“Disruptive” technolgies
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Clayton M. Christensen, The Innovators Dilemma,
HarperBusiness, 2000 og The Innovator's Solution:
Creating and Sustaining Successful Growth, 2003,
Harvard Business Press
Dramatic, "disruptive" changes in technology
What happens to organizations when such changes
occur?
They can adapt to new technology or die out
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Examples
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Mainframe to minicomputer
Mini-computer to PC
Development of disk technologies
From cable-management to hydraulic
excavators in American steel industry
Photocopy (Xerox)
Internet?
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Case: Digital Equipment Corpfrom success (mid -80s)
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60s: IBM dominance
70s: New technology, a new type machines, mini
computers
Many manufacturers: Digital, HP, Prime, Norwegian
Data
1986 "Taking on Digital these days is like standing in
front of a moving train. The $ 7.6 billion computer
maker has been gathering speed while most rivals
are stalled in a slump. "Warning to IBM ...
One of the most prominent companies in McKinsley
study that led to the book "In Search of Excellence"
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…to fiasko (end of the 80s)
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Digital has major problems: "Sales are drying up in its key
microcomputer line. A two-year Restructuring plan has
failed miserably ... The real misfortune may be DEC's lost
opportunities. It has squandered two years trying halfway
Measures two RESPOND two low-margin personal
computers that have transformed the computer industry “
Norwegian Data bankruptcy
The PC wins-out over the mini-computer
Compaq buys Digital (2000)
Digital (and the Norwegian Data) were leading "world
class" companies, why it can go so wrong so fast?
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New technology can be the
reason
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We can distinguish between:
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"Sustaining" Maintaining technologies.
These preserve corporate and market
structures.
"Disruptive" technologies. There may be
major changes in corporate and market
structures
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”Sustaining” (maintaining) technology
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All technologies are constantly evolving to better performance
and lower cost
Radical or more incremental change, but the common features
are:
 Increasing the performance of established products
 Within the main dimensions that customers want
 Example: cars, planes, computers, television sets
Most innovations in a given industry are "sustaining“
Radical changes in a "sustaining" technology, which
 propeller planes to jets
 VLSI development in the PC industry
 LP to cassette, to CD, to DVD
rarely lead to bankruptcies of leading companies.
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”Disruptive” (breakthrough)
technologies
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The characteristics of innovation that leads to performance
degradation:
 Mainframe to minicomputer
 Mini Machine for PC
 Cable-driven to hydraulic excavators
 From major to minor physical hard disks? (14 “ -> 8" -> 5
¼ “->3 ½" -> cloud)
But the technology may have other properties:
 Less expensive, more robust, smaller, lighter, requires less
energy, more flexible, easier to maintain, easier to use ...
Like opening the way for new markets
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The new technology comes into
traditional markets
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New markets provide good income
Revenues are used for new research and
development
The development is as good as the technology is also
appropriate for the traditional markets
But since the new ("disruptive") technology has
numerous other benefits it will undermine the market
for traditional products.
Therefore, we have (almost) no: Mainframes, Mini
Machines, Cable-operated excavator, Physical large
disk, …today.
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Mini-computer til PC
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PC brukte ny teknologi (VLSI)
Lavere kapasitet, men
billigere, mer robuste, mindre, lettere, ...
Enbruker-filosofi
Brukes direkte av sluttbruker, programvare som var
enklere å bruke (Apple Mac, så Windows)
Prosessor, maskinvare, operativsystem og
applikasjon fra forskj. leverandører (Intel, Compaq,
Windows, Office/Lotus/Quicken). Det gir fleksibilitet,
større konkurranse, lavere priser, bedre kvalitet
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Personal experiences
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Introduces the architecture for a system of health care in 1978:
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Comment from Norwegian Data were alternative supplier,
"complete unrealistic“
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A machine per physician (NPC)
A common database server (computer with 20 Mb disk)
But we argued that our solution was
safer (more machines)
cheaper and more future oriented (computer technology)
more efficient (one per processor. doctor)
more robust (run without an operator in a normal environment)
more user-friendly
Implemented in 1979, the world's first disk solution for PC
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PC Market development
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From one alternative for mini-computer (for end
users and small companies)
In substitute for mini-computer:
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greater capacity
Networking connections
The market for mini machines disappeared in a few
years:
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In 1986, the Norwegian Data seen as the flagship of the
Norwegian industry, they earned good money.
Two years later they were gone.
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Were the mini-computer
manufacturers sleeping in class?
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No, Digital, Norsk Data and the others had
built their busines based on competent
engineers, program developers and sales
force
They were all examples of ”world class”
businesses
They invested also in new technolgy. Digital
was early out with a PC-series
Even so, it didn’t go well...
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Development of ”disruptive”
technologies
Disruptive
technological
innovation
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Mini-computer producers
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Were expert
Did nothing wrong
However, it had a structure and a market adapted for a
different technology:
 New Forms (analyze customer needs)
 Sales margins
 Profits p.r. sale
1987 Discovery Project (Ministry of Industry + Norwegian
Research + SND + Norwegian Data):
 IT centers in rural areas
 Mini-computers from the Norwegian Data
 Panic Reaction to rescue Norwegian Data
 DN-chronicle: "U-help, latest in a bygone technology“
Must the Norwegian Data go into bankruptcy?
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Digging machine
manufacturers
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After World War II, remotely
operated excavator
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Large capacity
Costly
For mining, M. M.
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Hydraulic machines
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The first hydraulic
excavators:
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Small capacity
Could be connected to
tractors
Small and flexible
Reliable
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Hydraulic as a ”disruptive”
technology
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Hydraulic uninteresting to the established, their
customers that would have greater, not lesser
capacity
The established manufacturers took the customers
needs for granted
Many newcomers come in with hydraulic technology
These took the characteristics of technology for
granted
Found new markets, municipalities, contractors,
farmers, …
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What happened?
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Hydraulic-technology underwent fast
development
Increasingly large bucket capacity
Won new markets
Went into the established market
Broke most of the established
manufacturers
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Could the established have
done anything differently?
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They knew the technology
Try it out, often in hybrid solutions with
existing customers
Were skilled developers
Were locked into its established customer
base, unfortunately hydraulic was a
technology customers did not need
They competed with other companies that
used the same technology (cable)
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Standard solutions do not work against
”disruptive” technology
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Work harder
be smarter
Listen to your customers
Invest more aggressively
Develop technology
Drive in the wrong ...!
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Disc-technology
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Very rapid development from
the 1950s to the present day
Been through many
"generations" of technologies
The trend has been clear
"disruptive" effects
Prof. Christensen points out
that the development follows
a definite pattern, with easily
identifiable steps
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6 steps in development of
discruptive technology
1.
New, "disruptive" technology were first
developed in the established companies
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2)
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Control Data (14 "manufacturer) developed 8" technology
Seagate, executive producer of the 5 ¼ "technology
developed 3 ½" model
Marketing requested feedback from
customers
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IBM would not have 3 ½ "model for its XT and AT
computers (they wanted more capacity)
Weak sales forecasts
Management cut out the product (explicitly or implicitly)
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Further development and new
companies…
3) Established company focus on the development of existing
("sustained") technology
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Ruled by the customers (large capacity) and market
In order to generate revenue and profits
4) New companies are formed based on the new "disruptive"
technology
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For example, Connie Peripherals, formed by staff from Seagate
unable to sell to existing customers
had to find new markets
through trial and error
For example, the laptop market (but this was small and highly
uncertain in the late 80's)
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newcomers are taking market share,
the established get problems
5) The new technology developes for larger capacity
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Start market (for example) increases in size
The capacity is so great that technology also gains entry at
the high end of the market (e.g. Stationary PC)
6) The established attempts to defend their markets:
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Seeing that the new technology is introduced also in their
(high capacity) market
Taking up the prototypes from research labs
But now this has become a "sustained" technology, where
the competition is competing on performance and price
Newcomers often have advantages here
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Handling a "disruptive"
technology requires
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Knowledge of the new technology
Willingness and ability to develop a technology for
new customers, as well as a need to develop the
"sustained" technology
Willingness to accept new forms of marketing, sales
and production
Willingness to accept new profit margins for each
sale
Willingness to terminate the existing staff, hiring new
employees instead
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Impossible?
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Christensen finds few examples of companies
that have managed to survive "disruptive"
changes
IBM is an exception. Have had mixed success,
but it did best when the PC division was
isolated from its parent company
Best solution is to start a new company to
handle the new technology
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Is Internet such a technology?
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Allows for new sales channels (banking, insurance,
retail, auctions ...)
Radical change in costs per. transaction (from
manual to automatic)
However, the pioneer (first mover) advantage is
debatable, it is easy for others to come by and take
market share
"Click & Mortar" may be the best solution in many
markets, where they have established an advantage
“Both" it is possible here, but was difficult in the
other cases we have analyzed
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Survival examples
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Traditional industries for the production of watches
(Swiss):
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New technology, digital watch:
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Quality in appearance, clock necklace and watch that
functions
Quality linked to price
Very cheap in production
High quality mechanisms (functions)
Low quality jewelry?
Traditional industry managed to adapt to the
development, (are jewelry characteristics more
important than the functionality?)
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”Disruptive” technologies
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Is not common (fortunately?)
But in many industries, the new technology can have
a "disruptive" effect on parts of the business:
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Flight and bus for NSB (trains)
Numerically controlled machine tools in manufacturing
IT in Telecom (mobile technologies) (Internet on Telecom)
Internet for banking
Email for the postal industry
Laser surgery to correct vision
Digital Cameras
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Prognoses (by Kai)
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Libraries will disappear in its traditional form,
collections, purchases, loans will be irrelevant
in a digital world
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Prognoses (by Kai)
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All work to handle cash will disappear
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Prognoses (by Kai)
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Newspapers will have competition when
these are produced digitally
Shops will feel the competition from online
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Prognoses (by Kai)
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Newspapers will have competition
when these are produced digitally
(eAvis)
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Prognoses (by Kai)
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Shops will feel the competition from online
http://www.kelkoo.no/infosenter/faq
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