Tuesday, December 19, 2006

What am I reading over Christmas break?

There is a lot of free time over the Christmas break with the quarter system. Preparing for this, I pro-actively ordered two MBA related books before the end of the class. I just finished reading The Innovator's Dilemma by Clayton Christensen. The book addresses how even well-managed companies can not seize opportunities presented by disruptive technology.
Disruptive technology is improvements to current technology that are not sufficient for the current market, but could create a new (although less profitable) market. Established companies often ignore disruptive technology because their customers do not want it, the new markets are too small, and the margins are smaller than they currently experience. The problem is if the disruptive technology's capabilities improve at a greater rate than the demand of the established customers, at some point the disruptive technology will be adopted by those customers and the established firm will lose market share.
An example is Flash drives. When invented, the capacity of flash drives could not service the laptop industry, but they were ideal for iPods. As flash technology improves, it may develop the size and cost capabilities demanded by the laptop industry. Then, the flash drives will overtake the current 2.5" drives because flash is much more stable. Disruptive technology is not limited to hi-tech - discount retailing was a disruptive technology for the department stores. When first introduced, department stores wanted nothing to do with the low margins of discount retailing. The problem is that as the ability of the discount retailer to offer better discounts and move into higher quality goods, they are now supplanting the department stores from their traditional market as we can now go to Walmart to get a good blender.
This book is a classic and I highly recommend it to anyone interested in business. While there are the occasional detailed analysis, the book is written is a very easy-to-read style.

1 comment:

speirs_2000 said...

We missed you at home. Trivia was not the same but Michael and I won. Glad to hear that the California Christmas wasn't that bad. Talk to you guys soon!