Technological disruption and the innovators’ dilemma

Technological disruption refers to the process by which new technologies disrupt and displace existing technologies, products or business models. This phenomenon can occur when a new technology is introduced that is significantly superior to the existing in terms of performance, cost or convenience. This new technology may be adopted by consumers and businesses, leading to a decline in demand for the existing technology and the products or services that rely on it.

A new #technology is considered "disruptive" when it significantly changes the way that an industry or market operates. Disruptive technologies often have the potential to create new markets or significantly alter existing ones, leading to a shift in the competitive landscape.

There are several characteristics that can make a technology #disruptive:

a)????Performance: disruptive technologies often offer significantly better performance than existing technologies in terms of speed, efficiency, or other key metrics.

b)????Cost: disruptive technologies may be significantly cheaper than existing technologies, making them more accessible to a wider range of consumers or businesses.

c)????Convenience: disruptive technologies may be more convenient to use than existing technologies, making them attractive to consumers or businesses.

d)????Simplicity: disruptive technologies may be simpler and easier to use than existing technologies, which can make them appealing to a wider range of users.

e)????Accessibility: disruptive technologies may make it easier for new entrants to enter a market, disrupting the competitive landscape.

f)?????#Network effects: disruptive technologies may become more valuable as more people use them, creating a virtuous cycle of adoption.

It's worth noting that not all new technologies are disruptive, and some may fail to gain significant adoption. Disruptive technologies often require significant investments in infrastructure and other resources in order to be successful, and they may face resistance from established players in the market.

This phenomenon can have significant consequences for companies and industries that are impacted. For example, the introduction of smartphones and tablets disrupted the market for personal computers and laptops, leading to a decline in demand for these products. Similarly, the rise of streaming services has disrupted the traditional television and movie industries, as consumers have increasingly turned to these services for entertainment.

Technological disruption can also create new opportunities for companies that are able to adopt and leverage the new technology. For example, companies that were early adopters of e-commerce and online advertising have benefited from the disruption of traditional retail and advertising models.

The innovator's dilemma is a phenomenon that occurs when a company's success in the market becomes a hindrance to its ability to adopt new technologies or business models that may be disruptive to its current operations. This occurs because the company has a vested interest in maintaining its current business model, which often requires significant investments in infrastructure, training, and other resources. As a result, the company may be reluctant to make the necessary changes to adopt new technologies or business models, even if doing so would be beneficial in the long run.

We talk about dilemma as innovating or not is a situation in which the business must choose between two options, each of which has some drawbacks and negative consequences. A dilemma often involves a conflict of interests or values, and the person facing the dilemma must weigh the pros and cons of each option before making a decision. #Innovation comes to business' strategy with a certain amount of risk connected to it.

In the context of business, the dilemma may involve choosing between different strategies, technologies, or investments. Dilemmas can be challenging to navigate because they often involve trade-offs and difficult decisions. However, they can also be opportunities for growth and innovation, as they may require a person or organization to consider new approaches or ways of thinking.

The innovator's dilemma can be particularly challenging for companies that are leaders in their respective markets. These companies often have a large customer base and a strong brand, which can make it difficult for them to pivot to new technologies or business models without alienating their existing customers or damaging their brand. This can make it challenging for these companies to stay ahead of the curve and adapt to changing market conditions.

The concept of the innovator's dilemma was first introduced by Clayton Christensen in his 1997 book, "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail." In his book, Christensen describes how companies that are leaders in their respective markets often struggle to adopt new technologies or business models that may be disruptive to their current operations. He argues that this occurs because these companies have a vested interest in maintaining their current business models, which often requires significant investments in infrastructure, training, and other resources. As a result, they may be reluctant to make the necessary changes to adopt new technologies or business models, even if doing so would be beneficial in the long run.

Christensen's book has had a significant impact on the business world and has been widely cited by academics and practitioners alike. The concept of the innovator's dilemma has also been discussed in other books and articles on business and innovation, including "The Innovator's Solution: Creating and Sustaining Successful Growth" by Christensen and Michael Raynor and "The Innovator's DNA: Mastering the Five Skills of Disruptive Innovators" by Jeffrey Dyer, Hal Gregersen, and Christensen.

To overcome the innovator's dilemma, companies may need to take risks and make significant changes to their business models, even if it means temporarily disrupting their current operations. This may involve investing in new technologies or establishing partnerships with companies that are leaders in emerging areas. It may also require a shift in corporate culture, as employees may need to embrace new ways of working and thinking in order to adapt to changing market conditions.

The S-curve representation: the value of innovation is shaped like an S, distributed vertically over the Y axis. The value increases over time, fluctuating with more or less extended "S" shapes depending on the development structure and timing of each technology. When the S curve is completed and cannot grow longer in value, it encounters the limit. To overcome the limit, another technology, with another curve has to start. The initial competitive value is possibly less than the old technology apex, but it is functional to its growth.

In Christensen’s work the difficult topic of failing at innovating is faced and explained.

Because the incumbent has the luxury of a large customer base but high expectations of large sales of a specific product, he might encounter difficulties in changing. New entry next generation products find niches away from the incumbent customer set to build the new product. The new entry companies do not require the yearly sales of the incumbent and thus have more time to focus and innovate on this smaller venture.

The next generation #product is not being designed for the current customers of the incumbent company, and these customers are not interested in the new innovation. They continue to demand more innovation with the incumbent's existing product, but the company is unable to provide significant value due to being at the later stage of the S-curve. Meanwhile, the new entrant is providing significant value to its new product, which is in the earlier stages of the S-curve. By the time the new product becomes attractive to the incumbent's customers, it will be too late for the incumbent to catch up to the rapid rate of improvement being made by the new entrant, which is on the steep upward portion of the S-curve.

____________________________________

Literature Reference:

The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (1997) by Clayton Christensen