Management of New &

Emerging Technology
INNOVATION & DISRUPTIVE
TECHNOLOGY
Week 8&9
The Innovator’s Dilemma
The best of conventional good business
practices can ultimately weaken a great
firm

from “The Innovator’s Dilemma”, by Clayton M. Christensen,

Harvard Business School Professor, on technological innovation
and disruptive technologies
 Disruptive Technology:
Famous Incorrect Predictions
“The horse is here to stay, but the automobile is only a
novelty – a fad” Advice to Henry Ford’s Lawyer, 1922

“Well informed people know that it is impossible to

transmit the voice over wires and were that it were possible
to do so, it would be of no practical value” Editorial in the
Boston Post, 1865

“This telephone has too many shortcomings to be seriously

considered as a means of communication. The device is
inherently of no value to us.” Western Union Internal
Memo, 1876

Everything that can be invented has been invented.

--Charles H. Duell, Commissioner, U.S. Office of Patents,
1899.
“The wireless music box has no imaginable commercial
value. Who would pay for a message sent to nobody in
particular?” Response of Associates of David Sarnoff, when
invited to invest in radio

“I think there is a market for about five computers.”

Thomas Watson, Sr. Founder of IBM, 1943

“There is no reason anyone would want a computer in their

home.” Ken Olsen, President and Founder of Digital
Equipment Corp., 1977

“640k ought to be enough for anybody” Attributed to Bill

Gates in 1981

A cookie store is a bad idea. Besides, the market research

reports say America likes crispy cookies, not soft and chewy
cookies like you make. --Response to Debbi Fields' idea of
starting Mrs. Fields' Cookies.
Disruptive Technology:
Famous Incorrect Predictions
People predict the future incorrectly because the “wrong”
answer makes sense at the time
◦ Watson could not have know about:
● Miniaturization
● Networking
● The Internet
● User friendly, graphical user interfaces
● Falling costs of computer components
Technologies
Sustaining – Steady, linear improvement of
existing technology
Disruptive – Introduction of completely
new approaches that have the potential to
create a new industry or transform an
existing one
◦ Revolutionary – radical innovations
● digital photography, microbots, high-temperature
superconductors
◦ Evolutionary – formed by the convergence of
previously separate research areas
● MRI imaging, faxing, electronic banking
The Innovator’s Dilemma
The PC is a prime example of a "disruptive
technology" that was dismissed out of hand by
an industry's established leaders until it was
too late.
Disruptive technologies work by offering, at
least initially, little in the way of performance,
but plenty in terms of cheapness, convenience
and ease of use.
◦ As such, they appeal to a different class of customers, carving
out new markets for themselves before going on to have the
industrial Goliaths' business for lunch.
The Innovator’s Dilemma
The Innovator's Dilemma: A company which is in an existing
business and listening to its existing customers feels that
there is no need for anything new.
Should it invest its money to
◦ make new products that its best customers can use and that
would improve the company’s profit margins" or
◦ invest its money to create worse products that none of its
customers can use, that would wreck its profit margins.
● Sustaining technologies – meet the needs of customers today and
the ones who are paying
● Disruptive technologies – come from innovators who keep improving
the product performance till it comes "from below" and starts
hurting the entrenched incumbents.
Dilemmas of Disruptive
Technology

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Disruptive Technology
The sustaining technologies are on the blue line e.g., incremental
engineering advances that all good companies are able to grind out.

The downward yellow arrow, a disruptive technology, is something that

brings to the market a product or service that is not as good as what
historically had been available, and therefore it can't be valued or used
by customers in the mainstream of the market. Yet it takes root in a
different application.

The green line represents the new performance trajectory - it slopes

upward faster than the sustaining technology and intersects with the
customers needs and the mainstream.
Innovator’s Dilemma
Disruptive technologies do not initially satisfy
the demands of even the high end of the
market.
Large companies choose to overlook disruptive
technologies until they become more attractive
profit-wise.
Eventually they surpass sustaining technologies
in satisfying market demand with lower costs.
Large companies who did not invest in the
disruptive technology sooner are left behind.
Disruptive Technologies
Well-established companies have problems dealing
with disruptive technologies because they aren't
prepared to handle the changes they bring on.
◦ Christensen defines disruptive technologies as "simple,
convenient-to-use innovations that initially are used by
only unsophisticated customers at the low end of
markets."
Large companies tend not to pay attention to these
disruptive technologies because they don't satisfy
the demands of high-end users -- at least, not at
first.
◦ But because these radical innovations initially emerge in small
markets, they can, and often do, become full-blown competitors
for already established products
◦ If a company is prepared to deal only with "sustaining
technologies," or technologies that improve product
performance, and not disruptive technologies, it can fail.
How to identify a disruptive innovation
Disruption is a relative phenomenon

• Is the innovation targeting people who are nonconsumers or

overserved by existing products?
• Is the innovation not as good as existing products as judged
by historical measures of performance?
• Is the innovation simpler to use, more convenient, and more
affordable?
• Is there a technology enabler that can carry the new value
proposition up-market?
• Is the technology paired with a business model innovation
that allows it to be sustainable?
• Are existing providers motivated to ignore the new
innovation and not threatened at the outset?

@christenseninst Clayton christensen institute

Handling a "disruptive" technology
requires
Knowledge of the new technology
Willingness and ability to develop a technology
for new customers, as well as a need to develop
the "sustained" technology
Willingness to accept new forms of marketing,
sales and production
Willingness to accept new profit margins for
each sale
Willingness to terminate the existing staff,
hiring new employees instead

17
Industries Most Vulnerable to
Digital Disruption
1. Healthcare
2. Media and Entertainment
3. Retail
4. Financial Services
5. Telecommunications
6. Athletic equipment
7. Energy
8. Real estate
9. Education
10. Law
 Disruption in higher ed is just
beginning

@christenseninst CLAYTON CHRISTENSEN INSTITUTE

Much amuck about MOOCs
Are MOOCs a disruptive innovation?

• Is the innovation targeting people who are non-consumers or

over-served by existing products?
• Is the innovation not as good as existing products as judged
by historical measures of performance?
• Is the innovation simpler to use, more convenient, and more
affordable?
• Is there a technology enabler that can carry the new value
proposition up-market?
• Is the technology paired with a business model innovation
that allows it to be sustainable?
• Are existing providers motivated to ignore the new
innovation and not threatened at the outset?

@christenseninst Clayton christensen institute

Integration: Rise of the corporate university

@christenseninst Clayton christensen institute

The new kids on the block

@christenseninst Clayton christensen institute

IoT Impact!

@christenseninst Clayton christensen institute

 Benefits of blended
learning for teachers
1. Eager students
2. Better information
3. Team teaching
4. Extended time with
students
5. Individualized PD plans
6. Motivate hard to reach
kids
7. More leadership roles
8. More earning power
9. Focus on deeper
learning
10. New options to teach
at home

Source: Digital Learning Now!

@christenseninst CLAYTON CHRISTENSEN INSTITUTE

What is “S-Curve”?
The uses of S-curve at the industry level :
◦ The description of the magnitude of improvement
◦ The prescriptive S-Curve theory
Product performance results from:
◦ Component technology
◦ Architectural design
S-curve can provide convincing explanations of why alternative technologies
have made substantial inroads against currently dominant technology?
The Position on S-curve
Corresponding to BCG

HIGH Market Share

LOW

Product
performance
Growth

Time or engineering effort

LOW
Using S-Curve to Prescribe Development of
New Component Technologies
The risk to switching to a new S-curve.
◦ Cost more and take much longer time
When to manage the switch from one
component technology to another?
◦ Engineers sensed they were approaching the
physical limit of ferrite cores before 1970.
◦ With a process used in integrated circuit
manufacturing, thin-film photolithography, they can
create much smaller, more precise electromagnets
on the head.
So-what’s for tech based
startups
1. As a technology-based market matures, innovation
and competitive advantage switches from product
design innovation to process innovation – product
cost, quality, and delivery effectiveness become
more important. That is, your business models
must change.

2. This switch is marked by the emergence of a

dominant design for the product.

3. A startup can do well against established

competitors if it avoids direct confrontation with
what the incumbents regard as the most attractive
parts of a market, but rather if it provides new types
of functionality in inexpensive and easy to use
products to over-served or un-served customers.
It’s In The Timing
Hit the market too early, then the product performance
will not be adequate for the market to adopt it and it
will fail e.g., the Apple Newton
The key lies in targeting a niche which will use the product
and be delighted by it (as the Blackberry). As performance
improves over time, it becomes ready for the mainstream.
The Internet is also an "enabling technology“
◦ The Internet has unleashed a wave of innovation. Along
with the personal computer, it is perhaps the biggest
disruptive technology that we have seen in our generation.
◦ The impact of the Internet is only beginning to be felt
across many industries.
◦ As companies retool for web services, there will be dramatic
change in the way enterprises interact with each other -
collaborative commerce