Disruptive Innovation

Disruptive Innovationbased on theory by Clayton Christensen

27 augustus 2008

Future Studies

Synopsis:

“Outstanding companies can do everything right and still loose their market-leadership”, states Harvard professor Clayton Christensen. Companies face a tough dilemma; Should you listen to your best customers or the non-customers? In this rapport we pose the question; When to invest in lower-performance products?

Index:

Simply the best: the fast track of innovation

The comfort zone of society

The real meaning is in the use

The innovator's dilemma: when new technologies cause great firms to fail

Simply the best: the fast track of innovation

Because of increased competition in a globalized world innovation is speeding up more and more. The end of this development is nowhere near. But while new products are launched in an increasing pace, consumers are having a hard time catching up…

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Outstanding companies can do everything right and still loose their market-leadership, states Harvard professor Clayton Christensen. Companies face a tough dilemma; Should you listen to your best customers or the non-customers? In this rapport we pose the question; When to invest in lower-performance products?

According to Harvard professor Clayton Christensen outstanding

Companies can do everything right and still loose their market-leaderhip

How can this be?

Last year a new product was launched every 3.5 minutes. This means that by the time you've reached the end of this presentation 5 new products have been launched!

The speed of this innovation is fueled by globalization and increased competition

Moore’s law states that information technologies double their power each and every year, creating exponential growth.

Head of IT at CERN, Francois Grey explains…

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Technological innovation has become a major driver of progress

And while innovation is speeding up and companies are competing for better and better products the consumer is lacking behind in his adoption of those new technologies

Lecturer at Cranfield University Stephen Carver…

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The comfort zone of society

Society doesn’t change as fast as technological innovation is. Why is that? Because the outcome of any change in people’s behavior is unknown, their first instinct is to avoid taking such risks. They much rather stay within their comfort zone and keep living their lives they way they are used to living them. In a way everybody likes change, but nobody wants to change…

Why is it that the needs of society don’t change in the same pace as the technological opportunities do?

The adoption of technology means that the know-how, attitude and behavior of consumers has to change

And while everybody likes change, nobody wants to change

WHY NOT?

According to Robert E. Quinn, professor at the University of Michigan, people like to stay in their comfort-zone

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You are comfortable in your current situation and the result of a change is unknown, including possible sight effect, learning curve etc.

This behavior is well explained by the prospect-theory

The prospect-theory states that people strongly prefer to avoid losses than to acquire gains

This behavior leads to risk-aversion

And when people avoid risk, change is less likely to occur

We’ve entered an age where the technological possibilities outstrip the adoption of new technologies. In such a society the way people apply technology to their daily lives is of essential importance. We are thus living in the application-age in which the real meaning of innovation is in the use.

The real meaning is in the use

What happens when technological innovationoutstrips social adoption of technology?

According to John Thackara we’ve lost sight of what value new technologies add to our lives…

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This crisis of innovation, the spread between that what is possible and that what is used today, has hardly ever been larger

According to Stephen Carver this means we have to focus on how technology is used…

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We’ve thus entered an age that is about how people use technologies.

We call this age the application-age: an era where the real meaning is in the use

Research Director at PhilipsLab, Josephine Green, explains what this new age means

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So when you innovate you have to focus on what customers can use

The best customers of every company are driving them forward on the innovation curve. While that happens every company must steer away from the mainstream. That allows for new entrants to disrupt the innovators in any market. This dilemma is called the ‘innovators dilemma’…

The innovator's dilemma: when new technologies cause great firms to

fail

Companies keep innovating so they can sell better products for better profits to their best customers

But listening to their best customers with the biggest needs is driving them away from mainstream. Because the mainstream wants to use a simpler, more affordable product

Clayton Christensen, a professor of Business Administration at the Harvard Business School, calls this The Innovators Dilemma

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CONCLUSION:

The growth opportunities are with the non-users:

the people who historically couldn’t afford to own

or use the innovation

Set-up a new business unit within the company to pursue the gradual transition to the disruption within your market

For further details:

FreedomLab Future StudiesSingel 282

1016 AD AmsterdamThe Netherlands

http://www.freedomlab.org