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Disruptive Technologies - an introduction

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A brief description of the Clayton Christensen's concept of disruptive technology and how it helps us to understand why companies go bankrupt under conditions of technological change.

A brief description of the Clayton Christensen's concept of disruptive technology and how it helps us to understand why companies go bankrupt under conditions of technological change.

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    Disruptive Technologies - an introduction Disruptive Technologies - an introduction Presentation Transcript

    • Disruptive Technologies
    • Christian Sandström holds a PhD from ChalmersUniversity of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
    • Ever since Clayton Christensen published his book ’The innovator’s dilemma’ in 1997 its popularity hasincreased every year.
    • The book has had a profound impact on how both practitioners andscholars think about innovation and technological change.
    • This presentation will give a briefintroduction to the main idea of the book.
    • In his book, Christensen sought to explain why great firms fail underconditions of technological change.
    • While there are many explanations of suchfailure, Christensen brought an intriguingly different perspective upon this issue.
    • Previous work in this area had primarilylooked at how a new technology impacts the companies existing R&D skills.
    • For instance, a shift from mechanics to electronics in an industry would render the mechanical competence of established firms obsolete.
    • However, those perspectives could notexplain what happened in the disk drive industry, which Christensen studied during is PhD at Harvard.
    • In this industry, established firmsmanaged to renew their competence base, yet still failed.
    • Just take a look at what happened ineach shift from one generation of disk drives to another one:
    • 8-inch generation Year 1976 1978 1980Entrant firms 1 4 6Established 0 2 5 firms (Source: Christensen, 1997)
    • 8-inch generation Year 1976 1978 1980Entrant firms 1 4 6Established 0 2 5 firms (Source: Christensen, 1997)
    • 8-inch generation 5.25-inch generation Year 1976 1978 1980 Year 1980 1981 1982Entrant firms 1 4 6 Entrant 1 8 8 firmsEstablished 0 2 5 Established 1 2 8 firms firms (Source: Christensen, 1997)
    • 8-inch generation 5.25-inch generation Year 1976 1978 1980 Year 1980 1981 1982Entrant firms 1 4 6 Entrant 1 8 8 firmsEstablished 0 2 5 Established 1 2 8 firms firms (Source: Christensen, 1997)
    • 8-inch generation 5.25-inch generation Year 1976 1978 1980 Year 1980 1981 1982Entrant firms 1 4 6 Entrant 1 8 8 firms Established 0 2 5 Established 1 2 8 firms firms 3.5-inch generation Year 1983 1984 1985 Entrant 1 2 3 firmsEstablished 0 1 1 firms (Source: Christensen, 1997)
    • 8-inch generation 5.25-inch generation Year 1976 1978 1980 Year 1980 1981 1982Entrant firms 1 4 6 Entrant 1 8 8 firms Established 0 2 5 Established 1 2 8 firms firms 3.5-inch generation Year 1983 1984 1985 Entrant 1 2 3 firmsEstablished 0 1 1 firms (Source: Christensen, 1997)
    • 8-inch generation 5.25-inch generation Year 1976 1978 1980 Year 1980 1981 1982Entrant firms 1 4 6 Entrant 1 8 8 firms Established 0 2 5 Established 1 2 8 firms firms 3.5-inch generation 1.8-inch generation Year 1983 1984 1985 Year 1991 1992 1993 Entrant 1 2 3 Entrant 1 3 3 firms firmsEstablished 0 1 1 Established 0 0 3 firms firms (Source: Christensen, 1997)
    • In total, one established firm managedthe transition from one generation of disk drives to the next one!
    • And these shifts did not destroy the existing competence base of the incumbent firms.
    • Why then, did those firms fail?
    • Christensen’s answer:Because they listened to their customers!
    • Each of the new generations of disk drivesoffered a worse performance in terms of what existing customers demanded.
    • Customers wanted a better storagecapacity - and a smaller disk drive initially offered less storage.
    • Therefore, the established firms couldnot find any financial logic in entering the next generation.
    • Later on, the smaller generation would reach ’good enough’ performance levels andconsequently displace the former generation.
    • It looked like this:
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Technology supply and demand in the 10000 HDD industry 1000 Hard Disk Capacity (MB) 100 10 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
    • Companies went bankrupt by listening to their customers and giving them what they demanded.
    • The new generations of disk driveemerged in a new value network – in lowend segments or in entirely new markets.
    • The fact that the new generation had aworse storage capacity but offered newperformance attributes implied that they prospered in new applications.
    • Eventually, the products became ’goodenough’ in terms of storage capacity and then displaced the former generation.
    • Therefore, Christensen arguedthat one must look at whether innovations satisfy a firm’scurrent customer base or not.
    • Sustaining innovations are those which mainstream customers demand.
    • Sustaining innovations are those which mainstream customers demand.Those innovations which do not satisfy current customers are regarded as disruptive.
    • The disruptive innovation has:
    • The disruptive innovation has:Lower performance according to what mainstream customers want.
    • The disruptive innovation has:Lower performance according to what mainstream customers want. Other performance attributes(smaller, simpler), which are notvalued by current customers that makes it prosper in a new value network.
    • Companies are therefore ’heldcaptive’ by their most profitable customers – who impose a great indirect control of the resource allocation process inside the firm.
    • If you throw a stick into the field, you haven’t forced the dog to go and get it, but it would still do so.
    • You are fact in power, because you have something that the dog wants.
    • In the same way, existing customers influence what firms decide to do because they provide the company with profitable revenues.
    • This mechanism helps us to understand how companies may be misguided when listening to their current customers.
    • SourcesChristensen, C.M. (1997) The Innovator’s Dilemma, Harvard Business School Press, Cambridge, Massachusetts.
    • Image attributions
    • Find out more:www.disruptiveinnovation.se