History has many examples of great innovators who had difficult time convincing their contemporaries of new technology. Even incumbent and powerful companies regarded new technologies as inferior and dismissed it as "toys". Then when disruptive technologies take off they often are overhyped and can cause bubbles like the Internet bubble of the late 1990s. In this lecture we look at some examples of disruptive technologies and the impact they had. We look at the The Disruptive Innovation Theory by Harvard Professor Clayton Christensen.

1. Lecture L08
DISRUPTIVE TECHNOLOGY

2. Why do start-ups exits?

3. Technology is one of
the major factors in
change

4. Opportunity Threat

5. Example:
Digital
Photography

10. Media companies

11. Tech Has No Feelings:
Gary Vaynerchuk Crushes Old Media

13. The World is Changing

14. Technology has no feeling

15. Is this
Good or Bad?

16. Kranzberg’s
1. law of
technology
1. Technology is
neither good nor
bad; nor is it
neutral

17. Adjacent Possible
When in one room someone
will open the next door

18. Western
Union
Telegraph
Business

19. Bell offered the telephone patent for $100.000
Western Union turned Bell down
Bell went into business himself, founding AT&T

20. In 1900
AT&T had over million users
AT&T revenues were $13 million while Western
Union’s revenues were $6 million

21. Why would Western Union
make such short-sighted
decision?

22. We tend to view technology
based on
past usages
but not the future potential

23. "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.
Telephone (1876)

24. “What use could this company
make of an electrical toy?”
- Western Union president William Orton.
Telephone (1876)

25. „Well informed people know it is impossible
to transmit the voice over wires and that
were it possible to do so, the thing would
be of no practical value.“
- Editorial in the Boston Post.
Telephone (1876)

26. „Thus the telephone, by bringing music and
ministers into every house, will empty the
concert halls and the churches…“
- “The Telephone”, The New York Times, March 22, 1876
Telephone (1876)

27. “Rail travel at high speed is not
possible because the passengers,
unable to breathe, would die of
asphyxia”
- Dr. Dionysus Lardner, Professor of Natural
Philosophy and Astronomy at University College,
London
Railroads (1815)

28. Cars (1885) “The horse is here to stay, but the
automobile is only a novelty – a fad”
- The president of the Michigan Savings Bank to
advised Henry Ford's lawyer Horace Rackham not to
invest in the Ford Motor company
Image from http://www.huffreport.com/

29. Airplanes (1903)"Heavier-than-air flying
machines are impossible."
- Lord Kelvin, president, Royal Society, 1895.

30. “The wireless music box has no imaginable
commercial value. Who would pay for a
message sent to nobody in particular?"
- David Sarnoff's associates in response to his urgings for
investment in the radio in the 1920s
Radio (1905)

31. “For God’s sake go down to the reception
and get rid of a lunatic who’s down there.
He says he’s got a machine for seeing by
wireless!”
- Editor of the Daily Express in response to a prospective
visit by John Logie Baird, 1925
Television (1926)

32. "I think there is a world market for maybe
five computers.“
- Thomas Watson, chairman of IBM, 1943
Computers (1943)

33. "There is no reason for any individual to
have a computer in their home.”
- Kenneth Olsen, president and founder of
Digital Equipment Corp., 1977
Personal Computers (1977)

34. “The Internet is a shallow and unreliable
electronic repository of dirty pictures,
inaccurate rumors, bad spelling and worse
grammar, inhabited largely by people with
no demonstrable social skills.”
- Chronicle of Higher Education, 1997
Internet (1970)

35. I don't think that digital photography is
romantic yet. It's not sympathetic the way
that film is
- Matthew Modine
Digital Cameras (1991)

36. "The knowledge transition
was much more rapid for
those learning from
printed material...”
- The E-book skeptic
Digital books (1992)
Picture from Amazon.com

37. How
will
this
innovation
change
an
industry,
and
what
impact
does
this
have
on
the
firms
I
care
about?

38. Nordic Marketing Conference of Lottery
Companies, Mývatn, September 1995

39. Gradual Improvements
Foster improved product performance
Each year new and improved products are offered
Sustaining Innovations

40. Source: (Christensen, 2000)
Mature Leading Companies
Existing companies, incumbents, have a high probability
of beating entrant attackers when the contest is about
sustaining innovations

41. Red Ocean Industry
Bloody Competition
Well know industry boundaries
Rules are established, sustained Innovation
Commodities
D is r u p t io n
Blue Ocean
Value Innovation
Align innovation with utility,
price, and cost position
New
Technology,
new markets

42. The product performance is good enough
and affordable to fulfil a unfilled need in
the market
Disruptive Technology

43. Source: (Christensen, 2000)
The Disruptive
Innovation Theory
New organisation can use relatively simple, convenient,
low-cost innovations to create growth and triumph over
powerful incumbents

44. Source: (Christensen, 2000)

45. Source: (Christensen, 2000)
Low End
Can occur when existing products and services are “too good”
and hence overpriced relative to the value existing customer
can use – Value Innovation

46. Source: (Christensen, 2000)
New Market
Occur when characteristics of existing products limit the number of
potential consumers or force consumption to take place in inconvenient,
centralised settings

47. Source: Christensen et. al. Seeing what’s next
The Disruptive Innovation Theory

48. Source: (Christensen, 2000)
The Innovator’s Dilemma
Firms that succeed in one generation of innovation almost inevitable
become hamstrung by their own success and thus doomed to lose
out in the next wave of innovation

49. Disruptive
changes
in
Business
Environment
Opportunity/Pitfall
to
Make/Lose
Money
Force
Majeure
Legal/Regulatory
Competitor
Strategy
Popular
opinion
or
fashion
Political
Financial
Technology
Source: Yang, Harvard
Disruption and Innovation

50. Western
Union
Telegraph
Business

51. Resources, Processes and Values Theory
Resources (what a firm has),
Processes (how a firm does it´s work), and
Values (what a firm wants to do)
collectively defines an organization’s strengths as well as
weaknesses and blind spots
Source: (Christensen, 2000)
The RPV Theory

52. Source: (Christensen, 2000)
The RPV Theory
Organisations successfully tackle opportunities
When they have the resources to succeed,
when their processes facilitate what needs
to get done, and then their values allow them
to give adequate priority to that particular
opportunity in face of all other demands that
compete for the company’s resources

53. The
RPV
Theory
Possible consequences
Source: Christensen et. al. Seeing what’s next

55. Western
Union
Telegraph
Business

56. 1. The telephone was a new-market disruptive
innovation
2. Western Union’s resources, processes, and
values meant that what ultimately became the
right course appeared to be unattractive at
the outset
3. Western Union saw entrants improving.
However, investment in the core business
kept trumping investment in the new business
4. By the time the right course was clear, it was
too late

57. Western Union was in the
telegraph business, not the
communication business

58. The Disruptive Innovation Theory
The Innovators Dilemma
Resources, Processes and Values Theory
Key Concepts

59. Economist article: The last Kodak moment?
Kodak is at death’s door; Fujifilm, its old rival, is thriving. Why?
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