Use this model if you want to understand why large, successful companies are prone to disruption.
A central theme running through Clayton Christensen’s innovation research is how companies can guard against being disrupted. How can successful innovators avoid having their lunch eaten by smaller, nimbler upstarts?
As a company grows, its once simple products and services become ever more complex as it seeks to cater to more sophisticated customers where the company can command wider profit margins.
But…
As companies tend to innovate faster than their customers’ needs evolve, most organizations eventually end up producing products or services that are actually too sophisticated, too expensive, and too complicated for many customers in their market.
Clayton Christensen, https://claytonchristensen.com/key-concepts/
This leaves space for smaller competitors to move in at the bottom of the market. At first these disrupting businesses tend to have some combination of lower gross margins, smaller addressable markets and simpler products and services.
Watch out for
Christensen’s thesis might be summed up with the old saying “success breeds complacency.” But his work is riven with deeper, seemingly counterintuitive takeaways and action points. One is that the competencies a firm builds up in terms of resources, processes and values (RPV) – competencies that may have made it wildly successful – can become encumbrances, blocking the path to innovation and business model renewal (think Kodak and the growth of digital cameras).
Also see the inverted SWOT analysis, which sees strengths as threats (and competitor strengths as opportuntites).
Resources
Christensen. C. (2016). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Review Press
Christensen. C. & Raynor, M. (2013). Innovator’s Solution, Revised and Expanded: Creating and Sustaining Successful Growth. Harvard Business Review Press