Clark Gilbert’s two types of business inertia

This model explains why some large, established firms respond well to largescale disruption, while others struggle.

Imagine you run a chain of clothes shops. You sell the coolest, most popular clothes and you’re the king of the High Street, with a knighthood to boot. But a new generation of online retailers appears. You start your own website to combat the threat, but slowly your customers slip away, your shops close down and the challengers pick away at the carcass of your dying empire. Why couldn’t you, as the incumbent and dominant player in the industry, adapt to the change in the market?

And why do incumbent businesses fail in the face of major external challenges, even as their managers try everything to stay on top? That’s what Clark Gilbert attempted to solve with his model on inertia.

To understand the problem, he defined inertia as coming in two different forms — an unwillingness to invest (resource rigidity) and an unwillingness to change the way the business operates (routine rigidity). The first form is easy to overcome. Tell a manager that a new threat will put them out of business, and they’re usually happy to throw money at the problem.

The trouble is this causes an increase in the second form of inertia. Now they’ve committed extra resources, the manager wants to use tried-and-tested methods, to control how every penny is spent — and they certainly don’t want to take any risks.

Here are Gilbert’s three steps to overcome routine rigidity.

  1. Bring in outside influence
    If you’re a clothes shop setting up a website, put the digital marketers and social media experts in charge of what it should look like. If you put the old guard in charge, inevitably it won’t be a new product — it will be an extension of the old business, facing the same problems.
  2. Separate the new venture
    The new venture should operate independently, with its own management, its own processes and business model. Maybe it will even have a different name and a separate office.
  3. See opportunities, not threats
    Now that the new venture is separated from the parent business, its managers won’t see the rise of online shopping as an existential threat — they’ll see opportunities to reach new audiences, sell niche products and cut overheads.

The disruption is best framed as a threat within the resource allocation process in order to garner adequate resources. But once the investment commitment has been made, those engaged in venture building must see only upside opportunity to create new growth. Otherwise, they will find themselves with a dangerous lack of flexibility or commitment.

Christensen & Raynor, pp.114-115, The Innovator’s Solution (2013)

Watch out for

Why is it harder to overcome routine rigidity? The answer may lie in another model, prospect theory . This holds that the pain of a loss is greater than the pleasure of a win. Inertia over the use of resources is motivated by the fear of losing what you have — if you don’t devote resources to this threat, you’ll go out of business. But changing a business model to perceive opportunities rather than threats requires risk-taking and motivation by the prospect of gains.

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!


Christensen. C. & Raynor, M. (2013). Innovator’s Solution, Revised and Expanded: Creating and Sustaining Successful Growth. Harvard Business Review Press
Gilbert, Clark G. (Oct. 2005), Unbundling the Structure of Inertia: Resource Versus Routine Rigidity, Academy of Management Journal
Gilbert, Clark G. (2002), Can competing frames coexist? The paradox of threatened response, Working paper 02-056, Harvard Business School

Prospect Theory: an ‘S’ curve and the relatively muted joy of winning

The frame of reference is essential to understanding why we make the decisions we do.

This is the model that explains loss aversion and risk-seeking when we’re losing. The famous “S” curve addresses flaws in Daniel Bernoulli’s expected utility theory that he proposed way back in 1738 – a theory which had remained unquestioned for more than two centuries until two psychologists came along in the 1970s.

Here’s a generous deal: I’ll give you a choice between a guaranteed £500, or we can toss a coin for £1000. You’d probably bank your £500. Thank you very much.

Now imagine I gave you a different deal. You can pay me £500, or we can toss a coin: either you pay me £1000 or you pay me nothing. You’d probably take your chances. Anything to wipe the smile off my face. 

Each option has the same monetary value, but the decision you make is different, depending on whether you’re gaining or losing money. The reason for that lies in prospect theory. Understand this, and you can understand why people and organizations make the decisions that they do.

Prospect theory was first published by psychologists Daniel Kahneman and Amos Tversky in 1979. It aimed to challenge the previously accepted idea that people make rational decisions based on probability and the expected utility of an outcome as explained by Bernoulli. Instead, prospect theory accommodates the different attitudes to risk we have for gains and losses. Essentially, “losses loom larger than gains.”

Bernoulii’s theory assumes that the utility of wealth is what makes people more or less happy, but it lacks a vital moving part: the reference point from which gains and losses are evaluated.

The prospects of gains and losses are what drive the decisions made by companies and their managers every day. Businesses that are performing below expectations will be reeling from the losses and turn to increasingly risky strategies to try to recover. That may lead to throwing good money after bad, like a gambler making increasingly outlandish bets at the end of a day of heavy losses.

On the other side, everyone is loss averting to some degree. Loss aversion is often heightened in business settings when managers feel there’s no room for failure. For example, a speculative investment of £1 million for a 50% chance of a £10 million return would have an expected value of £4.5 million and should be an investment that’s made by any objective standard but might be rejected by the manager because she fears losing her job if the investment fails.

You can measure the extent of your aversion to losses by asking yourself a question: what is the smallest gain that I need to balance an equal chance to lose $100? For many people the answer is about $200, twice as much as the loss. The “loss aversion ratio” has been estimated in several experiments and is usually in the range of 1.5 to 2.5. This is an average, of course; some people are much more loss averse than others.

Daniel Kahneman, p.284. Thinking, Fast and Slow (2012)

Watch out for

Whether an event is considered a gain or a loss depends on expectations rather than reality. If my share portfolio rises 10% in a year when my friend gains 20%, that will feel like a loss. If I only lose a bit of money in a market crash, that will feel like a win. This ‘reference point’ between gains and losses can change over time, or from person to person.

Kahneman states that like Bernoulli’s theory, Prospect theory has flaws of its own. Most notably, the reference point usually has a value of zero, which can lead to some absurd results. It means that winning nothing when you have a 90% chance of winning $1 million and a 10% chance of winning nothing is assigned the same value as losing when you buy a lottery ticket. Prospect theory doesn’t take into account disappointment or regret.  

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!


Bendickson, J., Solomon, S., & Fang, X. (Summer 2017), Prospect Theory: The Impact of Relative Distances, Journal of Managerial Issues
Kahneman, Daniel & Tversky, Amos (March 1979), Prospect Theory: An Analysis of Decision Under Risk, Econometra
Kahneman, Daniel, (2012), Thinking, Fast and Slow, Penguin Books
Newell, Benjamin R.; Lagnado, David A. & Shanks, David R. (2007), Straight Choices: The Psychology of Decision Making, Psychology Press

Maslow’s Theory of Motivation: the five steps to Nirvana

Everyone has seen some version of this pyramid. But what exactly does it do?

American psychologist Abraham Maslow created his hierarchy of needs to explain what motivates certain behaviours. His theory was that once you’ve largely satisfied one need, it no longer motivates you. The next need in the hierarchy becomes the main motivation, and you feel its absence more noticeably.

Managers can use it to work out what does and doesn’t motivate their team members.

The basic needs are:

  1. Physiological: the most basic needs for survival, such as food and water.
  2. Safety: not just physical security, but also structure, stability and order. This is why people prefer secure jobs and savings accounts to starting a business or investing.
  3. Belongingness and love: friends, family, socialising and working with familiar colleagues. Maslow blamed urbanisation, mobility and the breakdown of traditional groupings for the rise in feelings of alienation and loneliness, half a century ago. Plus ça change.
  4. Esteem: this comes in two parts. The need for respect, recognition, attention and appreciation from others. And the need for self-respect and self-confidence — ultimately, liking yourself.
  5. Self-actualization: a feeling of fulfilment, achieving your potential and being true to your own nature. As Maslow described it, “a musician must make music, an artist must paint, a poet must write”.

To put it another way, if you’re alone on a desert island with plenty of food and water and no obvious dangers, you’ll probably wish you had some friends with you. You won’t think about food or safety much, or yearn to write poetry.

Maslow argued that people who satisfy all five basic needs are more intuitive, creative, curious, calm and open. They lose prejudice and “robot-like conventionality.”

Therefore, employees who are respected and have opportunities to pursue their goals and win recognition will not only be motivated to succeed, but more effective in getting there.

Watch out for

Achieving self-actualization doesn’t mean job done, and they lived happily ever after. There will always be a new goal to reach, a new desire to motivate you. Maybe the poet will one day find they don’t like writing poetry any more. If you expect eternal satisfaction, prepare to be dissatisfied.

You also don’t need 100% achievement in one need to move up to the next. In fact, Maslow said that most people are “partially satisfied in all their basic needs and partially unsatisfied in all their basic needs at the same time.” Of course, it’s possible to move down as well as up the hierarchy as your needs and motivations change over time.

Despite the popularity of the Maslow’s hierarchy, there’s scant recent data to support it…

Contemporary science — specifically Dr. Edward Deci, hundreds of Self-Determination Theory researchers, and thousands of studies — instead points to three universal psychological needs. If you really want to [take] advantage of this new science – rather than focusing on a pyramid of needs – you should focus on: autonomy, relatedness, and competence.

Susan Fowler, (2014, HBR)

Still, the pyramid could be a useful lens through which to assess your own life choices and consider whether the needs of your family and work colleagues are being met.

With thanks to Ivan Edwards who wrote most of this post. Thanks Ivan!


Abulof, U., (2017) Introduction: Why We Need Maslow in the Twenty-First Century.Society 54. Springer.
Bolton, J. & Naybour, P., (2014) The APM Project Management Qualification Study Guide. Association for Project Management.
Fowler, S. (November, 2014) What Maslow’s Hierarchy Won’t Tell You About Motivation. Harvard Business Review
Kremer, W. & Hammond, C., Abraham Maslow and the pyramid that beguiled business (2013), BBC News Magazine.
Maslow, A. H., (1970). Motivation and Personality.Harper & Row.

Innovator’s DNA: Do what Bezos, Cook and Musk do

This model explains what it takes to be a successful innovator.

We’re talking DNA. Not the long chains of nucleotides that are the blueprint of organisms, but what Jeff Dyer, Hal Gregersen and Clayton Christensen consider the foundational building blocks of great innovators.

After an eight-year study, meticulously collecting data from 500 innovators and 5,000 executives, the authors came up with a list of five behaviours that make up the “Innovator’s DNA.”

The 5 behaviours of great innovators

  1. Associating: making connections between ideas and concepts from unrelated fields
  2. Questioning: posing queries that challenge common wisdom
  3. Observing: (in highfalutin circles, also called ethnography) examining the behaviour of customers, suppliers, and competitors to identify new ways of doing things
  4. Networking: meeting people with different ideas and perspectives
  5. Experimenting: constructing interactive experiences and provoking unorthodox responses to see what insights emerge

The authors also find that the world’s most innovative companies are populated, perhaps unsurprisingly, with innovative people, processes and a culture that gives employees courage to try out new ideas and take smart risks.

If the people running Amazon don’t make some significant mistakes, then we won’t be doing a good job for our shareholders because we won’t be swinging for the fences.

Jeff Bezos, The Innovator’s DNA, p.27

Watch out for

The authors find that innovators asked more questions than answers in a normal conversation.

Innovators tend to spend a lot of time testing ideas using different networks of people with different backgrounds.

Leaders at the most innovative companies, lead from the front and spend 50% of their time trying to come up with new ideas.

The authors rather humbly assert that they’ve “cracked the code for generating business ideas, and it’s one that anyone can follow. Creativity is not just a genetic predisposition – it’s an active endeavor.

So, you have no excuses. Go innovate!

Innovator’s DNA is the third in the trilogy of Clayton Christensen’s books on innovation. Here’s more on his concept of how large companies often leave themselves open to disruptive innovation from the low end of the market.


Dyer, J. H., Gregersen, H. B., & Christensen, C. M. (2019). The Innovator’s DNA: Mastering the Five Skills of Disruptive Innovators (Updated). Cambridge, MA: Harvard Business Review Press

Dunning-Kruger effect: Are you pickaxing to the plateau or plummeting past the peak?

This is the model that explains why after two hours into an edX Python course you’re stuffing a backpack, searching for motels in central Menlo Park and muttering gibberish to your cat about s3 buckets and a world-beating app that’s the Uber of dentistry.

Still, on the flipside, the model offers solace when you know nothing after six months. Keep going, it gets better.  

This is a phenomenon that, in the words of David Dunning, “visits us all.” It’s not a model that’s about others, or them, it afflicts everyone. It forms part of a wider cognitive bias called naive realism. Our brains are authors of our own reality. We rationalize. Our “self-talk” normally paints us – our ego, what we’ve done, who we are – in a glowing, radiant light.

Unfortunately, this witness cannot be trusted, m’lud.

The first rule of the Dunning-Kruger club is you don’t know you’re a member of the Dunning-Kruger club.

David Dunning

Watch out for

The original effect has morphed incorrectly from the original research. It’s “poor performers are overconfident,” not “beginners are overconfident.”

Try to think in terms of probabilities rather than certainties.

Don’t confuse facts (which can be found true or false) with opinions (that can’t). Opinions can usually be prefaced with words like “I think”, “we should” and “they ought.” They are beliefs. The trouble comes when we bend the facts to fit our opinions. Facts shouldn’t bend. And, yes, that’s an opinion.   

This is the is-ought problem or Hume’s law. This brilliant, animated illustration from BBC Radio 4 read by Harry Shearer (aka Principal Skinner) explains it sweetly in less than 90 seconds. The whole series is great, so go listen.

Also see the will vs skill coaching matrix. Managers will often see this behaviour.


Dunning, D. (2011). The Dunning–Kruger Effect: On Being Ignorant of One’s Own Ignorance. Advances in Experimental Social Psychology, Volume 44, Pages 247-296
Kruger, J. & Dunning, D. (1999). Unskilled and unaware of it: how difficulties in recognizing one’s own incompetence lead to inflated self-assessments. Journal of Personality and Social Psychology
Resnick, B. (June 26, 2019). An expert on human blind spots gives advice on how to think. Vox

PESTLE and mortar your rivals (in a nice, non-lethal way)

Pulverize your competitors with this tool to analyze the environment that shapes your organization’s performance.

A PESTLE or PESTEL (or formerly, just plain PEST) analysis is a useful tool to deploy when starting a new business or entering a new market. It’s also a powerful sidekick for assessing external factors when used with the more inward facing models, SWOT analysis and Porter’s Five forces, to provide a comprehensive “inside-and-out” perspective on your firm and strategy.

PESTLE stands for:


To what degree does a government intervene in the economy or industry (or with an individual company if it’s nearing or exercising monopoly power)?  All influences on your business could be listed here: tax, procurement policy, treaty implementation, trade and environmental policies etc. The government could well be a mixture of negative (eg regulations that constrain) and positive (eg large buyer of health and education services) influences.


These are the key determinants of an economy’s performance: growth, exchange rates, inflation, interest rates, consumer income, confidence, and unemployment rates. Since all these factors might impact demand and supply in the economy, they all might impact the demand for and cost and supply of your company’s goods and services.


Here you would list out population trends, cultural norms and shifting attitudes (eg be greener and leaner, focus more on experiences than material possessions). These factors are important for marketeers to understand and target their product to customer segments and niches.  


Does new tech threaten or provide an opportunity to your business? Or some combination of the two? This factor refers to the amount of R&D in an industry, technological incentives, and the amount of technological awareness in the market. These factors can influence build or buy decisions, whether to enter certain markets and stop you spending a fortune on technology that may soon become obsolete because of disruption elsewhere.


Like the political factor but more specifically about the rules and regulations, current and probable-future legal states that provide the rails for your current business or where you might expand. Legal counsel is advised for this sort of thing. A good example would be how the rules and regulations have changed for British companies who sell to or have supply chain in the European Union following Brexit.


The emphasis on ESG and particularly the E given global warming means companies, especially large firms, must examine their environmental footprint and try to minimize their environmental impact or risk alienating stakeholders.

Watch out for

Not all factors will be of equal importance to all industries and businesses. Eg a games developer is less concerned about environmental considerations than a utility company.

List out as many factors under each category and rank them in order of importance.

Top tip: try to imagine how this list might change in 6 to 12-months’ time. Don’t just try to observe the here and now but try to foresee upcoming changes, such as disruption in an adjacent industry.

If we’re fairly confident the environment may change, we may reap rewards by adapting now. This explains why some large companies go beyond both the spirit and letter of the law on CSR and ESG. It’s because they can see the tide moving out (eg public opinion on plastic straws) and they don’t want to be standing there with no clothes and their reputation in tatters.


Kaplan, R. & Norton, D. (January, 2008) Mastering the Management System. Harvard Business Review
Richardson, J. (2019) A Brief Intellectual History of the STEPE Model or Framework (i.e., the Social, Technical, Economic, Political, and Ecological)

SWOT: Discover new opportunities and crush threats

Possibly the most popular strategy tool ever (strategists and business consultants love a 2×2) the SWOT box helps you identify strengths, weaknesses, opportunities, and threats.

A SWOT analysis can help you carve out a sustainable niche in you market, or on a personal level, help develop your career that best uses your talent and opportunities.

The model can be used in two ways: as a kick-off to a deeper strategic dive or as a more sophisticated strategic tool. It’s particularly powerful when combined with other strategy models such as Porter’s 5 forces, PESTLE and scenario analysis.  

How to use the model

From a business perspective, these questions should help you flesh out a SWOT:


  • what advantages does your business have?
  • what do you do better than anyone else?
  • how does the market see your strengths?
  • what is your USP?
  • what low-cost or unique resources can you draw on that others can’t?


  • what can you improve?
  • what should you avoid?
  • what does the market see as your weaknesses?


  • what good opportunities are there?
  • what trends are you aware of?
  • what new technology could you combine from adjacent industries?


  • what obstacles do you face?
  • what are your rivals doing?
  • is changing technology threatening your position?
  • are standard for your products and services changing?

When used as an in-depth tool, quantifiable statements should be used rather than vague statements such as “better customer service”. And prune and prioritise your points in each category.

Watch out for

One downside of the conventional SWOT analysis is that it doesn’t take into account the dynamic forces at work in modern business. Instead, Adam Brandenburger says we should tweak SWOT to look at our strengths (and weaknesses of our competitors) as threats and our weaknesses (and strengths of competitors) as opportunities. This echoes Clayton Christensen’s work on disruptive innovation and his explanation of how company competencies can become obstacles.

A surprising number of innovations fail not because of some fatal technological flaw or because the market isn’t ready. They fail because responsibility to build these businesses is given to managers or organisations whose capabilities aren’t up to the task. Corporate executives make this mistake because most often the very skills that propel an organisation to succeed in sustaining circumstances systematically bungle the best ideas for disruptive growth. An organisation’s capabilities become its disabilities when disruption is afoot.

Clayton Christensen & Michael Raynor, (2013) The Innovators Solution. p.177


Brandenburger, A. (August 22, 2019). Are Your Company’s Strengths Really Weaknesses? Harvard Business Review
Christensen. C. & Raynor, M. (2013). Innovator’s Solution, Revised and Expanded: Creating and Sustaining Successful Growth. Harvard Business Review Press
Helms, M. H. & Nixon, J. (2010). Exploring SWOT analysis – where are we now? A review of academic research from the last decade. Journal of Strategy and Management
Leonard-Barton, D.  (1992). Core Capabilities and Core Rigidities: A paradox In Managing New Product Development. Strategic Management Journal 13

Porter’s 5 Forces: Who has the upper hand, and why?

Use this model to understand where power lies in a business situation.

Michael Porter’s five forces model is a useful tool to understand and cope with competition. It helps you frame both the strength of your current position and the strength of a position you’re thinking about moving into.

If these forces are intense within an industry, it’s hard for companies to earn attractive returns. In Porter’s 2008 update to his 1979 paper, he lists airlines, textiles, and hotels as being in this camp. If the forces are benign, companies can earn attractive returns – such as software, soft drinks and toiletries, according to Porter.

Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time.

Michael Porter, p.26

The 5 forces that shape competition

  1. Threat of new entry. This puts a cap on the profit potential of an industry. If it costs little time or money to enter your market, new competitors can quickly enter your market and weaken your position.
  2. Supplier power. How easy is it for suppliers to drive up process or limit quality? The fewer suppliers you have the, and the more you need their help, the more powerful your suppliers are.
  3. Buyer power. On the flip side, powerful buyers can capture more value by driving down prices or asking for more. A few powerful buyers can often dictate terms.
  4. Competitive rivalry. The number and capability of your competitors will determine how much power you have here. If you provide a homogenous product you will have little power, but if no one can do what you do, you may have tremendous strength.
  5. Threat of substitution. Easy to overlook, substitutes can take many forms. For example, a consumer might forgo buying a car if there’s a reliable ride hailing service in the area. If substitution is easy and cheap, this weakens your power.

How to use the model

By understanding these forces, you can develop a strategy to improve returns by:

Positioning your business where the forces are weakest. For example, selling high-end electric sports cars.

Exploiting changes in the forces. For example, the emergence of music streaming platforms as broadband speed and smart phone usage increased.

Reshape forces in your favour by using tactics to reduce the share of profits leaking to other payers. For example, expand your services to limit buyer power by making it harder for them to leave for a rival and limit competitive rivalry by producing differentiated products and services.

Watch out for

While the strongest forces determine the profitability of an industry, they are not always easy to identify. Porter gives the example of the photographic film industry. The intense rivalry between Kodak and Fuji was not the factor limiting profitability, rather a better substitute – digital photography. Here, coping with the substitute becomes the top strategic priority.

Porter’s model shows that strategists should not only be concerned with their company’s competitive position versus rivals, but the competitive position of the industry as a whole. For example, consider the impact of Big Tech firms and platformification on traditional media industries such as terrestrial and cable TV, and newspapers.

The model assumes relatively static market structures, which can be a limitation in industries that are moving quickly – such as software development. To make up for this, it’s best to combine Porter’s 5 forces with other strategy models such as SWOT and PESTLE analysis.


Porter, M. (January 1, 2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review
Porter, M. (1979). How competitive forces shape strategy. Harvard Business Review

Learn to learn better in 3 steps

With three, brutalist green triangles because they’re memorable.

How can we get better at getting better? How can become more efficient learners? This model offers a useful starting point.

Ulrich Boser sets out three ways we can get better at learning in his Learn Better book.

1. Set goals

Boser argues that at heart learning is often a type of project management, and if we treat it as such – with clearly defined, specific, time-bound tasks – we have more chance of successfully completing the learning “project.” Imagine trying to take on a huge task. For example, trying to teach yourself JavaScript. It can seem like an impossible task, but if you spilt this herculean feat into much smaller, discrete steps such as first completing an introductory online course, secondly replicate a project on Medium etc. it becomes much more achievable and you’re less prone to negative thinking. Afterall, how do you eat an elephant? One bite at a time.

2. Think about thinking

Also known as metacognition, thinking about thinking is about introspection and asking ourselves: have I really understood what I’ve just learned?

When it comes to learning, one of the biggest issues is that people don’t engage in metacognition enough. They don’t stop to ask themselves if they really get a skill or concept.

Ulrich Boser

We can adopt routines and behaviours to force ourselves to do this. For example, can you summarize from a lesson or your reading the salient points in simple language. Could you explain it to your grandmother? This is the Richard Feynman learn-by-teaching technique. When I was studying A-level physics, for each module I honed into a routine of copying out the key learning objectives and the syllabus and wrote out the answers in full against each one. I then condensed the notes onto 5 or 56 sheets of A4 and then condensed them once more onto flash cards. Throughout this condensing stage I would be testing my learning by working through past exam papers. I’m not saying this is the golden technique but it worked well for me, and worked relatively quickly.

3. Reflect on your learning

Get some time and space away from your learning to process it. Again a period of introspection, but less focused than step #2. Look to set aside a moment of reflection when calm. This is what good rest and sleep is all about. Often our best breakthroughs are when we’re not confronting a problem straight on, but obliquely in the shower or on a walk when our mind is wandering.

Watch out for

Boser’s work is underpinned on the principle that learning can be learned -learning is not an innate skill. And there’s research to back this up. For example, Marcel Veenman found that focusing on how we understand is more important than intelligence at achieving mastery.

…intellectual ability uniquely accounts for 10 percent of variance in learning, metacognitive skills uniquely account for 17 percent of variance in learning…

Marcel V. J. Veenman & Bernadette H. A. M. Van Hout-Wolters & Peter Afflerbach


Bosner, U. (2017). Learn Better: Mastering the Skills for Success in Life, Business, and School, or How to Become an Expert in Just about Anything. Rodale
Bosner, U. (2018). Learning Is a Learned Behavior. Here’s How to Get Better at It. Harvard Business Review
Veenman, M., Van Hout-Wolters, B. & Afflerbac, P. (2006) Metacognition and learning: conceptual and methodological considerations. Metacognition Learning. Springer

Disruptive innovation: why large companies are prone to disruption

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.


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,  

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).


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