Blog 4: The Role of Customers and Disruptive Innovations

    In his 1995 book The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Professor Clayton Christenson developed the idea of a disruptive innovation. For a long time, it was believed that a disruptive innovation was simply “a breakthrough that makes good products better.”[1] Christenson took this definition one step further. He defined a disruptive innovation as a product that once was complex and available to only a small group of people, but through a new innovation, is simplified and made available to more people.[2] One of the principles that Christensen outlines is the role of investors and customers. Through the resources they provide, a firm can have a better idea of its positionality and ability to invest in a disruptive technology.[3]

            This principle is very present in the disruptive innovation that was the radio. When transistor radios came on the market, they were only available to middle- and upper-class families who would gather around and listen to their favorite programs. Ryan Moore writes, “middle class families owned nice radio consoles made by RCA and Zenith. Sound quality was excellent, but they were clunky, expensive, and inefficient.”[4]Then along came Sony who entered the market with their Walkman radios. Sound quality was poor, but the radios were cheaper to produce and sold well because they found a new market. Teenagers. Sony was able to keep improving its product while RCA and Zenith struggled to keep up and eventually began to fade away.

            This is an example of the power that customers can have when it comes to disruptive innovations. Sony was able to see that teenagers, who really like music in a portable way, were a new market with untapped potential and as a result Sony had to transition its strategy and investment patterns to cater to their customers. By the time RCA and Zenith realized what their customers wanted, it was too late, and Sony had overtaken them. But Sony itself would also be overtaken in this market when Apple introduced the iPod in the early 2000s.

            When it comes to disruptive innovations and technologies, investors, and particularly customers, have critical influence. Firms that listen to their customers and determine what they want and what they don’t want to have a better chance to improve their positionality and prepare for and defend against disruptive technologies. It is a common expression that the “customer is always right.” They may not always be right but they can certainly make or break a company.

 

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[1] Ryan Moore, 11 Disruptive Innovation Examples (and Why Uber and Tesla Don’t Make the Cut)

[2] Clayton Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, 1995

[3] Ibid

[4] Ryan Moore, 11 Disruptive Innovation Examples (and Why Uber and Tesla Don’t Make the Cut)