In the case of Digital Equipment Company (DEC), Professor Christensen does not blame the management team for the company’s failure. Moreover, he suggests that blaming the management team is what people mostly come up with when thinking about the mismanagement of the company’s direction. Opposite to this point of view, the professor claims that the business environment of the time when DEC and other companies were producing minicomputers killed them all together in unison. The product that these companies sold was complicated and required training, support, and software that cost much Thus, DEC had to generate high gross margins that were difficult to achieve, if possible.
The management team of DEC has faced two choices: first, to make better products that they could sell for better profits to their best loyal customers. Second, to switch and make personal computers as the demand for them was rising rapidly. However, the customers of DEC did not give the company’s management a clue that this path was right. Christensen claimed that the choice, in other words, was to make worse products that none of their customers would buy that would, consequently, ruin their margins. This is the innovator’s dilemma issue, as Professor Christensen explains, as doing the right thing is the wrong thing and vice versa. DEC finally chose the strategy of continuing the production of minicomputers, and it failed due to a lack of disruption.
In contrast to DEC, IBM, in a similar situation, pursued a strategy of setting up an independent business unit and allowing this unit to create a different profit formula and development of different unique processes within the group. IBM had the largest share of the mainframe computer market. When minicomputers came, companies that produced mainframe computers were killed. IBM survived due to the launch of the new unit in a different location that produced minicomputers with less gross margins that were needed to sustain the competition. The example of IBM shows that if big businesses want to survive, they need to respond to disruptive innovations by establishing their disruptive products and keeping them separate from other company’s units to sustain the emerging competition.