The Innovator’s Dilemma and the US Economy
Clayton Christensen, in his book The Innovator’s Dilemma, discusses how disruptive technologies will kill incumbent technologies. Basically it is about how the crappy and cheap will eventually take over the sophisticated and expensive.
The well-worn example is in the computing world. The PC (which until recently cost thousands of dollars) killed the dominance of the mini-computer and mainframe (which then cost tens of thousands of dollars). The new $300 netbooks may eventually become the dominant computing platform. Or maybe a $100 mobile phones will eventually replace computers altogether.
The dilemma arises because most companies focus their innovation energies on building faster and more sophisticated technologies: becoming bigger and better. That is, they move towards the right of the graphic above. Unfortunately, the newer, cheaper developments – even if they are lower quality (in the beginning) and don’t perform as well – will ultimately be the winners. Or in other words, the left part of the graphic above.
The US Economy Dilemma
I fear that the same dilemma exists for the US economy. Instead of disruptive technologies, we are talking about disruptive economies and countries.
The US economy – and most of the “Western world” – is based on constantly improving everything: becoming bigger and better.
But what if affordability and accessibility are the names of the game? How will we compete with China or India?
This poses a serious dilemma. In these situations, the incumbent often loses. The Western world is the current incumbent.
Innovation and the US Economy
What can be done? How can the US survive?
Some would claim that we need to become more creative. Use our right brain more. Focus on design and experiences. Taking things to the next level. Although this may be true, I wonder if it perpetuates the innovator’s dilemma thinking. Bigger and better. Moving towards the right.
What if the answer is to find ways of offering more affordable, more accessible, and more simplistic offerings? Moving towards the left. Of course, this too requires right brain, creative thinking.
Earlier today I spoke with Charlie Brofman, President and CEO of Cybersettle. This company offers online settlement and dispute resolution technologies. Interesting stuff. We tend to think of legal claims as being complicated, expensive, and manually intensive. However, Cybersettle’s patented technology almost totally automates the process. It’s low touch but low cost. During a two-year pilot, the city of New York saved over $25 million in administrative costs.
Maybe the development of this less expensive and more accessible solutions can help fend off low cost labor. Or maybe there are other solutions.
What idea do you have for revitalizing the US economy and preventing it from falling victim to the Innovator’s Dilemma?
P.S. Be sure to read my follow-up article on how to make your products and services more affordable and accessible.