Disruptive Innovation (The Innovator’s Dilemma)

Causing disruption Innovation, much prized by management thinkers, can put others out of business. Technology that eventually destroys the dominant product is known as “disruptive” and its chief chronicler is Harvard professor Clayton Christensen. Disruptive innovation, as Christensen points out in The Innovator’s Dilemma, takes a number of forms.

One is “low-end” disruption, where the existing product exceeds the requirements of certain customers. The new product enters the market at this less profitable end, with a quality that is just good enough. Early digital cameras, for example, had low picture quality but were cheap. With its foothold, the disruptor then needs to improve its profit margin and so increases quality. The incumbent doesn’t work too hard to defend share in this still none-too-profitable segment, and withdraws upmarket to concentrate on its higher-value customers.

Christensen says that it is gradually squeezed in this way until the disruptor’s quality satisfies the most profitable end of the market. Lights out. “New market” disruptors have an inferior performance by most standards but fit an emerging segment. The Linux operating system fitted this description. Other disruptors are superior but ignored by existing players, who defend their investments in the older technology.

By refusing to modernize when the more efficient containerization method came along, the port of San Francisco lost out to the port of Oakland. One of the litmus tests of disruptive technologies is that they invariably enable a larger population of less skilled people to do things that historically only an expert could do. But you can’t disrupt a market where customers are not yet overserved by the prevailing offerings.

Source: 50 Great Management Ideas

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