The_Innovators_Dilemma__Clayton

CHAPTER NINE
Performance Provided,
Market Demand, and the
Product Life Cycle
The graphs in this book showing the intersecting technology and market trajectories have proven useful
in explaining how leading firms can stumble from positions of industry leadership. In each of the
several industries explored, technologists were able to provide rates of performance improvement that
have exceeded the rates of performance improvement that the market has needed or was able to absorb.
Historically, when this performance oversupply occurs, it creates an opportunity for a disruptive
technology to emerge and subsequently to invade established markets from below.
As it creates this threat or opportunity for a disruptive technology, performance oversupply also
triggers a fundamental change in the basis of competition in the product’s market: The rank-ordering of
the criteria by which customers choose one product or service over another will change, signaling a
transition from one phase (variously defined by management theorists) to the next of the product life
cycle. In other words, the intersecting trajectories of performance supplied and performance demanded
are fundamental triggers behind the phases in the product life cycle. Because of this, trajectory maps
such as those used in this book usefully characterize how an industry’s competitive dynamics and its
basis of competition are likely to change over time.
As with past chapters, this discussion begins with an analysis from the disk drive industry of what can
happen when the performance supplied exceeds the market’s demands. After seeing the same
phenomenon played out in the markets for accounting software and for diabetes care products, the link
between this pattern and the phases of the product life cycle will be clear.
PERFORMANCE OVERSUPPLY AND CHANGING BASES OF COMPETITION
The phenomenon of performance oversupply is charted in Figure 9.1, an extract from Figure 1.7. It
shows that by 1988, the capacity of the average 3.5-inch drive had finally increased to equal the
capacity demanded in the mainstream desktop personal computer market, and that the capacity of the
average 5.25-inch drive had by that time surpassed what the mainstream desktop market demanded by
nearly 300 percent. At this point, for the first time since the desktop market emerged, computer makers
had a choice of drives to buy: The 5.25- and 3.5-inch drives both provided perfectly adequate capacity.
What was the result? The desktop personal computer makers began switching to 3.5-inch drives in
droves. Figure 9.2 illustrates this, using a substitution curve format in which the vertical axis measures
the ratio of new- to old-technology units sold. In 1985 this measure was .007, meaning that less than 1
percent (.0069) of the desktop market had switched to the 3.5-inch format. By 1987, the ratio had
advanced 0.20, meaning that 16.7 percent of the units sold into this market that year were 3.5-inch
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