like common sense, it happends over and over again in business. **
I am somewhat intimidated trying to net out this book, but here goes.
If it is "common sense", why DOES it happen that incumbents get overthrown by new technologies?
Christensen argues that the incumbents are locked into value networks that make the disruptive technology unattractive to pursue. And the disruptive technology is often offering a different value proposition (eg. smaller disk) that was not even something that the existing customers were even asking for(eg. faster access time, longer time to failure).
Re: the value networks in the company. Imagine 30 months ago you were an upwardly mobile executive at AT&T. There is no such company as Qwest or Level3 or Global Crossing, which are at the drawing board stage. But there is an emerging technology using wave-division multiplexing and erbium-doped amplifiers that could conceivably drive the cost of telecommunications down to a tiny fraction of your existing network. Voice would become just another IP-over-fibre application on an all-optic fibre-based network. And, oh yes, this IP-based network would not come with the Quality-of-Service and multi-level services/billing that your best customers expect and demand.
With your visionary ability, you propose that AT&T embraces the new technology. Yes, it will mean massive write-offs because you are effectively declaring the existing plant obsolete. And billions of dollars of new spending to implement. Perhaps the issue of debt or equity to fund the spending, diluting current shareholder claims to cash flow. Maybe a dividend cut. And it could cannibalize existing revenues. (And these are only the value networks internal to the company).
Even though Sprint and MCI/Worldcom and British Telecom are only cautiously shifting to the new technology, you implore the board that AT&T should go full bore and bet the company on this new vision of the future.
Although your career is now over, you did score a view points and a task-force is formed to review the implications of this new technology. A test-market roll-out is planned and capital is allocated.
Meanwhile, over at the drawing boards, there is no cannibalization, no write-offs. Just business models built entirely around the economics and value proposition of the new technology. And the entrepreneurial conviction and culture to get it done
Now, the AT&T vs. upstart story is not fully played out, but was it really "common sense" 30 months ago?
BTW, I am a big Christensen fan. I think this is a VERY important book. I admit, I did get bored during the hydrualic backhoe discussions, etc. to the point of skipping sections.
I like the spirit of the book, too. It encourages entrepreneurship, but also offers solutions for the Intels and AT&T's of the world to avoid becoming the next "common sense" casuality. And it is something of an antidote / complement to the kind of sad, deterministic view of "The Gorilla Game" that says the big win, it's over in several fields.
I hope the book it isn't overly obvious... I gave away about 30 copies to clients.... although the reviews aren't in yet... |
