Friday, July 18, 2003

Disruptive Technology

A lot of people throw around the term "disruptive technology" or "disruptive innovation," especially after Clayton Christensen's book The Innovator's Dilemma. Now it was a great book, but apparently either a lot of people didn't exactly understand it, or read it, because most uses of the term are wrong. That's too bad, because it's a useful idea.

Christensen's question is, why do powerful incumbent companies fail to develop certain new technologies? His answer is that in many cases, they do. They do in when the new technology is, according to the current metrics of success, better than the existing technology. It doesn't matter how different the technology is - giant magnetoresistive disk drives were a real change in drive tech, requiring years and millions of dollars of investment, but the existing drive manufacturers all made the transition. When they fail it's because the new technology is worse than the existing technology, according to the current metrics. The catch, of course, is that the new tech is better according to a different set of metrics. When 5" drives were introduced, they were worse than 8" drives on all of the usual metrics: price per byte, maximum capacity, profit margin, size of market. What the incumbents didn't understand was they were smaller. Strange, but true. No incumbents adopted 5" drives, and all subsequently went out of business.

Now people use the term to mean anything better, but most technologies described as "disruptive" aren't. They might be perfectly good, but they aren't disruptive, which means that the incumbents are just as likely to hop onto them as the startups (and it's usually the startups or the VCs who are describing their tech as "disruptive").

Christensen's flaw as a business analyst, though, is that he sees everything through the lens of disruptive innovations. There are lots of reasons why some technologies succeed and others fail, and disruption is just one of them.