Strategies & Analysis
Adisruptive technology or disruptive innovation is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades),
displacing an earlier technology. The term is used in business
and technology literature to describe innovations that improve
a product or service in ways that the market does not expect,
typically first by designing for a different set of consumers in the
new market and later by lowering prices in the existing market.
In contrast to “disruptive” innovation, a “sustaining” innovation does not create new markets or value networks but
rather only evolves existing ones with better value, allowing the
firms within the market to compete against each other’s sustaining improvements. Sustaining innovations may be either
“discontinuous” (i.e. “transformational”) or “continuous” (i.e.
“evolutionary”). Transformational innovations are not always
disruptive. (1)
In the Wikipedia definitions they further distinguish transformational from disruptive in this example: (2)
Although the automobile was a transformational innovation,
it was not a disruptive innovation, because early automobiles
were expensive luxury items that did not disrupt the market for
horse-drawn vehicles. The market for transportation essentially
remained intact until the debut of the lower priced Ford Model
T in 1908 by making higher speed, motorized transportation
available to the masses. Eventually, after sustaining innovations
within the automotive industry, automobiles displaced horses
and their associated businesses. Thus carriage-making, horse
trading and saddle repair ceased to be mass, commoditized
transportation businesses. In fact, the phrase “buggy whip maker” became a popular figurative description of business models
(and their technologies) slain by disruptive technologies.
Another example of a disruptive innovation would be rail
transportation. Prior to the railroads, goods were hauled to market via horse drawn wagons and, coincidentally, only to markets
relatively near to the sources of the hauled goods. Trains could
not only haul goods to much further geographical distances but
could haul exponentially greater volumes versus its displaced
wagon transportation.
Other examples of disruptive technologies are included in
the table above.
Christensen defines a disruptive innovation as a product or
service designed for a new set of customers.
“Generally, disruptive innovations were technologically straight-
forward, consisting of off-the-shelf components put together in a
product architecture that was often simpler than prior approaches.
They offered less of what customers in established markets want-
ed and so could rarely be initially employed there. They offered
a different package of attributes valued only in emerging markets
remote from, and unimportant to, the mainstream.” (1)
Christensen argues that disruptive innovations can hurt suc-
cessful, well managed companies that are responsive to their
customers and have excellent research and development. These
companies tend to ignore the markets most susceptible to dis-
ruptive innovations, because the markets have very tight profit
margins and are too small to provide a good growth rate to an
established (sizable) firm.
Thus disruptive technology provides an example of when
the common business-world advice to “focus on the customer”
(“stay close to the customer”, “listen to the customer”) can
sometimes be strategically counterproductive.(1)
This last Christensen statement unfortunately, is where many
small to mid-sized companies are currently struggling. Their
historic “focus on the customer” (“stay close to the customer”,
“listen to the customer”) emphasis is now placing them in a
quandary as they face not only new technology offered by their
larger competitor counterparts but they must organize differ-
ently as well.
Disruptive Events & Innovation
In Coatings & Paints
INNOVATION DISRUPTED MARKET
Downloadable digital media CD & DVD
Mini steel mills Vertically integrated steel mills
Personal computers Workstations, Word processors,
Autos/Trucks Rail transport
Plastics Metal, wood, glass
LED Light bulbs
e-Book Reader Printed books
On-line Degrees Higher learning - Colleges
Hacking disruption Computer intelligence flow
