disruptive technologies

Disruptive TechnologiesDisruptive Technologies

MIS 5105MIS 5105

Dr. GarrettDr. Garrett

ResourceResource

The Innovator’s DilemmaThe Innovator’s Dilemma, by Clayton , by Clayton M. Christensen (2003)M. Christensen (2003)

TechnologyTechnology

“…“…the processes by which an the processes by which an organization transforms labor, organization transforms labor, capital, materials, and information capital, materials, and information into products of greater value.”into products of greater value.”

““InnovationInnovation refers to a change in one refers to a change in one of these technologies.”of these technologies.”

Sustaining vs. Disruptive Sustaining vs. Disruptive TechnologiesTechnologies

Sustaining technologies foster improved Sustaining technologies foster improved performance of established productsperformance of established products

Most technological advances in a given Most technological advances in a given industry are sustainingindustry are sustaining

Disruptive technologies are those that Disruptive technologies are those that result worse product performance, at result worse product performance, at least in the near-termleast in the near-term


Bring new value propositions to Bring new value propositions to marketmarket

Underperform established products in Underperform established products in mainstream marketsmainstream markets

Have characteristics that appeal to Have characteristics that appeal to fringe or new customersfringe or new customers

Products are typically cheaper, Products are typically cheaper, simpler, smaller, less capable, but simpler, smaller, less capable, but more convenient to usemore convenient to use


“…“…disruptive technologies that may disruptive technologies that may underperform today, relative to what underperform today, relative to what users in the market demand, may be users in the market demand, may be fully performance-competitive in that fully performance-competitive in that same market tomorrow.”same market tomorrow.”

Disruptive Technologies vs. Disruptive Technologies vs. Rational InvestmentsRational Investments

Disruptive products are generally simpler Disruptive products are generally simpler and cheaper, with less margin, not greater and cheaper, with less margin, not greater profitsprofits

Disruptive technologies are typically first Disruptive technologies are typically first commercialized in emerging or insignificant commercialized in emerging or insignificant marketsmarkets

Leading firms’ most profitable customers Leading firms’ most profitable customers generally don’t want, and initially can’t use, generally don’t want, and initially can’t use, products based upon disruptive technologiesproducts based upon disruptive technologies

Initially embraced by the least profitable Initially embraced by the least profitable customers in a marketcustomers in a market

Principles of Disruptive Principles of Disruptive InnovationInnovation

Companies depend upon customers and Companies depend upon customers and investors for resourcesinvestors for resources

Small markets don’t solve the growth Small markets don’t solve the growth needs of large companiesneeds of large companies

Markets that don’t exist can’t be analyzedMarkets that don’t exist can’t be analyzed An organization’s capabilities define its An organization’s capabilities define its

disabilitiesdisabilities Technology supply may not equal market Technology supply may not equal market

demanddemand

Companies depend on Companies depend on customers and investors for customers and investors for

resourcesresources Established firms stay atop “wave Established firms stay atop “wave

after wave of sustaining technologies after wave of sustaining technologies (technologies that their customers (technologies that their customers need), while consistently stumbling need), while consistently stumbling over simpler, disruptive ones.”over simpler, disruptive ones.”

Theory of Resource Dependence – Theory of Resource Dependence – Companies depend upon their Companies depend upon their customers and investors to survivecustomers and investors to survive

Small markets don’t solve the Small markets don’t solve the growth needs of large growth needs of large

companiescompanies Successful companies need to continue to Successful companies need to continue to

growgrow “…“…the larger and more successful and the larger and more successful and

organization becomes, the weaker the organization becomes, the weaker the argument that emerging markets can argument that emerging markets can remain useful engines for growth.”remain useful engines for growth.”

Small organizations can most easily Small organizations can most easily respond to opportunities for growth in a respond to opportunities for growth in a small marketsmall market

Markets that don’t exist can’t Markets that don’t exist can’t be analyzedbe analyzed

““Companies whose investment Companies whose investment processes demand quantification of processes demand quantification of market sizes and financial returns market sizes and financial returns before they can enter a market get before they can enter a market get paralyzed or make serious mistakes paralyzed or make serious mistakes when faced with disruptive when faced with disruptive technologies.”technologies.”

An organization’s capabilities An organization’s capabilities define its disabilitiesdefine its disabilities

““The very processes and values that The very processes and values that constitute an organization’s constitute an organization’s capabilities in one context, define its capabilities in one context, define its disabilities in another context.”disabilities in another context.”

Technology supply may not Technology supply may not equal market demandequal market demand

““In their efforts to stay ahead by In their efforts to stay ahead by developing competitively superior developing competitively superior products, many companies don’t products, many companies don’t realize the speed at which they are realize the speed at which they are moving up-market, oversatisfying the moving up-market, oversatisfying the needs of their original customers as needs of their original customers as they race the competition toward they race the competition toward higher performance, higher margin higher performance, higher margin markets.”markets.”

Technology supply may not Technology supply may not equal market demandequal market demand

““In doing so, they create a vacuum at In doing so, they create a vacuum at lower price points into which competitors lower price points into which competitors employing disruptive technologies can employing disruptive technologies can enter.”enter.”

““Only those companies that carefully Only those companies that carefully measure trends in how their mainstream measure trends in how their mainstream customers customers useuse their products can catch the their products can catch the points at which the basis of competition points at which the basis of competition will change in the markets they serve.”will change in the markets they serve.”

What can managers faced with What can managers faced with disruptive technologies do?disruptive technologies do?

““Give responsibility for disruptive Give responsibility for disruptive technologies to organizations whose technologies to organizations whose customers need them so that customers need them so that resources will flow to them.”resources will flow to them.”

““Set up a separate organization Set up a separate organization small enough to get excited by small small enough to get excited by small gains.”gains.”


““Plan for failure. Don’t bet all your Plan for failure. Don’t bet all your resources on being right the first resources on being right the first time. Think of your initial efforts at time. Think of your initial efforts at commercializing a disruptive commercializing a disruptive technology as learning opportunities. technology as learning opportunities. Make revisions as you gather data.” Make revisions as you gather data.”


““Don’t count on breakthroughs. Move Don’t count on breakthroughs. Move ahead early and find the market for the ahead early and find the market for the current attributes of the technology. current attributes of the technology. You will find it outside the current You will find it outside the current mainstream market. You will also find mainstream market. You will also find that the attributes that make disruptive that the attributes that make disruptive technologies unattractive to technologies unattractive to mainstream markets are the attributes mainstream markets are the attributes on which the new markets will be on which the new markets will be built.”built.”


MIS 5105MIS 5105

Dr. GarrettDr. Garrett

disruptive technologies

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