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".
He showed that time and again almost all the organizations that have "died"
or been displaced from their industries (because of a new paradigm of customer
offering) could see the disruption coming, but did nothing until it was too
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
All kinds of companies - as they can be impacted by technology innovation/change.
Steps in Disruptive Innovation. Process
The model shows that, as the performance demanded by the customers of
an existing market increases over time, so does the performance provided
within a technological paradigm. Often the performance improvement provided
has a different trajectory to the trajectory of performance improvement
demanded by the customers (see figure). When the trajectory slopes differ,
and the performance provided exceeds performance demanded, new technologies
that were only performance competitive in remote market niches may migrate
into other customer networks. This provides innovators with a vehicle to
new customers, who would have previously viewed their offerings as substandard;
and enables them to offer established mainstream markets a new set of performance
value attributes that are now more relevant than the current paradigm.
Disruption and commoditization actually go hand in hand. A company that
overshoots, simply can't win (a firm that improves a product to the point
that it is more than good enough for customers to use and pay a premium
for). Either disruption will steal its markets, or commoditization will
steal its profits. While new waves of disruption wash over an industry,
the place where the money will be will shift across the value chain over
time. While this happens, companies that position themselves at a spot in
the value chain where performance is not yet good enough will capture the
Limitations of Disruptive Innovation. Disadvantages
Disruptive Innovation requires a separate strategy process. This process
must be emergent and focused on unanticipated opportunities, problems and
successes, rather than intended and focused on improved understanding of
what works and what doesn't.
Instead of designing products and services that address current behavior
of current customers, the underlying aims of people should inform the design
of innovations. Understanding what people really need is however far from
Disruptive businesses can't achieve big profits very fast, due to their
nature (addressing new markets, or addressing low end of existing markets).
Venture capitalists are increasingly impatient for businesses to deliver
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.
Book: Clayton M.
Christensen - The Innovator's Dilemma
Book: Clayton M.
Christensen - The Innovator's Solution
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