A dilemma is a situation in which the affected person must decide between two options, but both of them are difficult and unpleasant. The innovator’s dilemma describes a situation where large companies get out of the market they are in because of newly emerging technologies, despite the fact that the emergence of these new technologies, on the one hand, was foreseeable and, on the other hand, the big companies had the necessary resources to implement them. Originally, such situations were blamed on management failures; however, this is not the case. In theory, the management of the respective companies had done everything right. However, what is considered in theory to be “the right management” does not always correspond to what, in practice, is needed long-term at the appropriate time. Ironically, management must put fulfillment of its normal standard parameters for achieving its objectives (for example, alignment of the business activities with the needs of customers, entry into promising market segments, etc.) on the back burner, in order to do “the right thing”. Here, too, the term is a dilemma, since neither working against management mechanisms normally seen as “correct”, nor an exit from the market is particularly desirable for the company. The central question – when and why must companies act paradoxically? First – companies must always work opposite to their normal logical management strategy, when a new technology arises that has sufficient potential to replace existing technologies. As to the why – new technologies may not appear attractive at first to the market leader and all other large companies with a strong market position. The majority of enterprise customers will also not be interested in this technology, because it does not add enough value at the time – and it is not particularly cost-effective either. Customers also have no use for the advantages that the new technology offers. And the small segment of the market, for which the newly created advantages do offer enough added value to justify a purchase, is not lucrative enough for large companies. This encourages companies not to invest in this new technology. As the new technology develops, however, there is always a critical point. Here the initial problems of the new technology are able to be offset, and this provides added value for an ever growing market segment. Over the long term, the new technology catches on and the big companies are left behind because they stayed with the old technology. External links:

 

Jan

My name is Jan Puder (LinkedIn profile Jan Puder). I am the founder & CEO of the BusinessTech-Company. Me and the BusinessTech-Company want to push the digital frontier. This is the reason, why I started this website. I want to provide information about digital businesses, especially for Chief Digital Officers.

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