Disruptive Technologies
A disruptive technology is a new technological innovation, product, or service that eventually overturns the existing dominant technology or product in the market. Disruptive innovations can be broadly classified into lower-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption, whereas a lower-end disruptive innovation is aimed at main stream customers who were ignored by established companies. Sometimes, a disruptive technology comes to dominate an existing market by either filling a role in a new market that the older technology could not fill (as more expensive, lower capacity but smaller-sized hard disks did for newly developed notebook computers in the 1980s) or by successively moving up-market through performance improvements until finally displacing the market incumbents (as digital photography has begun to replace film photography).
In his well-known work The Innovator’s Dilemma, Christensen (2000) tackles the tough problem of why do big smart companies fail to innovate. For this purpose, he led in-depth studies of the technological evolution of industries such as the hard disk drive industry, the mechanical excavator industry and the steel industry. His findings can be summarised in the following ideas.
The causes of failure could not be attributed to established firms’ inadequate competence in new technological fields. Indeed, evidence is strong that as long as the new technology was required to address the needs of their customers, established firms were able to muster the expertise, capital suppliers, energy and rationale to develop and implement the requisite technology competitively and effectively. This has been true for incremental as well as radical advances. It was only when confronted with disruptive technologies that they failed. The reason for this failure is, according to Christensen, good management itself.
IBM discovered this reality in 1999 after realising that during several years it had missed the emergence of new industries closely related to its base of resources and capabilities. IBM discovered through an analysis of dozens of missed opportunities that its management system was only effective to deal with currently served markets and existing offerings, and decided to create a completely different management system for innovative initiatives, called the Emergent Business Opportunities (EBO) programme.
Examples of Disruptive Technologies
- Tablets replacing desktops
- Cloud and virtual solutions replacing Server and physical hardware
- Mobile technologies replacing fixed technologies
- Internet apps replacing premise vased applications
- Small Apps replacing large Applications
The Internet and Disruptive Technologies at the end of the 20th Century
In his article Strategy and Internet Michael Porter (HBR 1991) says that the Internet is often not disruptive to existing industries or established companies. It rarely nullifies the most important sources of competitive advantage in an industry; in many cases it actually makes those sources even more important. As all companies come to embrace Internet technology the Internet itself will be neutralized as a source of advantage. Basic Internet applications will become the basis for competing and companies will not be able to survive without them, but they will not gain any advantage from them. The more robust competitive advantages will arise instead from traditional strengths such as unique products, proprietary content, distinctive physical activities, superior product knowledge, and strong personal service and relationships. Internet technology may be able to fortify those advantages, by tying a company's activities together in a more distinctive system, but it is unlikely to supplant them.
Josh Harris, founder of the streaming-media company Pseudo.com declared with certitude on the CBS TV Show 60-Minutes that he was there to take companies like CBS out of business. At the time the Internet was seen as a “disruptive technology,” that would favor new entrants and send old-line companies scurrying for cover. At the time the boast did not seem too far-fetched, but only eighteen months later the boast seemed overblown. There were some breakthroughs. Companies like Napster, electronic brokerages, and online airline ticket sales ruled their respective industries, but the majority of the B2Cs – especially those that sold anything physical – were dismal failures.
The Internet and Disruptive Technologies in the early decades of the 21st Century
Has anything changed? To follow
See other Strategies for Managing Change.
- Strategy and Practice 9 - Strategies For Managing Change
- Strategy and Practice 9.1 Strategies for Managing Change
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