A brief description of the Clayton Christensen's concept of disruptive technology and how it helps us to understand why companies go bankrupt under conditions of technological change.

1. Disruptive Technologies

2. Christian Sandström holds a PhD from Chalmers
University of Technology, Sweden. He writes and speaks
about disruptive innovation and technological change.

3. Ever since Clayton
Christensen
published his book
’The innovator’s
dilemma’ in 1997 its
popularity has
increased every year.

4. The book has had a profound impact
on how both practitioners and
scholars think about innovation and
technological change.

5. This presentation will give a brief
introduction to the main idea of the book.

6. In his book, Christensen sought to
explain why great firms fail under
conditions of technological change.

7. While there are many explanations of such
failure, Christensen brought an intriguingly
different perspective upon this issue.

8. Previous work in this area had primarily
looked at how a new technology impacts the
companies existing R&D skills.

9. For instance, a shift from mechanics to electronics
in an industry would render the mechanical
competence of established firms obsolete.

10. However, those perspectives could not
explain what happened in the disk drive
industry, which Christensen studied
during is PhD at Harvard.

11. In this industry, established firms
managed to renew their competence
base, yet still failed.

12. Just take a look at what happened in
each shift from one generation of disk
drives to another one:

13. 8-inch generation
Year 1976 1978 1980
Entrant firms 1 4 6
Established 0 2 5
firms
(Source: Christensen, 1997)

14. 8-inch generation
Year 1976 1978 1980
Entrant firms 1 4 6
Established 0 2 5
firms
(Source: Christensen, 1997)

15. 8-inch generation 5.25-inch generation
Year 1976 1978 1980 Year 1980 1981 1982
Entrant firms 1 4 6 Entrant 1 8 8
firms
Established 0 2 5 Established 1 2 8
firms firms
(Source: Christensen, 1997)

16. 8-inch generation 5.25-inch generation
Year 1976 1978 1980 Year 1980 1981 1982
Entrant firms 1 4 6 Entrant 1 8 8
firms
Established 0 2 5 Established 1 2 8
firms firms
(Source: Christensen, 1997)

17. 8-inch generation 5.25-inch generation
Year 1976 1978 1980 Year 1980 1981 1982
Entrant firms 1 4 6 Entrant 1 8 8
firms
Established 0 2 5 Established 1 2 8
firms firms
3.5-inch generation
Year 1983 1984 1985
Entrant 1 2 3
firms
Established 0 1 1
firms
(Source: Christensen, 1997)

18. 8-inch generation 5.25-inch generation
Year 1976 1978 1980 Year 1980 1981 1982
Entrant firms 1 4 6 Entrant 1 8 8
firms
Established 0 2 5 Established 1 2 8
firms firms
3.5-inch generation
Year 1983 1984 1985
Entrant 1 2 3
firms
Established 0 1 1
firms
(Source: Christensen, 1997)

19. 8-inch generation 5.25-inch generation
Year 1976 1978 1980 Year 1980 1981 1982
Entrant firms 1 4 6 Entrant 1 8 8
firms
Established 0 2 5 Established 1 2 8
firms firms
3.5-inch generation 1.8-inch generation
Year 1983 1984 1985 Year 1991 1992 1993
Entrant 1 2 3 Entrant 1 3 3
firms firms
Established 0 1 1 Established 0 0 3
firms firms
(Source: Christensen, 1997)

20. In total, one established firm managed
the transition from one generation of disk
drives to the next one!

21. And these shifts did not destroy the existing
competence base of the incumbent firms.

22. Why then, did those firms fail?

23. Christensen’s answer:
Because they listened to their customers!

24. Each of the new generations of disk drives
offered a worse performance in terms of what
existing customers demanded.

25. Customers wanted a better storage
capacity - and a smaller disk drive
initially offered less storage.

26. Therefore, the established firms could
not find any financial logic in entering the
next generation.

27. Later on, the smaller generation would reach
’good enough’ performance levels and
consequently displace the former generation.

28. It looked like this:

29. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

30. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

31. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

32. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

33. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

34. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

35. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

36. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

37. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

38. Technology supply and demand in the
10000
HDD industry
1000
Hard Disk Capacity (MB)
100
10
1
1975 1980 1985 1990
Year (Source: Christensen, 1997)

39. Companies went bankrupt by listening to
their customers and giving them what
they demanded.

41. The new generations of disk drive
emerged in a new value network – in low
end segments or in entirely new markets.

42. The fact that the new generation had a
worse storage capacity but offered new
performance attributes implied that they
prospered in new applications.

43. Eventually, the products became ’good
enough’ in terms of storage capacity and
then displaced the former generation.

44. Therefore, Christensen argued
that one must look at whether
innovations satisfy a firm’s
current customer base or not.

45. Sustaining innovations are those
which mainstream customers
demand.

46. Sustaining innovations are those
which mainstream customers
demand.
Those innovations which do not
satisfy current customers are
regarded as disruptive.

47. The disruptive innovation has:

48. The disruptive innovation has:
Lower performance according to
what mainstream customers
want.

49. The disruptive innovation has:
Lower performance according to
what mainstream customers
want.
Other performance attributes
(smaller, simpler), which are not
valued by current customers that
makes it prosper in a new value
network.

50. Companies are
therefore ’held
captive’ by their
most profitable
customers –
who impose a
great indirect
control of the
resource
allocation
process inside
the firm.

51. If you throw a stick into the field, you haven’t forced
the dog to go and get it, but it would still do so.

52. You are fact in power, because you have something
that the dog wants.

53. In the same way, existing customers influence what
firms decide to do because they provide the
company with profitable revenues.

54. This mechanism helps us to understand how
companies may be misguided when
listening to their current customers.

55. Sources
Christensen, C.M. (1997) The Innovator’s
Dilemma, Harvard Business School
Press, Cambridge, Massachusetts.

56. Image attributions

57. Find out more:
www.disruptiveinnovation.se