The Perils of Disruption

Why is it so difficult for established firms to deal with disruptive innovation? In general, I think that Clayton Christensen’s model of disruptive innovation is correct. His basic idea is that since disruptions generally start in niches, the economics of pursuing disruptive innovations look really bad for large incumbents:

Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.

Because the new niche doesn’t look very attractive, it makes rational economic sense to let someone else fill it. And also, you wouldn’t want to cannibalise your existing products, would you?

Well, yes, actually – you would. Or at least you should. Here are some examples from Wired’s articles about tablet computers.

First off, this is from the discussion of Microsoft’s approach to tablet computing:

Incremental change, however, can ultimately mean no change. A decade ago, Microsoft came up with its own vision of a tablet computer. But the company tried to have it both ways: a new category of device that ran an old style of software — specifically, a modified version of Windows. (Using Windows, computer pioneer Alan Kay says, was “a very bad idea for this kind of interaction.”) The Tablet PC, introduced in 2002, was a flop. Meanwhile, advances from Microsoft’s labs can approach bar mitzvah age before finding their way into products. Surface is the most exciting product out of Redmond in years, but the company has been shockingly timid in pushing it into the marketplace. Almost three years after it was announced, Surface is still a novelty in a few hotel lobbies and retail stores. Apple all but announced that the iPad could damage its own desktop and laptop business, but Microsoft never seems to put all its weight behind groundbreaking products — especially if success may come at the expense of its Windows and Office cash cows.


Why is it so difficult for established firms to deal with disruptive innovation? In general, I think that Clayton Christensen’s model of disruptive innovation is correct. His basic idea is that since disruptions generally start in niches, the economics of pursuing disruptive innovations look really bad for large incumbents:

Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.

Because the new niche doesn’t look very attractive, it makes rational economic sense to let someone else fill it. And also, you wouldn’t want to cannibalise your existing products, would you?

Well, yes, actually – you would. Or at least you should. Here are some examples from Wired’s articles about tablet computers.

First off, this is from the discussion of Microsoft’s approach to tablet computing:

Incremental change, however, can ultimately mean no change. A decade ago, Microsoft came up with its own vision of a tablet computer. But the company tried to have it both ways: a new category of device that ran an old style of software — specifically, a modified version of Windows. (Using Windows, computer pioneer Alan Kay says, was “a very bad idea for this kind of interaction.”) The Tablet PC, introduced in 2002, was a flop. Meanwhile, advances from Microsoft’s labs can approach bar mitzvah age before finding their way into products. Surface is the most exciting product out of Redmond in years, but the company has been shockingly timid in pushing it into the marketplace. Almost three years after it was announced, Surface is still a novelty in a few hotel lobbies and retail stores. Apple all but announced that the iPad could damage its own desktop and laptop business, but Microsoft never seems to put all its weight behind groundbreaking products — especially if success may come at the expense of its Windows and Office cash cows.

And then there’s this from Fake Steve Jobs on the reaction of the NY Times and others to the iPad:

Anyway, do you really think saving newspapers is just a matter of putting your old crap on a new device? Because from what I can see, The New York Times sucks just as bad on a Kindle as it does on paper. That, in fact, is the real problem with The New York Times: It sucks, and everyone knows it, except, apparently, the [umm, idiots] who write for The New York Times, which is, oddly enough, the heart of the problem. Quod erat demonstrandum, as Socrates once said.

The iPad isn’t about saving newspapers. It’s about inventing new ways of telling stories, using a whole new language — one that we can’t even imagine right now.

This is the problem – when faced with a disruptive innovation, you can’t just innovate a little bit around the edges, while doing everything you can to protect your current market. You’re either in or you’re out. All of the numbers tell you that it makes no sense to be in. The problem is that if you’re not in at the start, then you’re playing catch-up, and you probably won’t ever catch up.

That’s what makes the iPad interesting – Apple here is taking aim at their own market. This is different from trying to disrupt markets that they are just entering, like mp3 players and mobile phones. If the iPad takes off, it’s not great news for MacBooks and Airs.

Here’s how I put it in an earlier post:

The simple fact of the matter is this: we must introduce innovations that take away our current market share. There’s no such thing as a cash cow – if you have a product that is dominating the market, but you’re not innovating around it, it’s not a cash cow, it’s already dead.

Cannibalise your current products. Kill your best performers, or someone else will kill them for you.

(iPad picture from a nice photostream by flickr/Yutaka Tsutano under a Creative Commons License)

http://timkastelle.org/blog/2010/05/the-perils-of-disruption/

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Autor: Gabriel Catalano - human being | (#IN).perfección®

Lo importante es el camino que recorremos, las metas son apenas el resultado de ese recorrido. Llegar generalmente significa, volver a empezar!