DisruptiveInnovation.Org - Key Concepts

Innovator's Dilemma

The Innovator’s Dilemma is a situation in which successful companies and competent managers are encouraged to make decisions that maximize profitability and simutaneously result in the company's long-term downfall. By prioritizing investments with higher profits, managers are often unwilling or unable to satisfy customers in low-end or new markets. These customers become “overserved” by the current product or service, meaning they are either unwilling to pay for the high-end performance or they never had access to that product in the first place. This allows new innovators to gain a foothold from which they can disrupt the incumbant company’s core business. This dichotomy is inherent in the Innovator’s Dilemma; decisions that maximize market dominance also reinforce the conditions under which disruption occurs.