Is IP Video a Disruptive Technology?

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Why IP based video surveillance is not a disruptive innovation.

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Is IP Video a Disruptive Technology?

  1. 1. Is IP Video a  Disruptive Technology?
  2. 2. The security and surveillance industry is currently experiencing a shift from analogue to digital  cameras which are connected over the internet.
  3. 3. It is sometimes It is sometimes argued that this transition is disruptive that this transition is disruptive.
  4. 4. It is sometimes It is sometimes argued that this transition is disruptive that this transition is disruptive. And there are indeed many signs of such a pattern.
  5. 5. It is sometimes It is sometimes argued that this transition is disruptive that this transition is disruptive. And there are indeed many signs of such a pattern. But i is IP video disruptive i h id di i in the original sense? i i l ?
  6. 6. It is sometimes It is sometimes argued that this transition is disruptive that this transition is disruptive. And there are indeed many signs of such a pattern. But i is IP video disruptive i h id di i in the original sense? i i l ? In this presentation I will address whether it is or not.
  7. 7. It is sometimes It is sometimes argued that this transition is disruptive that this transition is disruptive. And there are indeed many signs of such a pattern. But i is IP video disruptive i h id di i in the original sense? i i l ? In this presentation I will address whether it is or not. In order to do so, we first of all need to get a clear idea of what is meant by disruptive innovation.
  8. 8. Harvard Professor  Clayton Christensen  published hi b k ’Th bli h d his book ’The  innovator’s dilemma’ in  1997 and coined the  1997 and coined the term disruptive technology. gy
  9. 9. In this book, Christensen sought to explain why great firms fail under conditions of  technological change.
  10. 10. While there are many explanations of such failure are many of such failure,  Christensen brought an intriguingly different  p p perspective upon this issue. p
  11. 11. Previous work in this area had primarily looked at  how a new technology impacts the companies  h h l i h i existing R&D skills.
  12. 12. Christensen on the other hand, argued that it was the  Christensen on the other hand argued that it was the impact on the market that determined whether established firms would fail or not.
  13. 13. Therefore, Christensen claimed that one Therefore, Christensen claimed that one must look at whether innovations satisfy a firm s a firm’s current customer base or not or not.
  14. 14. Sustaining innovations are those which  mainstream customers demand.
  15. 15. Sustaining innovations are those which  mainstream customers demand. Those i Th innovations which d not  ti hi h do t satisfy current customers are  y regarded as disruptive.
  16. 16. The disruptive innovation has:
  17. 17. The disruptive innovation has: Lower performance according to what mainstream customers want want.
  18. 18. The disruptive innovation has: Lower performance according to what mainstream customers want want. Other performance attributes (smaller,  simpler), which are not valued by current simpler) which are not valued by current customers, that makes it prosper in a new  value network.
  19. 19. The main problem then for established firms is that they find it irrational to invest in a technology which their customers do not demand. not demand. They Th can’t fi d any fi ’t find financial l i i i l logic in  doing so and keep improving their g p p g existing products.
  20. 20. But once the disruptive technology has  become ”good enough” it displaces the good enough it displaces the  former one.
  21. 21. But once the disruptive technology has  become ”good enough” it displaces the good enough it displaces the  former one. Those entrant firms which found a niche a niche where customers did indeed demand the  technology initially now move up‐market t h l i iti ll k t and start to dominate the industry. 
  22. 22. The Disruptive innovation framework The Disruptive innovation framework essentially posits that companies go bankrupt by listening to  their customers and giving them what they demand. and giving
  23. 23. A pretty provocative and interesting conclusion.
  24. 24. Christensen based his argument upon evidence from  the rigid disk drive industry, where the rigid disk drive industry, where each shift from from  one generation of disk drives to a new one caused major problems for incumbent firms.
  25. 25. Christensen based his argument upon evidence from  the rigid disk drive industry, where the rigid disk drive industry, where each shift from from  one generation of disk drives to a new one caused major problems for incumbent firms. Each new generation of disk drives was smaller and new generation of disk drives was and  offered a lower performance in terms of storage capacity. Those firms that dominated the previous generation therefore struggled to develop the new one,  as their customers did not demand it.
  26. 26. It looked something like this:
  27. 27. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  28. 28. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  29. 29. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  30. 30. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  31. 31. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  32. 32. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  33. 33. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  34. 34. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  35. 35. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  36. 36. Technology supply and demand in the HDD industry 10000 1000 Capacity (MB) 100 Hard Disk C 10 H 1 1975 1980 1985 1990 Year (Source: Christensen, 1997)
  37. 37. In each In each transition to a new generation firms were to a new generation, firms mislead by focusing on the what their existing customers demanded.
  38. 38. No let’s go back to the case of IP video.
  39. 39. At first sight it appears to be truly disruptive.
  40. 40. It had a lower performance along many of the  traditional dimensions such as:
  41. 41. It had a lower performance along many of the  traditional dimensions such as: Image quality Frame rate Price
  42. 42. It had a lower performance along many of the  traditional dimensions such as: Image quality Frame rate Price At the same time, it offered new attributes such as: h ff d b h
  43. 43. It had a lower performance along many of the  traditional dimensions such as: Image quality Frame rate Price At the same time, it offered new attributes such as: h ff d b h Images can be viewed from anywhere, you only Images can be viewed from anywhere you only need an internet connection Easier to scale up these systems p y Software can make the cameras more intelligent
  44. 44. Over time, IP video has improved significantly along those dimensions which underperformed – image  quality is better today with HD and Megapixel cameras and the prices are declining. d th i d li i
  45. 45. Sound like a schoolbook example of a disruptive technology, right?
  46. 46. But remember, Christensen stated that these properties made a technology problematic because an  incumbent firm’s existing customers did not  appreciate such a value proposition. i t h l iti
  47. 47. But in the case of IP video, this is not  necessarily the case.
  48. 48. IP video has not initially prospered in low‐end segments or new markets as Christensen stated.
  49. 49. IP video has not initially prospered in low‐end segments or new markets as Christensen stated. It has rather emerged in many different, existing segments such as retail, transportation, schools and  city surveillance. i ill
  50. 50. IP video has not initially prospered in low‐end segments or new markets as Christensen stated. It has rather emerged in many different, existing segments such as retail, transportation, schools and  city surveillance. i ill These segments are hardly new,  or low‐end in any sense. or low‐end in any sense
  51. 51. IP video has not initially prospered in low‐end segments or new markets as Christensen stated. It has rather emerged in many different, existing segments such as retail, transportation, schools and  city surveillance. i ill These segments are hardly new,  or low‐end in any sense. or low‐end in any sense Rather, they are segments which benefited in  p particular from the scalability and other new  y attributes that IP brought to the market.
  52. 52. Wouldn’t Pelco’s customers in for instance the city  surveillance or retail segments benefit from  adopting IP? d ti
  53. 53. Wouldn’t Pelco’s customers in for instance the city  surveillance or retail segments benefit from  adopting IP? d ti I think I think they do and that they have adopted IP to and that they IP to  quite a large extent.
  54. 54. Wouldn’t Pelco’s customers in for instance the city  surveillance or retail segments benefit from  adopting IP? d ti I think I think they do and that they have adopted IP to and that they IP to  quite a large extent. But those cameras have not primarily come from  Pelco or other analogue firms. Entrants like Axis,  ACTI, Mobotix and Indigo Vision have been leading this shift, so far.
  55. 55. The transition to IP is therefore not a classical example of a disruptive technology.
  56. 56. One of the problems for analogue One of the problems for analogue firms has rather has rather been that they are not used to delivering this kind of  value proposition to their customers. p p
  57. 57. One of the problems for analogue One of the problems for analogue firms has rather has rather been that they are not used to delivering this kind of  value proposition to their customers. p p Their sales channel has been related to security people and with the shift to IP, surveillance is  becoming an IT issue.
  58. 58. One of the problems for analogue One of the problems for analogue firms has rather has rather been that they are not used to delivering this kind of  value proposition to their customers. p p Their sales channel has been related to security people and with the shift to IP, surveillance is  becoming an IT issue. Those firms find it difficult to target security people with an IT offer and their with an IT offer and their sales model has been built has been around relations with security people throughout the value the value chain.
  59. 59. And it is sometimes more difficult to change relations than to change technologies.
  60. 60. Summing up, the transition to IP may at first glance up, the transition to IP may at first glance appear to be a schoolbook example of disruptive innovation.
  61. 61. Summing up, the transition to IP may at first glance up, the transition to IP may at first glance appear to be a schoolbook example of disruptive innovation. But a closer look makes it clear that it is actually not  disruptive in the traditional sense.
  62. 62. Summing up, the transition to IP may at first glance up, the transition to IP may at first glance appear to be a schoolbook example of disruptive innovation. But a closer look makes it clear that it is actually not  disruptive in the traditional sense. IP has not primarily emerged i IP h t i il d in new markets or low‐ k t l end segments, rather, it has prospered in existing market segments, albeit in a new way that makes it  market segments albeit in a new way that makes it problematic to handle for established firms.
  63. 63. Sources Christensen, C.M. (1997) The Innovator’s  Dilemma, Harvard Business School Press,  Cambridge, Massachusetts.
  64. 64. Christian Sandström is a PhD  student at Chalmers  student at Chalmers University of Technology in  Gothenburg, Sweden. He  Gothenburg, Sweden. He writes and speaks about  disruptive innovation and  technological change. More about IP video and disruptive innovation: www.christiansandstrom.org

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