Exam 6: Disruptive Technologies: Understanding the Giant Killers and Considerations for Avoiding Extinction

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Those running big firms fail to see disruptive innovations as a threat not because they are dumb, but in many ways because they do what executives at large, shareholder-dependent firms should do-they listen to their customers and focus on the bottom line. And because the majority of a firm's current customers don't want the initially poor-performing new technology. The most disruptive technologies also often have worse margins than the initially dominant incumbent offerings. Since these markets don't look attractive, big firms don't dedicate resources to developing the potentially technology or nurturing the needs of a new customer base. Your best engineers are likely going to be assigned to work on cash-cow offerings, not questionable new stuff. This results in a sort of blindness created by an otherwise rational focus on customer demands and financial performance.

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In Christensen's view, true disruptive technologies have two characteristics that make them so threatening. First, they come to market with a set of performance attributes that existing customers don't value. Second, over time the performance attributes improve to the point where they invade established markets.
These attributes are found in many innovations that have brought about the shift from analog to digital. The first digital cameras were terrible-photo quality was laughably bad (the first were only black and white), they could only store a few images and did so very slowly, they were bulky, and they had poor battery life. Much the same could be said about the poor performance of early digital music, digital video, mobile phones, tablet computing, and Internet telephony (Voice-over IP or VoIP), just to name a few examples. But today all of these digital products are having a market-disrupting impact. Digital cameras have all but wiped out film use, the record store is dead, mobile phones for many are their only phone, tablets are selling faster than laptops, Internet phone service is often indistinguishable from conventional calls, and Skype can be considered the world's largest long-distance phone company.