Tuesday, April 14, 2015

Discruptive technology: an opportunity or a threat?

The current business world is indeed in a thunderstorm, where an unpredicted new comer can quickly surpass the incumbents. Christensen’s theory about disruptive technology, especially the failure framework, is definitely eye-opening. Indeed, the problem of disruptive technology is the nature of the “unknown”: the speed of technological progress enables the disruptive ones to develop to the point of “good-enough” for the customers. And the examples of hard-disk and iPod’s births are especially intriguing. 

From Christensen’s article, I think disruptive technologies possess two important characteristics, which are also major reasons why even good companies fail to face them. First, those innovations are not catered to current customers’ needs. Second, those innovations result in worse product performance, at least in the near-term. In Christensen’s research, Seagate Technology, pioneered 5.25-inch hard-disk drives and was the supplier for IBM, forwent the opportunity of 3.5-inch drive due to its dependence on its customers (resource dependence). Engineers at Seagate were able to develop working prototype of 3.5-inch in 1980s with a low level of funding, but at the time, IBM and other principal customers showed no interest in the new drives with the limited memory space of 10MB. Based on current customers’ concerns and requests, Seagate management made rationale decision (at the time) to continue improvements of 5.25-inch rather than invest in 3.5-inch hard drives. Later, 3.5-inch drives’ developers formed a new company and continued to improve the storage capacity by 50% per year. By the end of 1980s, the 3.5-inch drives’ capacities were able to meet the personal-computer market, and quickly dominated the market. Seagate had to defensively switch its development focus in order to survive [1]. Seagate failed to take advantages of 3.5-inch, not only because they heavily relied on its customers, but also because they were too large to be attracted by such an emerging market from a lowered-quality products.

However, just as Blue Ocean Strategy mentioned that existing companies can also identify those opportunities. The success of iPod shows how a good company with right strategic move can definitely identify the Blue Ocean. Initially, Steve Jobs asked Jon Rubinstein to develop a portable music player, which was not available at the time. During a routine visit to Toshiba, Jon noticed a 1.8-inc hard drive, which didn’t fit into any existing market. As the story goes, Apple sold over 350 million iPods since its launch in 2001 [3]. Ironically, when iPod launched initially, Mr. Gates commented as follows: “I still think that some mixture of voice, the pen and a real keyboard” [2].

My friends are launching a start-up back in China. They struggled quite much on how to forecast the future. However, the theory helps me understand that when market potential is still unknown, the must is to understand the product strengths and find the niche market, rather than try to figure out the competition. And they will have the possibilities to move to mainstream by continuously improving their current products.

Work Cited

[1] Joseph L. Bower, & ChristensenM.Clayton. (1995. January). Discruptive Technologies. Harvard Business Review.

[2] Ritchie Rene. (2010. 2. 11). iPhone made Bill Gates Say "Oh my God", iPad Makes Him Rehash iPod Dismissal. Source: iMore: http://www.imore.com/iphone-bill-gates-god-ipad-rehash-ipod-dismissal
[3] Statista. (2015). Global Apple iPod sales from 2006 to 2014 (in million units) . Source: Statista: http://www.statista.com/statistics/276307/global-apple-ipod-sales-since-fiscal-year-2006/


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.