Impact of new technologies (revolutionary change) on a firm's existence. Explanation of Disruptive Innovation of Clayton Christensen. ('97)
Contributed by: Neusa Hirota
What is Disruptive Innovation? Description
The Disruptive Innovation model from Clayton Christensen is a theory that
can be used for describing the impact of new technologies (revolutionary change)
on a firm's existence. Clayton Christensen first coined the phrase "disruptive
technologies" in 1997, in his book "The Innovator's Dilemma: When New Technologies
Cause Great Firms to Fail".
By doing what good companies are supposed to do - cater to their most profitable customers and focus investments where profit margins are most attractive - established industry leaders are on a path of Sustaining Innovations and leave themselves open for disruptive technologies to bury them. This happens because the resource allocation processes of established companies are designed to maximize profits through sustaining innovations, which essentially involve designing better and better mousetraps for existing customers or proven market segments. When Disruptive Innovations (typically cheaper, simpler to use versions of existing products that target low-end or entirely new customers) emerge, established companies are paralyzed. They are almost always motivated to go up-market rather than to defend these new or low-end markets, and ultimately the disruptive innovation improves, steals more market share, and replaces the reigning product.
Types of Innovation
Companies have two basic options when they seek to build new-growth businesses. They can try to take an existing market from an entrenched competitor with sustaining innovations. Or they can try to take on a competitor with Disruptive Innovations that either create new markets or take root among an incumbent's worst customers.
There are two distinct types of Disruptive Innovations. The first type
creates a new market by targeting non-consumers. The second competes
in the low end of an established market.
Origin of the Disruptive Innovation model. History
Christensen's research and studies at Harvard.
Usage of the Disruptive Innovation method. Applications
Steps in Disruptive Innovation. Process
Limitations of Disruptive Innovation. Disadvantages
Assumptions of Disruptive Innovation. Conditions
Companies risk death with decisions to ignore technologies that do not appear to address their customers' needs, as they become fatal when two paradigmatic trajectories of progress interact.
Compare with: Product Life Cycle | Twelve Principles of the Network Economy | Bass Diffusion Model | Ten Schools of Thought | Blue Ocean Strategy | Positioning | Innovation Adoption Curve | Marketing Mix | Forget Borrow Learn | Four Trajectories of Industry Change | Co-Creation | Three Dimensional Business Definition