Harvard Business Rewview – Joseph L. Bower and Clayton M. Christensen – FROM THE JANUARY 1995 ISSUE

“…Although most managers like to think they are in control, customers wield extraordinary power in directing a company’s investments. Before managers decide to launch a technology, develop a product, build a plant, or establish new channels of distribution, they must look to their customers first: Do their customers want it? How big will the market be? Will the investment be profitable? The more astutely managers ask and answer these questions, the more completely their investments will be aligned with the needs of their customers. This is the way a well-managed company should operate. Right? But what happens when customers reject a new technology, product concept, or way of doing business because it does not address their needs as effectively as a company’s current approach? The large photocopying centers that represented the core of Xerox’s customer base at first had no use for small, slow tabletop copiers. The excavation contractors that had relied on Bucyrus-Erie’s big-bucket steam- and diesel-powered cable shovels didn’t want hydraulic excavators because initially they were small and weak. IBM’s large commercial, government, and industrial customers saw no immediate use for minicomputers. In each instance, companies listened to their customers, gave them the product performance they were looking for, and, in the end, were hurt by the very technologies their customers led them to ignore. We have seen this pattern repeatedly in an ongoing study of leading companies in a variety of industries that have confronted technological change. The research shows that most well-managed, established companies are consistently ahead of their industries in developing and commercializing new technologies—from incremental improvements to radically new approaches—as long as those technologies address the next-generation performance needs of their customers. However, these same companies are rarely in the forefront of commercializing new technologies that don’t initially meet the needs of mainstream customers and appeal only to small or emerging markets.”