Key Points

• Disruptive technologies or innovations are innovations that upset the existing “order of things” in a particular industry. The usual process is a lower-end innovation that appeals to customers who are not served by the current market. With time, because the capacity/performance of the innovation exceeds the market’s needs, the innovation comes to displace the market incumbents.

• Incumbents generally don’t react to disruptive innovations until it’s too late, because they don’t represent an interesting market, being low end and often low cost. One successful strategy might be to hive off a separate “company within a company” that is responsible for the firm’s response to the disruptive technology. A smaller, more nimble organization is better placed to work in the initially smaller and less lucrative market that the innovation is creating.

Summary

Initially, Christensen examines why firms fail despite being leaders in their market, willing and able to compete with the best, and capable of continuous innovations within their industry.

“Sustaining technological changes” are not the problem for leaders in an industry. Time and time again, they should their ability to compete in the high end of their market, innovating and at times dealing with radical technological changes. Yet, because these are sustaining innovations, they are almost always best utilized by the firms that already have the best position in an industry. These are changes that follow an “s-curve”, increasing performance as their customers come to expect. New market entrants attempting to compete by means of these sorts of innovations often fail, because the established firms nearly always have more money, more established relationships with clients, a better reputation, and more technological prowess in the market. “The leaders … did not fail because they became passive, arrogant, or risk-averse or because they couldn’t keep up with the stunning rate of technological change.”

However, the story changes radically when it comes to what are called “disruptive innovations” - these are the “changes that toppled the industry leaders”. These are not radical improvements - quite the contrary, disruptive innovations are usually an innovation that are either so much cheaper that they open a new market, or start in a niche that the industry doesn’t care about because it’s too small.

Links

http://www.claytonchristensen.com/