It has been more than 10 years since I’ve seen Christensen presented his ideas. It is good to see him in good spirit and health at the World Innovation Forum. Clayton Christensen (HBS Professor) is known for his theory on disruptive innovation and he literally owns that word. He has recently co-authored a new book Disrupting Class - How disruptive innovation will change the way the world learns. His idea is practical provided you handle it with care. The idea is that you almost have to ignore the size of the market or the cash flow that you might generate from it. Find a pathetic market that you can sustainably serve, and then hope serendipity kicks in and you will be able to grow from there.
His first book, The Innovator's Dilemma, examines the process of innovation as it attempts to answer the question "why do most new technologies seem to come from start-ups and not from established companies that are also familiar with the technology?" He used a few examples, including tube table radios (displaced by transistor radios), cable-driven steam diggers (displaced by hydraulic diggers), and disk drives (where successive waves of technology were represented in shrinking form factors) that brought new companies to the fore at each new wave. In each of these markets, according to Christensen, innovation shook up the established way of doing things and propelled new market entrants past companies that had dominated the previous technology. Many of readers hear have probably read the book or come across his ideas somewhere, so I am not writing more.
10 years later, let’s see if this theory still hold. On of Christensen’s idea is that new technology improves over time until it is functionally equivalent to the existing product, but is still available at a lower price point. Then the market shifts dramatically, and the existing dominant players are forced out of the market almost overnight. He is suggesting that our energy solution will come from the developing world players. He told an interesting story about his trip to Mongolia where his daughter was working with local missionary. While solar panel is anything but mainstream here, in many developing worlds such as Mongolia many people are selling them in the market bundled with TV and radios, because there’s no electricity grid there.
I think low cost disruption will accelerate as technology continues to drive production and service cost down. Low-end disruption represents new contexts of consumption and competition, which are new value networks. These constitute either new customers who previously lacked the money or skills to buy and use the product, or different situations in which a product can be used—enabled by improvements in simplicity, portability, and product cost. I can think of 6 industries that you can apply his theory and come up with a viable disruptive innovation.
But I can also think of many examples how this won't work. One example is we have yet seen this is happening to Microsoft as they continue to dominate both the OS and the Office Productivity Software market. There are many versions of open-office software but they fail to gain any traction. Unlike Salesfroce.com who successfully took over the mid-market CRM. Why?
Even when the product is free, take Google doc (SaaS) is the 2nd most popular free productivity app, used by 1% of users according to recent survey. Google docs also had the lightest use of all productivity apps, with an average of 40 actions performed in the app (compare with 548 in OpenOffice and 1,797 in Microsoft Word), and the fewest average days used. Although 1% of users had Gears installed on their machine, there was no evidence of its use in conjunction with Google Docs, nor did any user click on “Offline” or “Get Google Gears now” in their Docs account. Here’s an example a low-end disruption strategy failed even thought the incumbent has clearly overshoot in terms of functionality and performance.
The secret lies in “integration” as there are many third party vendors offering add-on solutions to SharePoint, we haven’t seen any office productivity software integration other than MS Office. It’s unlikely you’ll ever see the likes of Google or Xythos provide integration points. If a product can continue to find ways to integrate tightly with other components, the chance of it is being disrupted is less likely.
When Christensen suggested that iPod will soon be disrupted by cell phones, I don’t think this will likely be the case. The reason is iPod’s integration with all these apps and iTunes will not be replaced by camera+music phone. My Prada phone and Blackberry Bold both has music function, but I still use my iPod Touch.
Christensen also talked about barriers that stand in front of the manager seeking to create growth through innovation. Conventional wisdom works in conventional circumstances, but it misleads when circumstances change. This difference tilts the advantage toward the entrant and forces incumbents to work hard to create the organizational space they need to succeed through disruption. Simply placing a disruptive idea squarely in the middle of any current operations can consign it to failure. Companies seeking to unlock the transformational power of innovation disruption need a common language, a process that treats different types of innovation projects differently, and demonstration projects that show the value of different approaches. This remains the very reasons why many innovation projects got stuck.