disruptive technology

 

A disruptive technology or disruptive innovation is a technological innovation, product, or service that eventually overturns the existing dominant technology or status quo product in the market. Disruptive innovations can be broadly classified into lower-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption, whereas a lower-end disruptive innovation is aimed at mainstream customers who were ignored by established companies. Sometimes, a disruptive technology comes to dominate an existing market by either filling a role in a new market that the older technology could not fill (as more expensive, lower capacity but smaller-sized hard disks did for newly developed notebook computers in the 1980s) or by successively moving up-market through performance improvements until finally displacing the market incumbents (as digital photography has begun to replace film photography).

The concept shares many similarities with biological evolution.

By contrast, "sustaining technology or innovation" improves product performance of established products. Sustaining technologies are often incremental; however, they can also be radical or discontinuous.

History and usage of the term

The term disruptive technology was coined by Clayton M. Christensen and introduced in his 1995 article Disruptive Technologies: Catching the Wave, which he coauthored with Joseph Bower. He describes the term further in his 1997 book The Innovator's Dilemma. In his sequel, The Innovator's Solution, Christensen replaced disruptive technology with the term disruptive innovation because he recognized that few technologies are intrinsically disruptive or sustaining in character. It is the strategy or business model that the technology enables that creates the disruptive impact. The concept of disruptive technology continues a long tradition of the identification of radical technical change in the study of innovation by economists, and the development of tools for its management at a firm or policy level.

The theory

Christensen distinguishes between "low-end disruption" which targets customers who do not need the full performance valued by customers at the high-end of the market and "new-market disruption" which targets customers who could previously not be served profitably by the incumbent.

"Low-end disruption" occurs when the rate at which products improve exceeds the rate at which customers can adopt the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments. At this point, a disruptive technology may enter the market and provide a product which has lower performance than the incumbent but which exceeds the requirements of certain segments, thereby gaining a foothold in the market.

In low-end disruption, the disruptor is focused initially on serving the least profitable customer, who is happy with a good enough product. This type of customer is not willing to pay premium for enhancements in product functionality. Once the disruptor has gained foot hold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate. The incumbent will not do much to retain its share in a not so profitable segment, and will move up-market and focus on its more attractive customers. After a number of such encounters, the incumbent is squeezed into smaller markets than it was previously serving. And then finally the disruptive technology meets the demands of the most profitable segment and drives the established company out of the market.

"New market disruption" occurs when a product that is inferior by most measures of performance fits a new or emerging market segment. The Linux operating system (OS) when introduced was inferior in performance to other server operating systems like Unix and Windows NT. But the Linux OS distributed through Red Hat is supposed to be inexpensive compared to other server operating systems. After years of improvements in this easily available operating system, the functionality has improved so much that it threatens to displace the leading commercial UNIX distributions.

Not all disruptive technologies are of lower performance. There are several examples where the disruptive technology outperforms the existing technology but is not adopted by existing major players in the market. This situation occurs in industries with a high investment into the older technology. To move to the new technology, an existing player not only must invest in it but also must replace (and perhaps dispose of at high cost) the older infrastructure. It may simply be the most cost effective for the existing player to "milk" the current investment during its decline - mostly by insufficient maintenance and lack of progressive improvement to maintain the long term utility of the existing facilities. A new player is not faced with such a balancing act.

Some examples of high-performance disruption:

• The rise of containerization and the success of the Port of Oakland, California, while the port of San Francisco neglected modernization - perhaps wisely due to its inconvenient location at the end of a peninsula not oriented with the prevailing freight traffic. Rather than attempt to compete in the oceanic freight terminal business, the city's resources were directed elsewhere, primarily toward becoming the leading financial center on the west coast through the encouragement of the construction of high rise buildings for office space.
• VoIP phone technology is a disruptive innovation. At its best, the quality of voice that is available over this phone system is at least as good as that has been offered by traditional players.

Examples of disruptive innovations

Disruptive Innovation	Displaced or Marginalized technology	Notes
Agriculture and Pastoralism	Hunting and gathering	The development of food production technology led to other disruptive technologies such as cities, writing, metal working, wheeled vehicles, and much of the remainder of world civilization.
steam engines and internal-combustion engines	horses and humans (for powering machines)	The new engines took centuries to establish themselves, but eventually rendered animal/people power obsolete on their ability to scale up to much higher power outputs and offer greater reliability.
Automobiles	Horses (for transport)	Early roads were designed for horses, not cars. Nevertheless, the potential for greater convenience, reliability and speed offered by the motor car meant that the road system was eventually redesigned in its favor, after overcoming many obstacles, both technical and political (such as the Red Flag Act).
Hydraulic excavators	Cable-operated excavators	Hydraulic excavators were clearly innovative at the time of introduction but they gain widespread use only decades after. However, cable-operated excavators are still used in some cases, mainly for large excavations.
Mini steel mills	vertically integrated Steel mills	By using mostly locally available scrap and power sources these mills can be cost effective even though not large
Container ships and containerization	"Break cargo" ships and stevedores	In addition to efficiency these also provide a great reduction in opportunities for pilferage and integrate well with both rail and truck transport.
Desktop publishing	Traditional publishing	Early desktop-publishing systems could not match high-end professional systems in either features or quality. Nevertheless, they lowered the cost of entry to the publishing business, and economies of scale eventually enabled them to match, and then surpass, the functionality of the older dedicated publishing systems.
Digital photography	originally, instant photography, now increasingly all chemical photography	Early digital cameras suffered from low picture quality and resolution and long shutter lag. Quality and resolution are no longer major issues and shutter lag is much less than what it used to be. The convenience of small memory cards and portable hard drives that hold hundreds or thousands of pictures, as well as the lack of the need to develop these pictures, also helped. Digital cameras have a high power consumption (but several lightweight battery packs can provide enough power for thousands of pictures). Cameras for classic photography are stand-alone devices.
Semiconductors	vacuum tubes	Electronic systems built up with semiconductors require less energy, are smaller and more reliable than such with tubes. However for high power device semiconductor solutions are not always available (or from more complicated design)
"Bug logic'"	Discrete components	Medium Scale Integration (MSI) - electronic circuits (such as a flip-flop) built upon a single substrate require less energy, are smaller and more reliable than such built upon circuit boards.
Large Scale Integration (LSI)	"Bug logic"	Complete electronic systems upon a single substrate require less energy, are smaller and more reliable than such built by mounting simpler Integrated circuits ("bug logic") upon complex circuit boards, extending to the current implementations of entire central processing units, memory, and supporting logic on a single chip.
Minicomputers	Mainframes	Though mainframes survive in a niche market which persists to this day, minicomputers have themselves been disrupted into extinction.
Personal computers	Minicomputers, Workstations	Workstations still exist, but are increasingly assembled from high-end personal computer parts, to the point that the distinction is fading
High speed CMOS video sensors	Photographic film	When first introduced, high speed CMOS sensors were less sensitive, had lower resolution, and cameras based on them had less duration (record time). The advantage of rapid setup time, editing in the camera, and nearly-instantaneous review quickly eliminated 16 mm high speed film systems. CMOS-based cameras also require less power (single phase 110 V AC and a few amperes of current vs. 208 V single, double and even triple phase cameras requiring 20-50 A for film cameras. Continuing advances have overtaken 35 mm film and are challenging 70 mm film applications.
Cassette Tape	Eight Track	Cassette tapes gave longer play times, a smaller size of player and media, and more functionality.
Compact Disc	Phonograph record, and later Cassette Tape	Compact Discs give higher quality, smaller size, eventual portability, and cheaper production costs.
Digital audio player	Compact Disc	From 15-20 songs per CD to 100's and 1000's of songs in a smaller form factor, with content that can be transferred effortlessly through the internet.
Muskets	Crossbows, longbows and the Knight military unit	The development of firearms allowed essentially anyone to become an effective soldier with very little training. Earlier military units like bowmen and knights needed years of practice to master the skills.
Steamships	Sailing ships	The first steamships were deployed on inland waters where sailing ships were less effective, instead of on the higher profit margin seagoing routes. Hence steamships originally only competed in traditional shipping lines' "worst" markets.
Telephones	Telegraphy	When Western Union infamously declined to purchase Alexander Graham Bell's telephone patents for $100,000, their highest-profit market was long-distance telegraphy. Telephones were only useful for very local calls. Short-distance telegraphy barely existed as a market segment, if at all. So Western Union's decision was quite understandable at the time.

Not all technologies promoted as disruptive innovations have actually prospered as well as their proponents had hoped. However, some of these technologies have only been around for a few years, and their ultimate fate has not yet been determined.

Unresolved examples of technologies promoted as 'disruptive innovations'

• Music downloads and file sharing vs. compact discs
• ebooks vs. paper books
• VoIP (and VoIP over 802.11) vs. traditional telephone and mobile phone service.
• Reconfigurable Computing as part of a dual paradigm approach to High Performance Computing vs. traditional computing exclusively based on the von Neumann machine paradigm.

Business implications

Disruptive technologies are not always disruptive to customers, and often take a long time before they are significantly disruptive to established companies. They are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is often entirely rational for incumbent companies to ignore disruptive innovations, since they compare so badly with existing technologies or products, and the deceptively small market available for a disruptive innovation is often very small compared to the market for the established technology.

Even if a disruptive innovation is recognized, existing businesses are often reluctant to take advantage of it, since it would involve competing with their existing (and more profitable) technological approach. Christensen recommends that existing firms watch for these innovations, invest in small firms that might adopt these innovations, and continue to push technological demands in their core market so that performance stays above what disruptive technologies can achieve.

Disruptive technologies, too, can be subtly disruptive, rather than prominently so. Examples include digital photography (the sharp decline in consumer demand for common 35mm print film has had a deleterious effect on free-riders such as slide and infrared film stocks, which are now more expensive to produce) and IP/Internet telephony, where the replacement technology does not, and sometimes cannot practically replace all of the non-obvious attributes of the older system (sustained operation through municipal power outages, national security priority access, the higher degree of obviousness that the service may be life-safety critical or deserving of higher restoration priority in catastrophes, etc).

See also

• List of emerging technologies
• Paradigm shift
• Technology strategy
• Disruptive Technology Office
• Category killer
• Obsolescence

References

• Bower, Joseph L. & Christensen, Clayton M. (1995). "Disruptive Technologies: Catching the Wave" Harvard Business Review, January-February 1995.
• How to Identify and Build Disruptive New Businesses, MIT Sloan Management Review Spring 2002
• Christensen, Clayton M. (1997). The Innovator's Dilemma. Harvard Business School Press. ISBN 0-87584-585-1. 
• Christensen, Clayton M.;Raynor, Michael E. (2003). The Innovator's Solution. Harvard Business School Press. ISBN 1-57851-852-0. 
• Christensen, Clayton M., Anthony, Scott D., & Roth, Erik A. (2004). Seeing What's Next. Harvard Business School Press. ISBN 1-59139-185-7. 
• Christensen, Clayton M. & Overdorf, Michael. (2000). "Meeting the Challenge of Disruptive Change" Harvard Business Review, March-April 2000.
• Christensen, Clayton M., Bohmer, Richard, & Kenagy, John. (2000). "Will Disruptive Innovations Cure Health Care?" Harvard Business Review, September 2000.
• Christensen, Clayton M., Baumann, Heiner, Ruggles, Rudy, & Sadtler, Thomas M. (2006). "Disruptive Innovation for Social Change" Harvard Business Review, December 2006.
• Mountain, Darryl R., Could New Technologies Cause Great Law Firms to Fail?
• Mountain, Darryl R. (2006). Disrupting conventional law firm business models using document assembly, International Journal of Law and Information Technology 2006; doi: 10.1093/ijlit/eal019
• Tushman, M.L. & Anderson, P. (1986). Technological Discontinuities and Organizational Environments. Administrative Science Quarterly 31: 439-465.

Additional Readings

• Danneels, Erwin (2006), “From the Guest Editor: Dialogue on The Effects of Disruptive Technology on Firms and Industries,” Journal of Product Innovation Management, 23 (1): 2-4
• Danneels, Erwin (2004), “Disruptive Technology Reconsidered: A Critique and Research Agenda,” Journal of Product Innovation Management, 21 (4): 246-258

External links

• "The Disruptive Potential of Game Technologies: Lessons Learned from its Impact on the Military Simulation Industry", by Roger Smith in Research Technology Management (Sept/Oct 2006)
• Disruptive Technology at c2.com
• Disruptive Innovation Theory
• Disruptive Technology at The Economist: The blood of incumbents
• The Myth of Disruptive Technologies. Note that Dvorák's definition of disruptive technology does not necessarily match the standard one described above. He complains about the overuse of the term and goes as far as claiming there are no disruptive technologies.
• Bibliography of Christensen’s "Theory of Disruptive Innovation" as it relates to higher education
• Disruptive Technology Portfolio by InformationWeek and Credit Suisse

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