The Innovator’s Dilemma

In my ongoing quest to figure out how to make interesting new games that the market will still accept, I stumbled across a book called The Innovator’s Dilemma, by Clayton Christiansen. Using a case study from the computer disk drive industry, Christiansen shows how noteworthy and successful companies can suddenly be eclipsed by disruptive technologies. These disruptive technologies are generally smaller, cheaper, faster versions of existing technologies and often serve a much smaller market initially. That makes the book’s message alarming: successful companies still fail when listening to your customers, doing traditional market studies and everything else you’re “supposed” to do.

There are three main elements to his theory, which I will summarize here:

Sustaining vs. Disruptive technologies
Christiansen argues that most new technologies are higher improving versions of their ancestors, which he calls sustaining technologies. They can be discontinuous, radical or incremental in character, but they all imporove the performance of existing products along dimensions that mainstream customers in large markets value. Disruptive technologies, on the other hand, often have worse performance and serve smaller markets, but often have a few new features that new customers value. Products based on these technologies tend to be “cheaper, simpler, smaller and, frequently, more convenient to use.”.

Market Need vs. Technology Improvement
The main assumption here is that technologies improve faster than market demand. In an effort to give customers more of what they want, technology innovators “overshoot” their market, giving customers more than they need or are ultimately willing to pay for.

Disruptive Technologies vs. Rational Investments
This is the conclusion that companies arrive at that says that disruptive technologies are not a rational financial target. This is because disruptive technologies are cheaper and promise lower margins, not greater profits. Also, the markets for these technologies are often smaller or unproven, in relation to the markets that sustaining technologies already target. Finally, existing customers served by sustaining technologies often don’t want products based on disruptive technologies, so any customer interviews and research points towards sustainable instead.

So what does this mean for games? Personally, I think his theory has some similarities and shared conclusions with Blue Ocean Strategy. To me, it seems like our current “next-gen” technology, like the XBox 360 and AAA PC titles are in danger of giving players more than they are willing to pay for. That is, their budgets are too high for what players get. With the latest $10 million budgets, are players really getting twice as much value as they were a few years ago? If so, are player willing to pay $80-$100 for a game instead of $40-50? I think not.

I think that game companies need to start looking more seriously at “casual” games (though I hate that term and the games it currently represents) and start thinking about serving a much larger market with a much smaller level of technology and amount of content. I think that companies like EA and even Blizzard could be in danger blinding giving existing players more of what they want at escalating budgets, only to be blind-sided by smaller (but hopefully no less artistic or compelling) games that serve an untapped audience.

This is all very paraphrased and without examples, so I would recommend that you read the book if you want more detail on companies that have failed in the past or “proof”.

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