Disruptive Innovation

Originally entitled Disruptive Technology but changed to Disruptive Innovation for clarity (both are used within this site) Christensen (1997)1 suggests the leadership within markets can be disrupted by new organisations...

Originally entitled Disruptive Technology but changed to Disruptive Innovation for clarity (both are used within this site) Christensen (1997)1 suggests the leadership within markets can be disrupted by new organisations that create new offerings which are not currently valued by existing customers. By examining the hard disk industry Christensen builds a compelling story on how incumbents can counteract these disruptive innovations.

He defines disruptive Innovation as:

Generally, disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches. They offered less of what customers in established markets wanted and so could rarely be initially employed there. They offered a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream.” Christensen (1997) p15 1

Christensen’s (1997)1 Disruptive Innovation theory can be seen as falling within the Reconstructionist camp, in that he is documenting processes that start with a new innovation (be that product, service or process) which offers something new to the customer and if successful re-orders the leadership within a larger market. As such this is re-constructing the market. He labels Sustaining Innovation as that which improves the offering (product/service) along line the existing customers value. As such this lines up nicely with the Structuralist label. See Table Comparison of Kim & Maubourgne and Christensen Terms.

Kim & Mauborgne Christensen
Structuralist = Sustaining Innovation
Reconstructionist = Disruptive Innovation

Table Comparison of Kim & Maubourgne and Christensen Terms

Examining Christensen’s work with a critical eye it is noticeable that the examples have a strong survivor bias to them; nowhere does he mention the number of disruptive innovations which fail or how to identify successful projects before they become successful. However, his theories “feel” right and although there is a lack of definition of Disruptive Innovation his strategy options seem sensible and well thought out. There are many papers either pro or anti Christensen:

Dhillon et al (2001)2 looked at the then emerging e-commerce businesses such as Amazon.com and Barnes & Noble and applied Christensen’s (1997) theories and found they:

“…provided some useful insight” Dhillon et al (2001).2

There are a number of other examples given by Dhillon confirming the insightfulness of Christensen.

Adner (2002)3 confirms Christensen’s Performance Oversupply theory by modelling in detail the consumer demand on technology rivalry.

Tellis (2006)4 although he disagrees with most of Christensen’s conclusions notes that some advice is good: to listen to others besides customers and to watch out for technology which does not perform well today as it may tomorrow.

Tellis (2006)4 argues the term Disruptive Technology can only be applied to a project after it has become a Disruptive Technology. The definition cannot be used to predict if an early stage low performing product will ever gain acceptance by the mainstream customers. He also questions the sampling of the example used to justify the theory. He goes on to disprove the simple technology S-curve theory by reference to his previous research. By suggesting a manager following Christensen’s advice could see a flattening of advances in technology and move to the next technology; however Tellis suggests technology follows a multi-step function which randomly advances followed by periods of stagnation. He also found large firms who had successfully introduced disruptive technology; however no evidence was given relating to the management of these larger firms. Tellis offers an alternative to Disruptive Technology; he suggests leadership and willingness to change within the culture of a firm is more important.

Danneels (2004)5 takes a very critical look at Christensen’s theories and subsequent research and suggests further questions to clarify areas of concern. Danneels (2004)5 wants a more accurate definition of Disruptive Technology, he feels Christensen leaves this slightly vague, and offers an insight and an alternative way of thinking about disruptive technology; this is more to stimulate the reader into thinking creatively than giving a fixed formula to follow religiously. Danneels (2004) identifies issues with selection bias and lack of predicting successful outcomes, the predicting of performance parameters into the future is also questioned. He suggests some of the facts in Christensen (1997) are wrong and cites other research into the hard disk market as contradictory to Christensen’s. Danneels (2004)5 also suggests the need to explain why some incumbents do succeed. In general Danneels points out many specific examples which either contradict or question Christensen’s theories but offers no real alternatives.

Henderson (2006)6 is very supporting of Christensen:

The fact that Christensen’s work has met with such success suggests that this explanation resonates deeply with practicing managers. My own experience in working with senior teams grappling with potential disruption has also highlighted its usefulness.” Henderson (2006) ((Henderson R. (2006), “The Innovator’s Dilemma as a Problem of Organizational Competence”, the Journal of Product Innovation Management, Issue 23 pp 5-11))

She investigates whether it is rational for an incumbent to not invest in disruptive technology and suggest several additional reasons to support Christensen’s theories.

In Knight (2001)7 interview of Christensen, he talks about the disruptive nature of the Japanese invasion from the likes of Sony in the 1980s where they disrupted the US incumbents with their miniaturisation. However Christensen argues that the problems within the Japanese economy are cultural. The Japanese do not have the opportunity to create start-up companies, whereas the US economy which has many Venture Capital funded start-ups allows Disruptive offerings to be born and challenge the incumbents.

This is one of Danneels (2004)5 criticisms; the theory of Disruptive Technology cannot be applied internationally as not all countries have cultures/environments where start-up companies flourish.

Christensen says Disruptive Innovation is relative to the business. For example, selling via the Internet was a sustaining technology for Dell (it allowed them to do what they were doing better) and therefore was easily implemented, however for Compaq it was a Disruptive Technology and was difficult to implement. Christensen says a good way to see if a start-up will ultimately succeed is to scan the environment and to establish whether the disruptive technology is actually sustaining to any incumbents, if it is then the incumbent will win if not the start-up has the advantage.

Christensen also suggests the analogy with evolution; if a mutation occurs in the mainstream population which is well adapted to its environment then it shows no advantage, however if the mutation occurs at the edges of the population where the population is not well adapted to the environment, it will either be extremely successful or die. This analogy is interesting; as it suggests the start-up culture in the US drives the evolution of the economy. However, there needs to be a large failure rate within these start-ups to make the analogy work. Also as a technology does not become disruptive until it is successful, predicting the success solely on looking at the start-up disruptiveness would be naïve.

Porter is arguably the leader of the Structuralists and in Porter (2001)8 shortly after the dot-com bubble burst, he fought back against the Reconstructionist’s by suggesting the Internet which many have described as a disruptive technology and a game changer is in fact nothing of the sort. Although many “got on the band wagon” and ploughed very large sums of money into dot-com businesses, most did not succeed, as they were built on non-sound principals.

Porter (2001)8 also suggests the Internet has only managed to reduce the profit for all companies, and is no longer a differentiator but a given, if a company does not have the internet then it will not be in business. Outsourcing of products and focusing on price has meant the customer becomes very strong as the only differentiator for the same products is price. Since 2001 this has meant the Internet Dot-com’s have had to reduce costs to a bare minimum and maximise economies of scale. Porter suggests network externalities were unfounded and the cost of switching for Internet users is very low therefore going for large numbers of users is a very poor measurement tool and was one of the reasons for the dot-com bubble bursting. The pit fall most dot-coms succumbed to was to try and make a “land-grab” for as many users as possible with as wide product /service offer, leaving no room for differentiation.

Porter (2001)8 suggests the Internet has allowed the incumbents to use their bricks-and-mortar business to their competitive advantage and have developed more efficient front ends / portals to allow the cost reduction of ordering and product selection. Porter’s views are actually in line with Christensen’s as documented by Knight (2001)9 above.

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  1. Christensen C.M. (1997) “The Innovator’s Dilemma”, Harvard Business School Press [] [] []
  2. Dhillon G., Coss D. & Hackney R. (2001), “Interpreting the role of disruptive technologies in e-businesses”, Logistics Information Management, Volume 14, pp. 163-170 [] []
  3. Adner R. (2002), “When are Technologies Disruptive? A Demand-Based View of the Emergence of Competition”, Strategic Management Journal issue 23 pp 667–688 []
  4. Tellis G.J. (2006), “Disruptive Technology or Visionary Leadership?”, Journal of Product Innovation Management Volume 23, Issue 1, pages 34–38 [] []
  5. Danneels E. (2004), “Disruptive Technology Reconsidered: A Critique and Research Agenda”, The Journal of Product Innovation Management, issue 21 pp 246-258 [] [] [] []
  6. Henderson R. (2006), “The Innovator’s Dilemma as a Problem of Organizational Competence”, the Journal of Product Innovation Management, Issue 23 pp 5-11 []
  7. Knight D.J. (2001) “Making Friends With Disruptive Technology: An Interview With Clayton M. Christensen”, Strategy & Leadership, Vol. 29 issue 2 pp. 10-15 []
  8. Porter M.E. (2001), “Strategy and the Internet”, Harvard Business Review, March 2001 pp. 62-78 [] [] []
  9. Knight D.J. (2001) “Making Friends With Disruptive Technology: An Interview With Clayton M. Christensen”, Strategy & Leadership, Vol. 29 issue 2 pp. 10-15 []

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