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It is interesting how my understanding of innovator's dilemma perfectly explains Tesla. - there is market for luxury cars - luxury cars market was full of exp

by tlogan 11y ago

It is interesting how my understanding of innovator's dilemma perfectly explains Tesla. - there is market for luxury cars - luxury cars market was full of expensive but uninteresting, crapy and low quality cars. - Tesla make cool car for same price as other luxury cars but it was way cooler. It worked well. - Tesla now goes to conquer low end of the market So it is typical market disruption: make something better than others for lower price. NOTE: People say Tesla Model S is expensive but it is actually less expensive that Mercedes CLS which is has 2 stars reliability rating by JD Power.

pavlov 11y ago
The examples in the original Christensen book are a bit different from that scenario. As far as I remember, they're all about products in a lower market segment gradually moving up into a higher segment: 5" hard drives become good enough to eat the expensive 8" drives' market, initially weak hydraulic excavators gain enough power to compete with cable excavators, etc. So in the car example, this interpretation of "innovator's dilemma" would mean that something like electric Smart cars would gradually encroach on Mercedes' luxury market. Clearly it hasn't worked that way -- so that suggests that consumer cars are fundamentally different from excavators bought by businesses. (I know that Smart is actually a Mercedes brand. I have a suspicion that the huge investments that Mercedes made in Smart around the turn of the millennium were motivated by Christensen's theory so much in vogue at the time...)
hencq 11y ago
Actually the way the Innovator's Dilemma" uses the word disruption is very specific and doesn't match your explanation or the article's for that matter. Christensen doesn't use disruption to mean "making something better than others for a lower price". Disruption, as he defines it, is specifically about making a product that is actually inferior on the metrics valued by the existing market. The canonical example from his book is about hard drive manufacturers increasing the storage space of their hard drives for mainframes (something the market asked for). They got disrupted by manufacturers making hard drives that had much less storage space (so considered inferior by the existing market), but were physically smaller allowing them to be used in minicomputers, a new market. Now, it might still be possible to apply disruption as Christensen defines it to the market for cars, though arguably it might be stretching it. It seems to me that Tesla sacrificed some of the metrics used by current buyers of luxury cars, but appealed to a previously ignored segment of "green" or "techie" buyers. Compare for instance the interior of a Tesla model S against a Mercedes S class and the Tesla would lose. However, Tesla correctly identified that there appears to be a market for electric cars where customers are willing to pay a premium.
pc86 11y ago
Why is the price or reliability of a Mercedes CLS relevant to whether or not a Model S is expensive (which is certainly is)? I'm not saying the CLS isn't more expensive, or less reliable, I just don't know what that has to do with anything.
erikpukinskis 11y ago
> it is typical market disruption: "make something better than others for lower price" That is the opposite of a disruptive technology, as defined by Christensen. Disruptive technologies are making something worse and typically more expensive but which has a key advantage which can't be replicated in the old paradigm. The newcomer establishes themselves in the niche for whom that key advantage is most important, and over time achieves cost and feature parity with the incumbent, at which point the new technology is better and cheaper in every way and they become the new incumbent. OP's article describes "obsoletive" technology as the counterpart to "disruptive" technology, and defines it as technology which is simply better or cheaper than the old generation, rendering it obsolete. That's a closer fit to what you're describing.

by tlogan 11y ago

pavlov 11y ago

The examples in the original Christensen book are a bit different from that scenario. As far as I remember, they're all about products in a lower market segment gradually moving up into a higher segment: 5" hard drives become good enough to eat the expensive 8" drives' market, initially weak hydraulic excavators gain enough power to compete with cable excavators, etc. So in the car example, this interpretation of "innovator's dilemma" would mean that something like electric Smart cars would gradually encroach on Mercedes' luxury market. Clearly it hasn't worked that way -- so that suggests that consumer cars are fundamentally different from excavators bought by businesses. (I know that Smart is actually a Mercedes brand. I have a suspicion that the huge investments that Mercedes made in Smart around the turn of the millennium were motivated by Christensen's theory so much in vogue at the time...)

hencq 11y ago

Actually the way the Innovator's Dilemma" uses the word disruption is very specific and doesn't match your explanation or the article's for that matter. Christensen doesn't use disruption to mean "making something better than others for a lower price". Disruption, as he defines it, is specifically about making a product that is actually inferior on the metrics valued by the existing market. The canonical example from his book is about hard drive manufacturers increasing the storage space of their hard drives for mainframes (something the market asked for). They got disrupted by manufacturers making hard drives that had much less storage space (so considered inferior by the existing market), but were physically smaller allowing them to be used in minicomputers, a new market. Now, it might still be possible to apply disruption as Christensen defines it to the market for cars, though arguably it might be stretching it. It seems to me that Tesla sacrificed some of the metrics used by current buyers of luxury cars, but appealed to a previously ignored segment of "green" or "techie" buyers. Compare for instance the interior of a Tesla model S against a Mercedes S class and the Tesla would lose. However, Tesla correctly identified that there appears to be a market for electric cars where customers are willing to pay a premium.

pc86 11y ago

Why is the price or reliability of a Mercedes CLS relevant to whether or not a Model S is expensive (which is certainly is)? I'm not saying the CLS isn't more expensive, or less reliable, I just don't know what that has to do with anything.

erikpukinskis 11y ago

> it is typical market disruption: "make something better than others for lower price" That is the opposite of a disruptive technology, as defined by Christensen. Disruptive technologies are making something worse and typically more expensive but which has a key advantage which can't be replicated in the old paradigm. The newcomer establishes themselves in the niche for whom that key advantage is most important, and over time achieves cost and feature parity with the incumbent, at which point the new technology is better and cheaper in every way and they become the new incumbent. OP's article describes "obsoletive" technology as the counterpart to "disruptive" technology, and defines it as technology which is simply better or cheaper than the old generation, rendering it obsolete. That's a closer fit to what you're describing.