Disruptive Technologies - · PDF fileNon-consuming occasions Different measure Of Performance...

1/25/06 Copyright Clayton M. Christensen 1

Disruptive Technologies:

A driver of leadership failure and the source of new growth opportunitiesP

erf

orm

an

ce

Time

Performance that customers

can utilize or absorb

Pace of

Technological

Progress

Sustaining innovations

Disruptive

technologies

Incumbents nearly always win

Entrants nearly always win


The Innovator’s Dilemma

Performance

Time

Disruptive

technology:

personal

computers

60% on

$500,000

45% on

$250,000

40%

on $2,000

20%

Sustaining innovations

to minicomputers


7%

4%

Quality of m

inimill-

produced steel

12%

8%

18% 22%

% of tons

Ste

el

Qu

ali

ty

19801975 1985 1990

Rebar

Angle iron; bars & rods

Structural Steel

Sheet steel

25–30%55%

Beat competitors with asymmetry of motivation

Quality o

f inte

grate

d mills

’ ste

el


Brands can be disruptedPerformance

Time

Brands create value when

marketing to customers who

are not yet well-served

Brands create little value

when marketing to customers

who are over-served

Store brands


Two strategies for asymmetric competition

Non

-con

sum

ers o

r

Non

-con

sum

ing

occa

sions

Dif

fere

nt

mea

sure

Of

Per

form

an

ce

Time

New-market disruption:

Compete against non-

consumption

Low-end disruption

Address over-se

rved

customers with a lower-co

st

business model

Performance

Time

Bring a better product into

an established market


Non

-con

sum

ers o

r

Non

-con

sum

ing

occa

sions

Dif

fere

nt

mea

sure

Of

Per

form

an

ce

Time

Pe

rfo

rma

nc

e

Time

Pocket radios

Portable TVs

Hearing Aids

Tabletop Radios,

Floor-standing

TVs

Path taken by

vacuum tube

manufacturers

How Transistors Disrupted Vacuum Tubes


Non

-con

sum

ers o

r

Non

-con

sum

ing

occa

sions

Dif

fere

nt

mea

sure

Of

Per

form

an

ce

Time

Pe

rfo

rma

nc

e

Time

Standard phrases

Chat rooms

Toy robots

Word Processing

Path taken

by

IBM

Voice Recognition as Disruption


Time

Co

mp

lex

ity

of

dia

gn

os

is &

tre

atm

en

t

Time

Disruption among Healthcare institutions

General Hospitals

Doctors’ Offices

Patients’ homesCost of venue

Outpatient Clinics


Co

mp

lex

ity

of

dia

gn

os

is &

tre

atm

en

t

Time

Disruption among healthcare providers

Specialist physicians

Nurses

Patients and familiesCost of provider

General practice physicians


Sim

ple

Cla

rity

of

the

rule

s

Am

big

uo

us

Lit

tle

S

kil

l re

qu

ired

to f

oll

ow

th

e ru

les

D

eep

Sick child NurseFamily

doctorSpecialist

Home

Office

Outpatient

Clinic

Parent

General

Hospital

Tertiary

hospitalScientific understanding,

built upon the ability to diagnose

unambiguously, shifts the method used

to diagnose and treat disorders from

an unstructured, experimental

problem-solving process, towards

a rules-based regime.

Simple Clarity of the rules Ambiguous

Little Skill required to follow the rules Deep


Integrated firms have the advantage when products aren’t good

enough. Focused firms overtake over-served markets.

Modular Arc

hitectu

res

Compete by improving

speed, responsiveness

and customization

Performance

Time

Interdependent A

rchitectures

Compete by improving

functionality &

reliability


Changes in integrality/modularity have profoundly

changed the structure of the computer industry

Equipment

Materials

Components

Product design

Assembly

Operating system

Applications software

Sales & distribution

Field service

Intel, Micron, Quantum, Komag, etc.

Compaq, Dell, Gateway, Packard Bell

Compaq

Microsoft

Word Perfect, Lotus, Borland, etc.

CompUSA

Independent contractors

Microsoft

Contract assemblersContract assemblers

1960 - 1980 1980 - 1990 1990 - Present

Dell

IBM

Co

ntr

ol D

ata

Dig

ita

l E

qu

ipm

en

t

Monsanto, Sumitomo Metals, Shipley, etc.

Teradyne, Nikon, Canon, Applied Materials, Millipore, etc.

Ap

ple

Co

mp

ute

r

Micro-

Center


Modular Arc

hitectu

res

Performance

Time

Interdependent A

rchitectures

Integrated companies with proprietary products

typically commoditize their suppliers

Commoditizer

IBM

Commoditizee

Applied Magnetics

General Motors Dana Corp.

P&G Dow Corning


Modular Arc

hitectu

res

Performance

Time

Interdependent A

rchitectures

When an industry’s value chain dis-integrates,

assemblers of modular products must begin outsourcing.

Their suppliers then can commoditize their customers

Commoditizer

Flextronics

Commoditizee

Compaq

Implant makers Orthopedic Surgeons

Bloomberg Wall Street analysts

Business ProfessorsHBS Publishing

Infosys, Wipro IT Departments

Tier-One Suppliers Auto Assemblers


Products find a certain market only when

they help customers get done the jobs that

they already have been trying to do

Milk shakes

Internet appliances / simputers

Digital cameras

Electronic learning


•Voice phone

•News summaries

•Always on

•Simple, mindless

games

Structuring the market in terms defined by data that are

easily collected obfuscates the right targets for innovation.

•CRM software

•E-books, e-

magazines

•Stock trading

•Travelocity

•E-mail

•Voice

•Digital camera

•Word

•Excel

•Handwriting

recognition

•Wireless e-mail

•Phone

Define the Market

as a class of

products (wireless

hand-held)

Competition: Palm,

Sony, Hewlett

Packard, Nokia

Define the market in

demographic terms

(the business

traveler)

Competition: wireline

telecom and notebook

computers

Define the market in

terms of jobs that

customers need to

get done

Competition: Nokia,Wall Street Journal,CNN Airport News,

boredom


• When companies segment their markets by job,they find

– The market is much larger

– Their share is smaller

– Their real competitors aren’t in their product category

– Growth potential is greater, because non-consumptionis usually a major competitor

• Methods for discovering job segments

– Catch customers right after they hired a product

– Don’t ask why. Understand & write a case about thesituation.

– Ask what the customer hired or did when in that samesituation, but didn’t hire your product

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