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Disruptive Innovation The Challenges for Managing
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LOW LOW HIGH,environmental turbulence, improvement of products commercial and or technical transformation. services or business models of productsservices or business models. Competence enhancing,discontinuities,Competence destroying. Incremental,Disruptive,Innovation,Innovation,maintenance of mainstream. Radical growth of emerging or niche value, value networks Incrementalism networks re framing the mainstream. LOW LOW HIGH,market uncertainty,Evolutionary Revolutionary.
Figure 1 Innovation Continuum Thomond and Lettice 2002. Discontinuous innovations can be distinguished along two dimensions as. shown in Figure 2 1 product capability or the benefits that the products. provide as perceived by customers and users and 2 technological. capability the degree to which the product involves expanding capabilities. beyond existing organisational competencies The diagram shows with. examples the three different types of discontinuous innovation that can be. introduced,Perceived Product Capability,Same Enhanced. Technological Capability,Commercially,Same Continuous Discontinuous. Technologically,Technologicallty Commercially,Advanced Discontinuous Discontinuous. e g Flat Screen TV e g Compact Disks,and disk drive. technology, Figure 2 Types of Discontinuous Innovations Veryzer 1998.
Flat screen televisions are an example of a radically different technology. being used to improve a product This provides a technological discontinuity. although it only offers customers a small or incremental improvement in. terms of product capability and features In contrast the Sony Walkman. utilised existing technologies to introduce a commercially discontinuous. product Customers had not been able to easily walk around with music. before the introduction of the walkman and this product opened up a whole. new market for portable sound systems that had not previously existed. Disruption has been the key driver in democratising computer technology and. placing personal computing into the hands of the masses Moore 1995. Christensen 1997 and has been both technologically and commercially. discontinuous Most established computing firms no matter how well. managed have been severely damaged if not destroyed by the impact of. disruptive innovations introduced by new entrants Hamel 2000. Christensen 1997 Armed with this knowledge Andy Grove Intel s. chairman and former CEO has led his management team in using the. concept of disruptive innovation to invent and launch the Celeron chip. Christensen 2002 The Celeron chip has generated a new growth business. at the low end of the personal computer PC processor market thus. protecting Intel s hold from a low end disruptor and ensuring longer term. organisational survival Christensen 2003 However the likes of Intel. cannot relax as the forces of disruption look set to impact the traditional. desktop PC which enabled by improvements in disk drive technology was. itself the disruptor of the minicomputer and the traditional mainframe The. increasingly powerful personal digital assistants PDAs now combined with. other technologies such as mobile communication and digital photography. are in a prime position to offer the low end customers who are over. supplied with the traditional performance of PCs with a different potentially. disruptive value proposition, Figure 3 Disruptive Innovation Model adapted from Christensen 1997. Figure 3 shows Christensen s 1997 model of disruptive innovation This. shows that organisations often over supply their customers needs with. excess technological functionality or services that customers do not actually. require Line A shows the trajectory of increasing customer requirements for. a given product or service while Line B is the increasing performance offered. by the product or service which is far steeper than Line A For example. mainframe and mini computers in the late 1980s offered many customers. higher levels of performance features and capability than they could use. This oversupply left a vacuum at the low end of the market for a simpler. product offering the personal computer When this was introduced its. performance characteristics represented by the beginning of Line C were. perceived as lower and seemed to offer worse performance to the. mainstream mainframe mini computer customers and users However a. niche of consumers valued the performance characteristics of the personal. computer and with time the technological performance improved along the. trajectory of Line C At point D the technological performance of the PC. equalled that demanded by the average mainstream customers of. mainframes mini computers and they started to switch causing the. widespread disruption of the established mainframe mini computer market. and causing many of these incumbent organisations to go out of business. Again these new products and services will continually improve usually. faster than the average customer s requirements leaving space for new. waves of disruption Line F showing the potential for Personal Digital. Assistants to disrupt the PC market in the near future This model best. describes what has been termed low end market disruption. Gilbert 2003 has identified what have been termed new market disruptive. Area of Displacement Area of Net Growth,Established Disruptive. Origin of disruptive business,outside of established. market with non consumers,innovations as shown in Figure 4. Figure 4 Model of New market Disruptive Innovations adapted from Gilbert 2003. These occur when non consumers are offered a simple convenient product. or service that allows them to do things that they would not have otherwise. been able to do Often the growth of the new market is ignored by. established companies as it is considered too small and low margin for them. to consider Just as for low end disruptors as the offerings improve. customers are attracted away from established products and services By. the time the incumbents begin to notice the defection it is often too late for. them to respond effectively and the disruptive products and services. permanently reshape the existing markets Companies introducing these. new market disruptions need to follow a strategy of being patient for growth. but impatient for profitability Christensen 1997, In the early 1990s major airlines such as British Airways decided that the.
opportunities afforded by a low cost point to point no frills strategy such as. that introduced by the newly formed Ryanair was an unlikely threat to their. established high revenue market of regular business flyers By the mid. 1990 s other newcomers such as easyJet had followed Ryanair s example. The low cost approach had captured a large segment of a new market. customers who had not been regular flyers before The low cost no frills. approach proved a hit with European travellers but it took a while before. increasing numbers of business travellers started to switch from the high cost. airlines to the rapidly improving services provided by the low cost airlines. Now the older airlines are trying to fight back with their own low cost services. or are having to downsize their operations as they continue to lose market. Figure 5 Disruption in the Airline Industry, If an organisation manages to foster a potentially disruptive idea not only. does it often face problems getting internal support Rice et al 2001 but. there are problems to overcome to get it adopted by the mass market Moore. 1995 discusses the difficulties faced by companies trying to cross the. chasm from early market acceptance to gain the support of the early. majority and how to deal with the problems that occur when the early. majority begins to rapidly adopt the new technology or change Disruptive. innovation only begins to be truly realised when the marketplace shifts to. adopt a new paradigm in what he calls the tornado of adoption Once the. tornado begins it is not long before the majority of potential customers in the. marketplace have undergone dramatic change in their past behaviour with. the promise of gaining equally dramatic benefits from the new paradigm For. disruptive innovations to successfully cross the chasm an initial niche market. needs to be found from which other segments of the market can be. conquered avoiding the mistake that many companies make of trying to take. disruptive products straight to the mainstream market where they are likely. to fail as they will be perceived as being poorer products and services If. Ryannair and easyJet had tried to target regular business travellers first it is. unlikely that they would have been able to attract these customers away from. the established airlines By establishing their reputation in the non. consumption and low ends of the market they have been able to. successfully cross the chasm and now are able to compete successfully. against the established airlines,Main Street applications products. Early Market Tornado infrastructure products,Bowling Alley niche marketing. Late Majority,Early Adopters,Early Majority,Innovators. Figure 6 Crossing the Chasm the technology adoption curve Moore 1995. Challenges of Disruptive Innovation and the DISRUPT IT Solutions. By reviewing the literature and working with the industrial partners in the EC. IST programme DISRUPT IT project the key barriers and challenges to. developing and commercialising disruptive ideas and innovations have been. identified and are shown in Figure 7 The DISRUPT IT project has. developed tools and methods to help to overcome these barriers and these. will be briefly described,Figure 7 Barriers to Disruption.
1 The strategic importance of disruptive innovation is not well known. There is generally a lack of knowledge about the theory of disruptive. innovation within organisations which prevents them from developing. strategies to systematically introduce potentially disruptive products and. services to the customers who value them Christensen and Raynor 2003. Moore 1995, To overcome this barrier the DISRUPT IT Consortium has developed a. Knowledge Safari A Knowledge Safari distils a large amount of theory and. information onto graphical templates which are placed around a room. These templates are large hand drawn posters which include Figures 1 to 6. as presented in this paper and can be seen in use in a workshop in Figure 8. Participants can then be led through each of the templates by a DISRUPT IT. facilitator This process allows the participants to gain a visual and holistic. view of the principles of disruptive innovation and to see the interrelationships. between the key concepts presented The Knowledge Safari uses lots of. examples which can be discussed in depth so that disruptive innovation can. be more easily understood, Figure 8 Workshop discussion on Disruptive Innovation Knowledge Safari. part of the Knowledge Safari can be seen on the walls behind the participants. 2 Inability to generate disruptive ideas, Generating potentially disruptive ideas requires organisational resources to. be freed up to understand where customers are not consuming products and. why this might be so and to understand the needs of low end customers who. are getting increasingly frustrated with paying for additional performance that. they do not need It requires thinking about markets and customers in non. traditional ways and for exploring the intersections of technologies which. make new potentially disruptive ideas feasible, To overcome this barrier the DISRUPT IT consortium have developed an. ideas workshop This workshop uses creativity techniques to guide the. participants through a structured one or two day process to help them to. identify and explore unserved or overserved market segments in which there. are non consumers or low end consumers ready for building a path to. disruption It helps the participants to discover disruptive applications for. their existing technologies and competences and to identify threats and. opportunities for disruption in their current markets Figure 9 shows one of. the creativity techniques The Wheel used to challenge the assumptions. about current markets and to generate and identify potentially disruptive. Figure 9 Ideas Workshop The Wheel Creativity Technique. 3 Inappropriate funding routines, The fundamental nature of disruptive innovation necessitates organisations to.
lead and not follow and an organisation s long term competitive strength lies. in its capacity to be corporately entrepreneurial Baden Fuller and Pitt 1996. Tidd et al 1997 state that most companies organisational routines struggle. to lead transformational change at any level of the organisation Instead. companies choose to focus on incremental and occasionally mildly radical. innovation as organisational development is mostly path dependent with the. past and current knowledge dictating or at least significantly influencing the. future Many organisations therefore have an unbalanced portfolio of R D. which does not balance between evolutionary and revolutionary change in. their portfolio of ideas their portfolio of projects and their portfolio of products. and business units Cooper 1980 Cooper et al 2001 For organisations to. survive long term they must select initiate and capitalise on disruptive. Disruptive Innovation The Challenges for Managing Knowledge Dr Fiona Lettice and Pete Thomond International Ecotechnology Research Centre Cranfield University Cranfield Beds MK43 0AL UK Email f lettice cranfield ac uk Presented on www knowledgeboard com KnowledgeBoard 3 Nov 2003 Abstract This paper describes what disruptive innovation is and then highlights the key barriers that

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