Beating The Innovator’s Dilemma

Every good boss knows you have to innovate to succeed – but it’s easier said than done.

“If we don’t create the thing that kills Facebook, someone else will” – so reads a page in Facebook’s Little Red Book. It continues: “‘Embracing change’ isn’t enough. It has to be so hardwired into who we are that even talking about it seems redundant. The internet is not a friendly place. Things that don’t stay relevant don’t even get the luxury of leaving ruins. They disappear.”.

This dramatic little paragraph is a nod to the Innovator’s Dilemma, the seminal theory from Harvard professor Clayton Christensen which explains why great companies fail when faced with new technology. Every company boss worth their salt knows that innovation is key to staying alive, yet smart people are in charge of failing companies all the time. For example, video rental chain Blockbuster collapsed instead of turning into a Netflix, and Kodak failed instead of embracing the principles that has made Instagram so popular.

Of course, business survival in the face of major change is far more complicated. Christensen’s theory is that companies place too much emphasis on the needs of current clients, to the detriment of what he calls “disruptive innovation”: ideas that may be great for the future, but right now the existing customers can’t or won’t use them. Then eventually, along comes a new company who’s free to embrace new ideas without any of these “legacy” problems.

One thing is clear from the Little Red Book: Facebook understands the Innovator’s Dilemma. But is it really possible to beat it? The answer to this is “sometimes”, concludes Arjun Sethi, Head of Growth and Emerging Products at Yahoo. Sethi wrote on ‘Medium’: “I’ve learned that once a product finds or gains a large initial audience, there are two options for achieving large scale growth.”. The first option: the product evolves, and becomes a platform that other companies can integrate into their own products and build specialised use cases for their audience. The second option: the company decides to try and disrupt its own product in order to hold off competitors who’re going after the audience.

Facebook is an example of the first option. The social network has long since moved on from just helping people keep up with their friends to also directing users to news and entertainment. In recent months, Facebook has started directly hosting video and news content on the site, rather than just linking out to other platforms. An example of the second option is Apple, who launched the iPad despite the fact it could become a competitor to its laptops. The iPhone has destroyed the market for the iPod, but ultimately the result was a positive for Apple. As Steve Jobs said: “If you don’t cannibalise yourself, someone else will.”.

So how do you challenge your own products and succeed?

Again, this is easier said than done, as many companies lose sight of innovation as they grow. More people join the company than can work in a single group, creating departments which may not communicate with each other. Departments may turn into effective groups, but if they’re focused on their own products with no one around to keep an eye on the big picture overall innovation becomes difficult. One solution may be to create a family of brands: “Some of those products compete with each other, and that’s fine. It’s better (and cheaper) to constantly try to cannibalise your existing business with your own new brand than be disrupted by another company that’s more nimble and growing more quickly,” wrote Sethi.

This attitude also explains why Facebook didn’t integrate Instagram or WhatsApp into the core Facebook offering, as well as why they went to the effort of making every Facebook user download a separate Messenger app. Zuckerberg calls it the “Facebook Family of Apps”. The result: the company now has a handful of different products to sell to users, instead of one big product which could more easily be toppled.

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