Managing the Threat of Disruptive Technology

Clayton Christensen, author of The Innovator’s Dilemma

The Death of DEC - ignored PC’s and Unix when DEC was at the height of their place in the industry.

Studied Disk Drive Makers since that industry changes so rapidly.

Trajectory of technology improvement is not the same as customer needs, creating instability in the market.

Sustaining technologies bring better features (make a good disk drive better, either incrementally or generationally). Disruptive technologies bring worse features (cheaper, faster).

DEC made a good microcomputer better — to make a better product to sell to their most profitable customers. PC’s weren’t good enough for their customers. Later the PC technology caught up to users’ needs.

Well-managed companies (listening to customers, keeping margins high) are paralyzed by disruptive innovations.

Dell started by taking phone orders. Compaq had a dealer network. For Dell, the Internet was a sustaining technology. For Compaq, the Internet was disruptive to their business model.

For Schwab, the Internet was sustaining - discount better. For Merrill Lynch, it was disruptive.

When looking at a startup, is there an established competitor for whom the Internet is sustaining, not disruptive? Be very afraid. You will be pre-empted.

Healthcare needs to be disrupted.

Credit scoring was disruptive to commercial banks that were making loans.

…image from Koafec.org