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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.

Published in Business , Technology
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  • 1. Disruptive Technologies
  • 2. Christian Sandström holds a PhD from ChalmersUniversity of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
  • 3. Ever since Clayton Christensen published his book ’The innovator’s dilemma’ in 1997 its popularity hasincreased every year.
  • 4. The book has had a profound impact on how both practitioners andscholars think about innovation and technological change.
  • 5. This presentation will give a briefintroduction to the main idea of the book.
  • 6. In his book, Christensen sought to explain why great firms fail underconditions of technological change.
  • 7. While there are many explanations of suchfailure, Christensen brought an intriguingly different perspective upon this issue.
  • 8. Previous work in this area had primarilylooked at how a new technology impacts the companies existing R&D skills.
  • 9. For instance, a shift from mechanics to electronics in an industry would render the mechanical competence of established firms obsolete.
  • 10. However, those perspectives could notexplain what happened in the disk drive industry, which Christensen studied during is PhD at Harvard.
  • 11. In this industry, established firmsmanaged to renew their competence base, yet still failed.
  • 12. Just take a look at what happened ineach shift from one generation of disk drives to another one:
  • 13. 8-inch generation Year 1976 1978 1980Entrant firms 1 4 6Established 0 2 5 firms (Source: Christensen, 1997)
  • 14. 8-inch generation Year 1976 1978 1980Entrant firms 1 4 6Established 0 2 5 firms (Source: Christensen, 1997)
  • 15. 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)
  • 16. 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)
  • 17. 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)
  • 18. 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)
  • 19. 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)
  • 20. In total, one established firm managedthe transition from one generation of disk drives to the next one!
  • 21. And these shifts did not destroy the existing competence base of the incumbent firms.
  • 22. Why then, did those firms fail?
  • 23. Christensen’s answer:Because they listened to their customers!
  • 24. Each of the new generations of disk drivesoffered a worse performance in terms of what existing customers demanded.
  • 25. Customers wanted a better storagecapacity - and a smaller disk drive initially offered less storage.
  • 26. Therefore, the established firms couldnot find any financial logic in entering the next generation.
  • 27. Later on, the smaller generation would reach ’good enough’ performance levels andconsequently displace the former generation.
  • 28. It looked like this:
  • 29. 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)
  • 30. 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)
  • 31. 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)
  • 32. 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)
  • 33. 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)
  • 34. 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)
  • 35. 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)
  • 36. 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)
  • 37. 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)
  • 38. 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)
  • 39. Companies went bankrupt by listening to their customers and giving them what they demanded.
  • 40. The new generations of disk driveemerged in a new value network – in lowend segments or in entirely new markets.
  • 41. The fact that the new generation had aworse storage capacity but offered newperformance attributes implied that they prospered in new applications.
  • 42. Eventually, the products became ’goodenough’ in terms of storage capacity and then displaced the former generation.
  • 43. Therefore, Christensen arguedthat one must look at whether innovations satisfy a firm’scurrent customer base or not.
  • 44. Sustaining innovations are those which mainstream customers demand.
  • 45. Sustaining innovations are those which mainstream customers demand.Those innovations which do not satisfy current customers are regarded as disruptive.
  • 46. The disruptive innovation has:
  • 47. The disruptive innovation has:Lower performance according to what mainstream customers want.
  • 48. 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.
  • 49. Companies are therefore ’heldcaptive’ by their most profitable customers – who impose a great indirect control of the resource allocation process inside the firm.
  • 50. 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.
  • 51. You are fact in power, because you have something that the dog wants.
  • 52. In the same way, existing customers influence what firms decide to do because they provide the company with profitable revenues.
  • 53. This mechanism helps us to understand how companies may be misguided when listening to their current customers.
  • 54. SourcesChristensen, C.M. (1997) The Innovator’s Dilemma, Harvard Business School Press, Cambridge, Massachusetts.
  • 55. Image attributions
  • 56. Find out more:www.disruptiveinnovation.se