Key Learning Objectives

• Disruptive innovations often don’t meet the needs of a firm’s top customers, but managers need to keep an eye on whether these innovations could potentially meet the needs of other customers.
• Sometimes the best opportunity for a product is not visible early on, and it takes time to develop. Closely watching the market and building strategy in an emergent way is helpful in these circumstances.
• Managers must carefully allocate R&D funds based on the evolution of a firm’s strategy.
• Meeting specific short-term financial targets can constrain a company’s ability and willingness to innovate.
• Managers are best positioned to invest in potentially disruptive innovation when the core business is healthy. They should always be thinking about how to make the new disruptive business profitable as quickly as possible.