The_Innovators_Dilemma__Clayton

customers who pay the present bills. Demands from our own customers, on the other hand, would help
us to focus on and lend impetus and excitement to our program.
An independent organization would not only make resource dependence work for us rather than against
us, but it would also address the principle that small markets cannot solve the growth or profit problems
of large companies. For many years into the future, the market for electric vehicles will be so small that
this business is unlikely to contribute significantly to the top or bottom lines of a major automaker’s
income statement. Thus, since senior managers at these companies cannot be expected to focus either
their priority attention or their priority resources on electric vehicles, the most talented managers and
engineers would be unlikely to want to be associated with our project, which must inevitably be seen as
a financially insignificant effort: To secure their own futures within the company, they naturally will
want to work on mainstream programs, not peripheral ones.
In the early years of this new business, orders are likely to be denominated in hundreds, not tens of
thousands. If we are lucky enough to get a few wins, they almost surely will be small ones. In a small,
independent organization, these small wins will generate energy and enthusiasm. In the mainstream,
they would generate skepticism about whether we should even be in the business. I want my
organization’s customers to answer the question of whether we should be in the business. I don’t want
to spend my precious managerial energy constantly defending our existence to efficiency analysts in
the mainstream.
Innovations are fraught with difficulties and uncertainties. Because of this, I want always to be sure that
the projects that I manage are positioned directly on the path everyone believes the organization must
take to achieve higher growth and greater profitability. If my program is widely viewed as being on that
path, then I have confidence that when the inevitable problems arise, somehow the organization will
work with me to muster whatever it takes to solve them and succeed. If, on the other hand, my program
is viewed by key people as nonessential to the organization’s growth and profitability, or even worse, is
viewed as an idea that might erode profits, then even if the technology is simple, the project will fail.
I can address this challenge in one of two ways: I could convince everyone in the mainstream (in their
heads and their guts) that the disruptive technology is profitable, or I could create an organization that
is small enough, with an appropriate cost structure, that my program can be viewed as being on its
critical path to success. The latter alternative is a far more tractable management challenge.
In a small, independent organization I will more likely be able to create an appropriate attitude toward
failure. Our initial stab into the market is not likely to be successful. We will, therefore, need the
flexibility to fail, but to fail on a small scale, so that we can try again without having destroyed our
credibility. Again, there are two ways to create the proper tolerance toward failure: change the values
and culture of the mainstream organization or create a new organization. The problem with asking the
mainstream organization to be more tolerant of risk-taking and failure is that, in general, we don’t want
to tolerate marketing failure when, as is most often the case, we are investing in sustaining technology
change. The mainstream organization is involved in taking sustaining technological innovations into
existing markets populated by known customers with researchable needs. Getting it wrong the first
time is not an intrinsic part of these processes: Such innovations are amenable to careful planning and
coordinated execution.
Finally, I don’t want my organization to have pockets that are too deep. While I don’t want my people
to feel pressure to generate significant profit for the mainstream company (this would force us into a
fruitless search for an instant large market), I want them to feel constant pressure to find some way—
some set of customers somewhere—to make our small organization cash-positive as fast as possible.
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