The Innovator’s Dilemma

Recently my dad traveled to Colorado and stopped by our Aurora DWC office.  He is about to be 69-years-old and our conversations can quickly become nostalgic.  My dad was an entrepreneur.  He owned the local pharmacy in our small Texas town called Service Drug.  It was where I cut my teeth on how the day to day operations of a small business run.  Of course, I had carte blanche to ask him any questions or patrol behind the counter to understand the inter-workings of our family business more than most.

As we were reminiscing about the early days at Service Drug, my dad brought up technology since he knew DWC made it a focus.  Back then my dad wanted to have the latest technology for his pharmacy to make it leaner and the customer experience better.  This was the 1980’s, and well before the PC boom or even the internet.  Nonetheless, in 1981, my dad went all in and purchased a brand new Burroughs B800 for $50,000, a ton of money then and now.

burroughsB800_processorMy dad’s computer was a beast with four total pieces all about the size of a small dresser. By the time we assembled the computer in the office, there was barely room for a desk.  We never thought about the type of heat the beast put out with all the processors.  This was long before the concept of climate controlled server room and the processors on the Burroughs B800 could jump the temp in the room quickly.

I was in awe of this thing.  It would make an intense rumbling noise and literally shake the office when all four units were fired up.  Afterword, it would print something out on a dot matrix style printer that my dad would use to organize and reconcile his inventory and transactions.  Looking back, I am not sure how much time it saved or if it was even helping my dad run his business better.  Today, a microchip that fits inside your smart phone has 1000X the memory and power of a Burroughs B800.  I think that computer probably ended up being a better marketing tool for Service Drug given all the people who would want to come look at it.

Back then the Burroughs B800 was the best computer available.  Sadly, the Burroughs Corp has been out of business for over two decades now.  They opened in 1886 so it was a very good run by all counts.  Why did the Burroughs Corp, a company that pioneered some of the very first computer hardware and software for home and office, shut down?  They never took the next logical step.  They didn’t build faster and smaller computers.

This is The Innovator’s Dilemma.  This concept is written about in a book by Harvard professor and businessman, Clayton Christensen.  He suggests, and really proves, that companies can put too much emphasis on customers’ current needs, and fail to adopt new technology or business models that will meet customers’ unstated or future needs.  These companies will eventually fail.

When a disruptive innovation hits a market, the market leader almost never recognizes it.  Why?  Because they confuse what market they are in.  They think they are in the train market or the horse and buggy market not the transportation market.  A great quote by Henry Ford is “If I would have ask people what they wanted, they would have just said faster horses.”   Most industry leaders spend their time looking to just improve their existing products and not at disruptive innovation.

In the automobile example, when it was invented, all of its competitors dismissed it.  They said it was too noisy, it smelled bad and was unreliable.  Early on, many ignored the automobile due to this reasoning.  However, The Innovator’s Dilemma is that these disruptive technologies improve at a much faster rate.  At a certain point they will better serve the demand of the customer eventually creating a completely new market and space for the consumer.  In present day transportation, car manufacturers continue to try and make their vehicles get better MPG while Tesla is trying to unlock never having to use gas again.  That is true disruptive innovation.

A classic example of a company who avoided The Innovators Dilemma is Apple.  As many of you know the iPod is truly one of the greatest inventions of our generation.  When it was released, it quickly made Apple the most valuable company in the world.  They sold tens of millions of them and it was by far the leading product for Apple pushing past the iMac and iBook.  So what did Steve Jobs and Apple do to the iPod a few years later?  They cannibalized their best product by creating the iPhone.  Why?  They realized if they didn’t do it someone else will.  Apple understood that out innovating yourself always beats being out innovated by someone else.  The Burroughs Corp failed to recognize the market they were in, and recognize the future needs of its customers, thus ending their run in the PC industry.

At DWC, we have a core value to always be a Disruptive, Chaotic Force.  This helps remind all of us that we are not simply in the wire and cable market.   We are in the business of building strong relationships and delivering a premium experience.   As our wholesalers needs evolve, our business model will as well to ensure we never fall victim to The Innovator’s Dilemma.

-Written by Bryce Huett, DWC CEO