InnovatorsDilemma (ThoughtStorms)

A lot of people talk about radical new technologies upsetting the existing order, bringing big companies down, creating opportunities for newcomers to take over. Sometimes it happens. Sometimes it doesn't.

Why?

ClaytonChristensen looks at the disk drive industry to attempt to build a model. He then compares other industries to test the model.

His conclusion. The existing market leaders fail, NOT because they screw up through :

Christensen sees new innovations falling into two types : sustaining and disruptive.

Sustaining technologies, however radical, do not bring down the market leaders, they are quickly adopted by them. In contrast, disruptive

technologies often cause a wholesale extinction of many previous generation companies and their replacement by new ones.

But what distinguishes a DisruptiveTechnology from a sustaining innovation is not technological but related to its structural position in the market.

Q : Why can't big companies handle disruptive technologies?

Big, succesful companies typically get big and succesful by being attentive to their customers' needs. They, therefore, don't get into these disruptive technologies because their customers don't want them to. Demand from existing customers for disruptive technologies is initially zero. (The new technology offers them no advantage; and might even create a new class of competitor.)

Therefore customers pull their suppliers away from disruptive technologies and in the direction of sustaining technologies. It is only later, when the customer has realized the importance of the new technology, or the new technology has improved its price / performance sufficiently to compete with the old technology that this customer becomes interested - by then it's typically too late, as a newer, more innovative company has established itself with the new technology.


It's a good heuristic to check whether a new technology is really :

Ironically, only then is it a likely to be genuinely disruptive innovation, and a genuine oportunity.


Example disruptive technologies which saw new companies significantly challenge previous market leaders ...

But NOT 2 1/2 inch technology, which the existing market leader simply adopted (their own laptop customers could understand the benefit)

Importantly none of these new innovations were strictly technical. The technical innovations in disk drive manufacture : thin film heads, tripple density writing techniques were sustaining, in that market leaders quickly adopted them and sold them to the customers.


In the software world, giving away FreeAsInBeer copies of older versions of your software is a way to keep out the "worse but possibly disruptive" competitors. Your customers will still buy the new version. But you starve the followers who are making worse, cheaper versions that may one day become good enough to compete.

: Actually according to the interview with him (linked on ClaytonChristensen page) he thinks of the modularity and adaptability of FreeSoftware being it's real value.


This notion of good companies failing through good management sets me thinking like this :


Criticism

Jill Lepore has a good criticism of Christensen's theory including the disc-drive data : http://www.newyorker.com/magazine/2014/06/23/the-disruption-machine?currentPage=all

Contrast


See also :


CategoryEconomics, CategoryDesign