| A disruptive technology is a new technological innovation, product, or service that eventually overturns the existing
dominant technology in the market, despite the fact that the disruptive technology is both radically different than the leading
technology and that it often initially performs worse than the leading technology according to existing measures of performance.
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 come to replace film photography).
By contrast, sustaining technology refers to the successive incremental improvements to performance that market
incumbents incorporate into their existing product.
The term disruptive technology was coined by Clayton M. Christensen and described in his 1997 book
The Innovator's Dilemma. In his sequel, The Innovator's
Solution, Christensen replaced the term with the term disruptive innovation because he recognized that few
technologies are intrinsically disruptive or sustaining in character. It is strategy that creates the disruptive impact.
The theory
Christensen distinguishes between low-end disruption which targets customers that do not need the full performance of
the high end of the market and new-market disruption which targets customers that could previously not be served
profitably by the incumbent.
"Low-end disruption" occurs when the rate at which products improve exceeds the rate at which customers can learn and adopt
the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments.
At this point, a disruptive technology may enter the market and provide a product which has lower performance than the incumbent
but which exceeds the requirements of certain segments, thereby gaining a foothold in the market.
In low-end disruption, the disruptive company will naturally aim to improve its margin (from low commodity level) and
therefore will innovate to capture the next level of customer requirements. The incumbent will not want to engage in a price war
with a simpler product with lower production costs and will move up-market and focus on its more attractive customers. After a
number of iterations, the incumbent has been squeezed into successively smaller markets and when finally the disruptive
technology meets the demands of its last segment the incumbent technology disappears.
"New market disruption" occurs when a product that is inferior by most measures of performance fits a new or emerging market
segment. In the disk drive industry, for example, new generations of smaller-sized disk drives were both more expensive and had
less capacity than existing, larger-sized drives. Since size was not an important factor for the early computer market, these new
drives seemed worse in every way. With the development of the minicomputer (or afterwards, the desktop computer, the notebook,
and the personal music player), size became an important dimension, and these new drives quickly dominated the market.
Not all disruptive technologies are of lower performance. There are a several examples where the disruptive technology
outperforms the existing technology but is not adapted by existing majors in the market. These occur in industries with a high
capitalization sunk into the older technology. To update, an existing player not only must invest in new technology but also must
replace (and perhaps dispose of at high cost) the older infrastructure. It may simply be most cost effective for the existing
player to "milk" the current investment during its decline - mostly by insufficient maintenance and lack of progressive
improvement to maintain the long term utility of the existing facilities. A new player is not faced with such a balancing
act.
Some examples of high performance disruption:
- The rise of containerization and the success of the Port of Oakland,
California, while the port of San Francisco neglected modernization -
perhaps wisely due to its inconvenient location at the end of a peninsula not oriented with the prevailing freight traffic.
Rather than attempt to compete in the oceanic freight terminal business, the city's resources were directed elsewhere, primarily
toward becoming the leading financial center on the west coast through the encouragement of the construction of high rise
buildings for office space.
- "Mini mill" scrap feed steel product production facilities in the United States using integrated vertical casting methods
feeding rolling mills in a single continuous process to produce specialty products such as reenforcing bar for concrete. This
left the existing large steel producers with only the lower value commodity production which could not compete with lower cost
production worldwide - largely due to the lower labor costs offshore.
Examples of disruptive technologies
Not all technologies promoted as disruptive technologies have actually prospered as well as their proponents had hoped. However,
some of these technologies have only been around for a few years, and their ultimate fate has not yet been determined.
Unresolved examples of technologies promoted as 'disruptive technologies'
Business Implications
Disruptive technologies are not disruptive to customers, and often take a long time before they are significantly disruptive
to other manufacturers, so they are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is
often entirely rational for incumbent companies to ignore disruptive technologies, since they compare so badly to existing
approaches, and the initial markets for a disruptive technology are often very small compared to the main existing market for the
technology. Even if a disruptive technology is recognized, existing businesses are often reluctant to take advantage of it, since
it would involve competing with their existing (and more profitable) technological approach. Christensen recommends that existing
firms watch for these technologies, invest in small firms that might produce them, and continue to push technological demands in
their core market so that performance stays above what disruptive technologies can achieve.
External links
Books and Papers
- Christensen, Clayton M. (1997). The Innovator's Dilemma. Harvard Business School Press. ISBN 0875845851.
- Christensen, Clayton M.;Raynor, Michael E. (2003). The Innovator's Solution. Harvard Business School Press. ISBN 1578518520.
- Tushman, M.L. & Anderson, P. (1986). Technological Discontinuities and Organizational Environments. Administrative
Science Quarterly 31: 439-465.
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