Blockbuster had thousands of video rental stores. Kodak once ruled photography. Nokia was the phone in every pocket. These were giants—rich, powerful, and everywhere. And yet, all of them were crushed by smaller, faster, more creative rivals. Why?
To answer that question, we turn to one of the most important ideas in modern business thinking: The Innovator’s Dilemma, a theory by Harvard professor Clayton Christensen. It’s a simple but powerful concept that explains why some of the biggest companies in the world fail when new technologies arrive—even when they see it coming.
Let’s break it down.
Christensen found that most big companies fail not because they’re lazy or stupid, but because they’re doing everything right. They’re listening to customers, improving their products, growing their profits. But they miss something crucial: the needs of the future market.
When a new technology appears—something that’s not perfect yet, but cheaper, simpler, or more flexible—it’s often ignored by big companies. That’s because their current customers don’t ask for it, and their profits don’t depend on it. Why focus on a risky, new idea when the old one is still working?
That’s the dilemma.
If they invest in the new idea too early, they risk losing money. But if they wait too long, a startup comes along, improves the new technology, and suddenly—boom—the old company is left behind.
Take Kodak. They invented the digital camera in the 1970s. Yes, invented. But they didn’t invest in it, because they made most of their money from selling photographic film — a business worth billions at the time. Executives feared digital cameras would kill that cash flow, so they left the idea on the shelf. For years, Kodak stayed focused on film while the world quietly shifted. Years later, digital cameras took over — and Kodak, once a symbol of photography, couldn’t catch up and eventually filed for bankruptcy in 2012.
Nokia ruled the mobile phone industry in the 2000s. Their phones were everywhere — tough, reliable, and trusted by millions. But they focused on making better keypad phones, refining what already worked, instead of preparing for what was coming.
In 2007, a small company named Apple launched a touchscreen smartphone. It wasn’t perfect, but it showed where the world was heading. Nokia dismissed it as a niche product, believing people still preferred buttons. But within just a few years, smartphones had taken over — and Nokia, despite its resources, couldn’t adapt fast enough.
Blockbuster had the chance to buy Netflix in 2000 for just $50 million. At the time, Netflix was a tiny DVD-by-mail service, and streaming felt like a far-off dream. Blockbuster’s executives laughed off the offer, confident that people would always prefer visiting video rental stores. They believed their brand was too big to fail. But while Blockbuster stuck to late fees and physical stores, Netflix kept evolving. Streaming took off, customer habits changed — and Blockbuster collapsed.
Today, Netflix is worth over $150 billion. Blockbuster has just one nostalgic store left in Oregon.
In each case, the big companies weren’t blind. They had smart people. But they were trapped by their own success. That’s what Christensen called the Innovator’s Dilemma. Success can make you slow, cautious, and focused on the present—just when you need to be brave, fast, and focused on the future.
So how do companies escape the trap?
Some create small internal teams to explore risky ideas—far away from their main business. Others invest in startups or buy them early. Amazon, for example, always reinvests profits into bold new projects like AWS, Kindle, and Alexa. That’s how it stayed ahead. Apple kills its own products when something better comes along. They dropped the iPod when the iPhone came out, even though it was one of their best-sellers.
The Innovator’s Dilemma is a warning—but also a lesson. No matter how big you are, if you stop taking risks and ignore the new kid on the block, you might be next. For startups, it’s a reminder: even if your product isn’t perfect yet, there’s power in being small, fast, and willing to challenge the giants.
Because every great disruption starts as an idea someone else was too afraid to try.
Prepared by Navruzakhon Burieva
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