There are several suggestions so far that the dilemma incumbents come to confront, as explained by Christensen, originates from how organisational members make choices and what influenced the decision behind these choices, which subsequently lead to negative organisational outcomes. As he explains it: “[r]esource dependence as it is enacted through the resource allocation process is the causal mechanism that makes it difficult for the leading
1 Christensen & Overdorf (2000, p. 69) 2 Christensen (2016, p. 165)
incumbents to address a disruption.”1 These process are however considered to “make sense”,2 or said alternatively, rational, except that in their consequence they lead to losses in leadership positions and/or failures. Christensen references what he considers as rational to incumbents as those choices that are in line with efforts to satisfy lead customers. This observation is notable from the following statement: “Good resource allocation processes [italics added] are designed to weed out proposals that customers don’t want. When these decision-making processes work well, if customers don’t want a product, it won’t get funded; if they do, it will.”3 He explains that “[g]ood management do what makes sense [i.e. what is rational], and what makes sense is primarily shaped by their value network.”4
Thus, the core arguments which sustain the theory, in as far as incumbents’ dilemma is understood, rest upon and are themselves shaped by assumptions about decision-making processes and what influence these decision processes. Implicit in the notion of the innovator’s dilemma is the presenting of incumbents as having to choose between two supposedly difficult alternatives, namely, disruptive and sustaining innovations. This section looks especially at those aspects of the theory which clarify Christensen’s thinking regarding what shapes the processes of decision-making, which he considers to be the eventual
difficulties incumbents face in dealing with disruptive innovations.
Christensen reports that he interviewed “more than eighty managers who played key roles in the disk drive industry’s leading firms, both incumbents and entrants, at times when
disruptive technologies had emerged.”5 He goes further to state that he “tried to construct, as accurately and from as many points as possible, the forces that influenced these firms’ decision-making processes regarding the development and commercialization of the
technologies either relevant of irrelevant to the value networks in which the firms were at the time embedded.”6 Based on these interviews, he sketches what he refers to as a “decision- making pattern”7 by which he illustrates decision-making processes in incumbents, meanwhile pointing out observed problem areas of the process. He explains that while
incumbents fail in the face of disruption, they are organisations which have nevertheless been 1 Christensen (2006, p. 51) 2 Christensen (2016, p. 42) 3 Christensen (2016, p. 103) 4 Christensen (2016, p. 42) 5 Christensen (2016, p. 42) 6 Christensen (2016, p. 42) 7 Christensen (2016, p. 42)
well run, except that “there is something about the way decisions get made in successful organizations that sows the seeds of eventual failure.”1 The assertion can be understood as implying that changing these decision patterns in ways that favour disruptive innovations as well should lead to incumbents’ successes in disruptive innovation markets.
Observed as a process of the decision-making pattern, Christensen explains that when
prototypes of potentially disruptive innovation are made in incumbent organisations, they are typically presented to lead customers through marketing departments. In line with this is the observation that, during his case studies, prototypes of disruptive innovations were often found to have been previously developed by incumbent organisations despite not being commercialised. If the lead customers show no interest, it typically follows that developments of these prototypes are almost without reservation thwarted. It is only when lead customers show interest do the projects get resources, and when they do not, in which case the
innovation does not address the needs of these customers, the project is starved of requisite resources. However, innovations that do not get support do not necessarily die, as
entrepreneurial individuals at times do establish new companies to pursue their
commercialisation. This cohort tends to include “frustrated engineers from [these] established firms”.2
It is important to recognise that Christensen considers lead customers as wielding more power in influencing how organisations allocate their resource towards innovation projects. Accordingly, he argues strongly that “demands of a firm's customers shape the allocation of resources in technological innovation”, 3 highlighting the relatedness of his views to theories of resource dependence and resource allocation.4 He has however sometimes made what seems to be an about turn on this, acknowledging it as a “mistake”.5 “A more accurate
prescriptive statement is that managers always must listen to customers. They simply must be aware of the direction in which different customers will lead them”6, he later revised his views. The purported insight behind this revised prescription is, thus, that lead customers are less likely to show interest in innovations which do not fulfil their own needs. The more
1 Christensen (2016, p. xii) 2 Christensen (2016, p. 45)
3 Christensen & Bower (1996, p. 197) 4 Christensen & Bower (1996) 5 Christensen (2006)
important insight is perhaps that resource allocation and innovation “are the two sides of the same coin [because only] those new product developments projects that do get adequate funding, staffing, and management attention has a chance to succeeed; those that are starved of reseouces will languish.”1
Christensen does however bring to light some further intricacies of the processes of decision- making, recognising that “resource allocation is not simply a matter of top-down decision making followed by implementation.”2 He highlights that innovations are typically initiated at the lower levels of the organisations and follow different filtering processes dictated by decisions of different people at varying hierarchical levels of the organisation.3 This is because “crucial resource allocation decisions are made after project approval – indeed, after product launch – by mid-level managers who set priorities when multiple projects and products compete for the time of the same people, equipment, and vendors.”4 This
explanation about influences on what ultimately become successful innovation projects, is an illustration of where power lies in organisations in relation to decisions.
As Christensen explains, although it is commonly assumed that executives wield power regarding “important decisions about where a company go and how it will invest its
resources… the real power lies with the people deeper in the organization who decide which proposals will be presented to senior management.”5 The point he raises here is particularly interesting given its highlighting of a different place within the organisation where sources of the innovator’s dilemma derive, as we begin to see the power of incumbents’ leaders as relatively less influential. That is, the executives’ making of final decisions is viewed as analogous to rubber stamping decisions which have long been made by different people below them, although such people are mostly viewed as deciding on the basis of customer needs. He also stresses the importance and the closeness of a propensity for success of the project with the career ambitions of different decision makers, which is presented as a pivotal element in determining how innovation proposals are presented to bid for resource
sponsorship. 1 Christensen (2016, p. 103) 2 Christensen (2016, p. 103) 3 Christensen (2016, p. 104) 4 Christensen (2016, p. 103) 5 Christensen (2016, p. 236)
Tightly coupled with this is their view of how their sponsorship of different proposals will affect their own career trajectories within the company formed heavily by their understanding of what customers want and what types of products the company needs to sell more of in order to be more profitable. Individuals’ career trajectories can soar when they sponsor highly profitable innovations projects. It is through these mechanisms of seeking corporate profit and personal success, therefore, that customers exert a profound influence on the process of resource allocation, hence patterns of innovation in most companies.1
Parts of the quotation such as tightly coupled, affect own career trajectories, and personal
success begin to show a different element in the process of resource allocation, the focus of
which is individuals’ aspirations. There are also negative implications for supporting projects which fail due to lack of a market as these “tend to be much more expensive and public failures.”2 Thus, the potential for both success and failure of innovation projects and their close ties with the success or failure of individual’s careers are seen as critical in the decision- making processes, which filter and thus determine which projects are ultimately presented to senior managers.
These observations are indeed made in light of, or as influenced by, Pfeffer and Salancik‘s theory of resource dependence,3 which Christensen labels as “somewhat controversial” due to its portrayal of executives as powerless, as has just been discussed.4 Nevertheless Christensen points out that the findings of his studies on disruption support this view, asserting that “customer-focused resource allocation and decision-making processes of successful
companies are far more powerful in directing investments than are executive’s decisions.”5 It is crucial to also mention that closely related to resource dependence is role of marketing departments, who influence the resource dependence dimension through conducting studies aimed towards understanding the needs of dominant customers. The emerging picture is that of inversed power distribution. Determinants of decisions are largely from outside the firm (i.e. in customers’ hands), followed by people from the lower levels of the organisation, with the executives wielding the least influence on decision-making about resource allocation.
1 Christensen (2016, p. 104) 2 Christensen (2016, p. 82) 3 Pfeffer & Salancik (1978[2003]) 4 Christensen (2016, p. 101) 5 Christensen (2016, p. 102)