Clayton Christensen defines disruptive technologies as innovations that initially underperform established products in mainstream markets but offer a different value proposition that appeals to new customer segments. These technologies typically introduce a product that may seem inferior to the existing ones in the eyes of mainstream customers, yet they possess attributes that appeal to niche or emerging markets.
"Disruptive technologies bring to a market a very different value proposition than had been available previously." — Clayton Christensen, Introduction
Undershoot Mainstream Needs: Disruptive products often underperform compared to established products on the attributes valued most by mainstream customers. For example, early personal computers were far less powerful than mainframes, but they were significantly cheaper, smaller, and more accessible.
"Disruptive technologies underperform established products in mainstream markets." — Christensen, Introduction
Offer a Different Value Proposition: These technologies cater to different needs and values that are often overlooked by mainstream customers. They don't necessarily focus on outperforming existing products but instead offer attributes that appeal to fringe customers.
"They have other features that a few fringe (and generally new) customers value." — Christensen, Introduction
Simpler, Cheaper, Smaller, More Convenient: Disruptive innovations frequently involve simpler technology, reduced costs, and increased convenience.
"Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use." — Christensen, Introduction
Definition: Sustaining technologies are innovations that improve existing product performance along dimensions that are already valued by mainstream customers. These technologies help companies maintain their positions in the market by enhancing their current offerings without fundamentally disrupting the market or the value network.
"Most technological advances in a given industry are sustaining in character." — Christensen, Introduction
Improve Performance on Established Metrics: These innovations enhance the attributes that mainstream customers already care about.
"Sustaining technologies...improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued." — Christensen, Introduction
Reinforce Existing Value Networks: They serve the existing needs of customers within the current market structure rather than creating new markets.
Can Be Incremental or Radical: Sustaining innovations can range from small, incremental improvements to significant technological leaps that still serve the same customer base.
Key Insight: Christensen observes that technological advancements often outpace the evolving needs of the market, leading to a situation where technologies offer more performance than the market requires. This oversupply creates opportunities for disruptive technologies to enter the market by offering sufficient performance on less critical attributes.
Generally evolve slowly, driven by external factors like consumer preferences, regulations, or changes in other industries.
Often rapid, driven by continuous innovation and the pursuit of better performance.
When technologies exceed the needs of the market, this creates room for disruptive technologies to gain a foothold by focusing on different, perhaps less critical, performance metrics.
Example: In the disk drive industry, technological advancements rapidly increased drive capacity, outpacing the mainstream market's capacity needs. This gap allowed smaller, less expensive drives to enter and eventually dominate new markets.
Definition: Value networks are the ecosystems within which firms interact with their customers, suppliers, competitors, and other stakeholders. These networks are defined by the specific product attributes that are most important to customers within a particular market or industry segment.
"Companies are embedded in value networks because their products generally are embedded, or nested hierarchically, as components within other products and eventually within end systems of use." — Christensen, Chapter 2
Product Performance Attributes: Value networks are shaped by the key performance metrics that matter most to customers.
Customer Needs: These networks are reflections of the unique needs and preferences of customers within a specific segment.
Cost Structures: Different value networks have distinct cost structures that dictate how firms compete.
Competitive Dynamics: The level of competition, the nature of rivalry, and differentiation strategies are influenced by the specific value network.
Definition: Established firms have a tendency to migrate towards higher-performance, higher-margin market segments, often abandoning lower-end markets. This migration is driven by the attractiveness of higher margins and the difficulty of maintaining profitability in lower-margin markets.
Attractiveness of Higher Margins: Higher-performance products generally command higher prices, making them more appealing to established firms.
Difficulty in Lower-Margin Markets: Established firms often struggle to compete effectively in markets where profit margins are slim, due to their cost structures being aligned with higher-end markets.
Example: In the disk drive industry, companies like Seagate gradually moved from the desktop PC market to more high-performance segments like engineering workstations and file servers, where higher margins could be achieved.
Definition: Entrant firms, particularly those introducing disruptive innovations, often have an advantage over established firms because they are better positioned to identify and exploit emerging market opportunities.
Lower Costs: Entrants typically have lower overheads and more flexible cost structures, enabling them to compete in emerging markets with lower margins.
Flexible Organizational Structures: Smaller and more agile, these organizations can quickly adapt to changing market needs and evolving technologies.
Willingness to Accept Failure: Entrants are often more willing to experiment and embrace failure, allowing them to iterate rapidly and refine their products or strategies.
Example: Companies like Conner Peripherals, Micropolis, and Plus Development captured significant market share in the disk drive industry by leveraging their lower costs, agility, and willingness to learn from early failures.