---
description: A companys customers suppliers employees and partners collectively determine which innovations it can perceive and pursue -- opportunities valued in other networks are structurally invisible
type: claim
domain: teleological-economics
created: 2026-02-21
source: "Clayton Christensen, The Innovator's Dilemma (1997)"
confidence: likely
tradition: "Christensen disruption theory"
---

# value networks act as perceptual filters that make disruptive opportunities invisible to incumbents

A value network is the context within which a firm identifies and responds to customers' needs, solves problems, procures inputs, reacts to competitors, and strives for profit. It includes customers, suppliers, employees, and partners -- all of whom influence what a company can and cannot do. Christensen's key insight is that a company's position in a value network determines which innovations it can and cannot pursue. If an innovation's value lies in a different value network -- one the company does not participate in -- the company has no mechanism to recognize or respond to it. The value network acts as a perceptual filter, making disruptive opportunities literally invisible to the incumbent's decision-making apparatus.

This explains why disk drive makers failed at each successive generation despite having the technical capability to build the smaller drives. The 8-inch drive makers supplied 200MB+ drives to mainframe manufacturers. When 5.25-inch drives appeared offering 10-50MB for the emerging PC market, the 8-inch makers could build them -- but their value network (mainframe customers demanding 300-400MB capacity) told them there was no market. The drives were too small, the customers too uncertain, the margins too thin. In each transition from 14-inch to 8-inch to 5.25-inch to 3.5-inch to 2.5-inch, established firms failed not because they could not build the new drives but because they delayed the strategic commitment to enter emerging markets where the smaller drives initially sold. Of the four leading 8-inch manufacturers, only Micropolis survived the 5.25-inch transition -- and it too was eventually liquidated.

The value network concept deepens [[proxy inertia is the most reliable predictor of incumbent failure because current profitability rationally discourages pursuit of viable futures]] by revealing that proxy inertia is not just about protecting current profits -- it is about the inability to even perceive alternatives. The entire organizational sensorium is tuned to the current value network's frequencies. This connects to [[three types of organizational inertia -- routine cultural and proxy -- each resist adaptation through different mechanisms and require different remedies]]: value networks create all three inertia types simultaneously. Routines encode value network assumptions. Culture reflects value network priorities. Proxies measure value network metrics. Since [[industries are need-satisfaction systems and the attractor state is the configuration that most efficiently satisfies underlying human needs given available technology]], the value network filter prevents incumbents from seeing that the attractor state has shifted -- they keep optimizing for the old configuration because their perceptual apparatus cannot detect the new one.

This is why [[riding waves of change requires anticipating the attractor state and positioning before incumbents respond through their predictable inertia]] is so powerful as an investment thesis: the value network filter makes incumbent response predictable. They will not respond until the disruption has penetrated their own value network, by which point the disruptor has already built capabilities and market position.

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Relevant Notes:
- [[proxy inertia is the most reliable predictor of incumbent failure because current profitability rationally discourages pursuit of viable futures]] -- value networks are the mechanism that creates proxy inertia at the organizational level
- [[three types of organizational inertia -- routine cultural and proxy -- each resist adaptation through different mechanisms and require different remedies]] -- value networks create all three inertia types simultaneously
- [[industries are need-satisfaction systems and the attractor state is the configuration that most efficiently satisfies underlying human needs given available technology]] -- value network filters prevent perception that the attractor state has shifted
- [[riding waves of change requires anticipating the attractor state and positioning before incumbents respond through their predictable inertia]] -- value network predictability enables strategic positioning
- [[good management causes disruption because rational resource allocation systematically favors sustaining innovation over disruptive opportunities]] -- value networks are the perceptual mechanism underlying the innovator's dilemma
- [[master narratives fail at technological integration when new technology would destabilize the narratives core legitimating structure]] -- value network logic scales to civilizational narratives: civilizations cannot perceive or integrate technologies that threaten their core legitimating structure

Topics:
- [[competitive advantage and moats]]