Why IP based video surveillance is not a disruptive innovation.

1. Is IP Video a
Disruptive Technology?

2. The security and surveillance industry is currently
experiencing a shift from analogue to digital
cameras which are connected over the internet.

3. It is sometimes
It is sometimes argued that this transition is disruptive
that this transition is disruptive.

4. It is sometimes
It is sometimes argued that this transition is disruptive
that this transition is disruptive.
And there are indeed many signs of such a pattern.

5. It is sometimes
It is sometimes argued that this transition is disruptive
that this transition is disruptive.
And there are indeed many signs of such a pattern.
But i
is IP video disruptive i h
id di i in the original sense?
i i l ?

6. It is sometimes
It is sometimes argued that this transition is disruptive
that this transition is disruptive.
And there are indeed many signs of such a pattern.
But i
is IP video disruptive i h
id di i in the original sense?
i i l ?
In this presentation I will address whether it is or not.

7. It is sometimes
It is sometimes argued that this transition is disruptive
that this transition is disruptive.
And there are indeed many signs of such a pattern.
But i
is IP video disruptive i h
id di i in the original sense?
i i l ?
In this presentation I will address whether it is or not.
In order to do so, we first of all need to get a clear idea
of what is meant by disruptive innovation.

8. Harvard Professor
Clayton Christensen
published hi b k ’Th
bli h d his book ’The
innovator’s dilemma’ in
1997 and coined the
1997 and coined the
term disruptive
technology.
gy

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

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

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

12. Christensen on the other hand, argued that it was the
Christensen on the other hand argued that it was the
impact on the market that determined whether
established firms would fail or not.

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

14. Sustaining innovations are those which
mainstream customers demand.

15. Sustaining innovations are those which
mainstream customers demand.
Those i
Th innovations which d not
ti hi h do t
satisfy current customers are
y
regarded as disruptive.

16. The disruptive innovation has:

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

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

19. The main problem then for established
firms is that they find it irrational to invest
in a technology which their customers do
not demand.
not demand.
They
Th can’t fi d any fi
’t find financial l i i
i l logic in
doing so and keep improving their
g p p g
existing products.

20. But once the disruptive technology has
become ”good enough” it displaces the
good enough it displaces the
former one.

21. But once the disruptive technology has
become ”good enough” it displaces the
good enough it displaces the
former one.
Those entrant firms which found a niche
a niche
where customers did indeed demand the
technology initially now move up‐market
t h l i iti ll k t
and start to dominate the industry.

22. The Disruptive innovation framework
The Disruptive innovation framework essentially
posits that companies go bankrupt by listening to
their customers and giving them what they demand.
and giving

23. A pretty provocative and interesting conclusion.

24. Christensen based his argument upon evidence from
the rigid disk drive industry, where
the rigid disk drive industry, where each shift from
from
one generation of disk drives to a new one caused
major problems for incumbent firms.

25. Christensen based his argument upon evidence from
the rigid disk drive industry, where
the rigid disk drive industry, where each shift from
from
one generation of disk drives to a new one caused
major problems for incumbent firms.
Each new generation of disk drives was smaller and
new generation of disk drives was and
offered a lower performance in terms of storage
capacity. Those firms that dominated the previous
generation therefore struggled to develop the new one,
as their customers did not demand it.

26. It looked something like this:

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

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

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

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

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

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

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

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

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

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

37. In each
In each transition to a new generation firms were
to a new generation, firms
mislead by focusing on the what their existing
customers demanded.

38. No let’s go back to the case of IP video.

39. At first sight it appears to be truly disruptive.

40. It had a lower performance along many of the
traditional dimensions such as:

41. It had a lower performance along many of the
traditional dimensions such as:
Image quality
Frame rate
Price

42. It had a lower performance along many of the
traditional dimensions such as:
Image quality
Frame rate
Price
At the same time, it offered new attributes such as:
h ff d b h

43. It had a lower performance along many of the
traditional dimensions such as:
Image quality
Frame rate
Price
At the same time, it offered new attributes such as:
h ff d b h
Images can be viewed from anywhere, you only
Images can be viewed from anywhere you only need
an internet connection
Easier to scale up these systems
p y
Software can make the cameras more intelligent

45. Over time, IP video has improved significantly along
those dimensions which underperformed – image
quality is better today with HD and Megapixel
cameras and the prices are declining.
d th i d li i

46. Sound like a schoolbook example of a disruptive
technology, right?

47. But remember, Christensen stated that these
properties made a technology problematic because an
incumbent firm’s existing customers did not
appreciate such a value proposition.
i t h l iti

48. But in the case of IP video, this is not
necessarily the case.

49. IP video has not initially prospered in low‐end
segments or new markets as Christensen stated.

50. IP video has not initially prospered in low‐end
segments or new markets as Christensen stated.
It has rather emerged in many different, existing
segments such as retail, transportation, schools and
city surveillance.
i ill

51. IP video has not initially prospered in low‐end
segments or new markets as Christensen stated.
It has rather emerged in many different, existing
segments such as retail, transportation, schools and
city surveillance.
i ill
These segments are hardly new,
or low‐end in any sense.
or low‐end in any sense

52. IP video has not initially prospered in low‐end
segments or new markets as Christensen stated.
It has rather emerged in many different, existing
segments such as retail, transportation, schools and
city surveillance.
i ill
These segments are hardly new,
or low‐end in any sense.
or low‐end in any sense
Rather, they are segments which benefited in
p
particular from the scalability and other new
y
attributes that IP brought to the market.

53. Wouldn’t Pelco’s customers in for instance the city
surveillance or retail segments benefit from
adopting IP?
d ti

54. Wouldn’t Pelco’s customers in for instance the city
surveillance or retail segments benefit from
adopting IP?
d ti
I think
I think they do and that they have adopted IP to
and that they IP to
quite a large extent.

55. Wouldn’t Pelco’s customers in for instance the city
surveillance or retail segments benefit from
adopting IP?
d ti
I think
I think they do and that they have adopted IP to
and that they IP to
quite a large extent.
But those cameras have not primarily come from
Pelco or other analogue firms. Entrants like Axis,
ACTI, Mobotix and Indigo Vision have been leading
this shift, so far.

56. The transition to IP is therefore not a classical
example of a disruptive technology.

57. One of the problems for analogue
One of the problems for analogue firms has rather
has rather
been that they are not used to delivering this kind of
value proposition to their customers.
p p

58. One of the problems for analogue
One of the problems for analogue firms has rather
has rather
been that they are not used to delivering this kind of
value proposition to their customers.
p p
Their sales channel has been related to security
people and with the shift to IP, surveillance is
becoming an IT issue.

59. One of the problems for analogue
One of the problems for analogue firms has rather
has rather
been that they are not used to delivering this kind of
value proposition to their customers.
p p
Their sales channel has been related to security
people and with the shift to IP, surveillance is
becoming an IT issue.
Those firms find it difficult to target security people
with an IT offer and their
with an IT offer and their sales model has been built
has been
around relations with security people throughout
the value
the value chain.

60. And it is sometimes more difficult to change
relations than to change technologies.

62. Summing up, the transition to IP may at first glance
up, the transition to IP may at first glance
appear to be a schoolbook example of disruptive
innovation.

63. Summing up, the transition to IP may at first glance
up, the transition to IP may at first glance
appear to be a schoolbook example of disruptive
innovation.
But a closer look makes it clear that it is actually not
disruptive in the traditional sense.

64. Summing up, the transition to IP may at first glance
up, the transition to IP may at first glance
appear to be a schoolbook example of disruptive
innovation.
But a closer look makes it clear that it is actually not
disruptive in the traditional sense.
IP has not primarily emerged i
IP h t i il d in new markets or low‐
k t l
end segments, rather, it has prospered in existing
market segments, albeit in a new way that makes it
market segments albeit in a new way that makes it
problematic to handle for established firms.

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

66. Christian Sandström is a PhD
student at Chalmers
student at Chalmers
University of Technology in
Gothenburg, Sweden. He
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
More about IP video and disruptive innovation:
www.christiansandstrom.org