Disruptive Technologies Catching the Wave

January 1995 Disruptive Technologies: Catching the Wave by Joseph L. Bower and Clayton M. Christensen

The Idea in Brief Goodyear, Xerox, Bucyrus-Erie, Digital. Leading companies all—yet they all failed to stay at the top of their industries when technologies or markets changed radically. That’s disturbing enough, but the reason for the failure is downright alarming. The very processes that successful, well-managed companies use to serve the rapidly growing needs of their current customers can leave them highly vulnerable when market-changing technologies appear. When a technology that has the potential for revolutionizing an industry emerges, established companies typically see it as unattractive: it’s not something their mainstream customers want, and its projected profit margins aren’t sufficient to cover big-company cost structures. As a result, the new technology tends to get ignored in favor of what’s currently popular with the best customers. But then another company steps in to bring the innovation to a new market. Once the disruptive technology becomes established there, smaller-scale innovations rapidly raise the technology’s performance on attributes that mainstream customers value. What happens next is akin to the rapid, final moves leading to checkmate. The new technology invades the established market. By the time the established supplier—with its high overhead and profit margin requirements—wakes up and smells the coffee, its competitive disadvantage is insurmountable. The Idea in Practice At issue here is a key distinction: Sustaining innovation maintains a steady rate of product improvement. Disruptive innovation often sacrifices performance along dimensions that are important to current customers and offers a very different package of attributes that are not (yet) valued by those customers. At the same time, the new attributes can open up entirely new markets. For example, Sony’s early transistor radios sacrificed sound fidelity, but they...