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In May 1997, Clayton M. Christensen published The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail.1 As the subtitle to his book indicates, Christensen was interested in understanding why some successful firms stumble and even fail for what appears to be no good reason. In his introduction, he states:
This book is about the failure of companies to stay atop their industries when they confront certain types of market and technological change. It's not about the failure of simply any company, but of good companies-the kinds that many managers have admired and tried to emulate, the companies known for their abilities to innovate and execute. Companies stumble for many reasons, of course, among them bureaucracy, arrogance, tired executive blood, poor planning, short-term investment horizons, inadequate skills and resources, and just plain bad luck. But this book is not about companies with such weaknesses: It is about well-managed companies that have their competitive antennae up, listen astutely to their customers, invest aggressively in new technologies, and yet still lose market dominance.2
Based on a careful study of the hard-disk-drive industry, the book cites other examples, including the failure of mainframe-computer makers to adapt to personal computers, the inability of Sears and other established retailers to respond to discount chains, the collapse of the American motorcycle industry, and the failure of leading excavator manufacturers to move from cable to hydraulic technology.
It took a while for The Innovator's Dilemma to catch on, but when it did it exploded. Technology pundit George Gilder called it "the most profound and useful business book ever written about innovation."3 Shortly after this statement was made, the book was featured on the cover of Forbes; in February 1999 it made the Business Week bestseller list and was one of the hottest books in the business world. Quoting from the introduction to a Business Week interview with Christensen in April 1999, "The surge seemed to be at least partly tied to the emergence of the Internet as a place to do business. For instance, Edward D. Horowitz, corporate executive vice president for advanced technologies at Citigroup, sent a copy to two hundred top Citigroup execs in December."4
The bursting of the Internet bubble has brought new issues to the top of...