Overview of Disruptive Technologies
Disruptive technology was first introduced by Clayton Christensen in his article “Disruptive Technologies: Catching the Wave” (1995) which was co-wrote with Joseph Bower. In view of business and technology fields, disruptive technology is a technology initially in a form of simple application, then improves and dominates dramatically in the markets, where the markets do not expect. Disruptive technology typically improves in a way that by being lower priced and designed for various disciplines of consumers. Instead of allowing consumers with lots of money or lots of skills to use it, disruptive technology is designed in which allow “whole new population of consumers” to use it, access its services.
For leaders of the existing markets, disruptive technology makes potential threats on them. It is because it competes with the existing leaders of the market in such an unexpected trend. Leaders of the existing markets sometimes fail to compete with disruptive technology since they do not expect disruptive technology can improve and dominate dramatically in the markets. Generally, disruptive technology dominates the existing markets by moving into a new market where the older technology fails to follow. In additional, it enhances and makes improvements in its performance until finally displace the market incumbents.
There are lots of examples of disruptive technology such as personal computers, digital memory cards, digital photography, and Liquid Crystal Displays (LCD). Personal computers displaced the original mainframes computers. The dominant of digital memory cards has displaced the floppy disks which were widely used in the past.
Overview of Sustainable Technologies
Sustainable technology improves established products performance without replacing them. Sustainable technology is usually developed by well-established company which usually holds a leadership position in the corresponding industries. Generally, most of the new technologies and innovations improve the performance of products. The term sustainable technology was introduced by Clayton Christensen in 2003: “What all sustaining technologies have in common is that they improve the performance that mainstream customers in major markets have historically valued.”
In general, sustainable technology does not create side effect on the existing markets. Sustainable technology can be classified into two categories: Revolutionary or Evolutionary. For Revolutionary technology, customers are allowed to deal with a problem in a radically mean while for Evolutionary technology, products in an existing market are improved in such ways that customers are expecting.
Sustainable technology aims to sustain the organization’s focus, and sustainable technology usually satisfies current customers’ needs, while disruptive technology does not initially improve the focus of an organization. They sometimes do not have a market when they are created. In view of the difference between incumbents and entrants in terms of technology adoption, since sustainable technologies are well established together with the domination of strong players in their markets, an entrant may choose to begin with alternative technologies. Besides, disruptive technologies have lower gross margins, smaller size of target markets and simpler products, which allow them to carry out by either firm. Nevertheless, when compared to disruptive technology, products of sustainable technology are usually regarded as too expensive to be adopted and preferred instead of too cheap that no one want to adopt and prefer.
Which Type of Technology is Better? Disruptive or Sustainable
Instead of disruptive technology, sustainable technology which serves the present customers and puts emphasis on incremental improvements is more comfortable to develop and maintain from the point of views of managers who are doing on-going and successful business.
Since the majority of advances are sustainable technologies, with the established technologies, developed good reputation of the organizations and relationship with the customers in the mainstream markets, it is no doubt that managers in on-going business will feel more comfortable in those sustainable technologies.
In the mainstream markets, there are enough suppliers willing to develop and support the new technology and customers to buy it. In the computer industry, as a manager of Intel Corporation, it is more comfortable for them to perform continuous advancement on the processing power of Intel’s integrated chips as a sustainable technology since there are enough suppliers such as Tenco Electronics Co. and IT Market Web to support their development and large groups of mainstream customers to buy them. As a manager in an organization, a stable and sustainable market is preferred.
In the healthcare industry, applications which are used to manage the assets and traditional supply chain are usually considered as sustainable applications. It is nothing but the improvements and enhancements in the existing processes for the mainstream customers such as the large hospitals. Suppliers of these applications include the large hospital suppliers and Radio Frequency Identification (RFID) consultants. With the large supports behind, managers are much used to prefer sustainable technology.
Sometimes, if an organization chooses to adopt disruptive technologies instead of sustainable technologies, rapid technology improvements may overshoot the mainstream markets. This is a significant perplexing problem for a manager in an organization. Taking the producer of graphics cards – Nvidia as an example, the development of technologies and products were good initially. However, a large difference to their customers’ requirement was finally reached when the number of polygons rendered per second was increased rapidly every successive improvement.
From the perspective of managers in an on-going, successful business, sustainable technology is more preferred in general.
Examples of Digital Equipment Corporation (DEC) and Kodak
Many great companies were too focused on satisfying their customers stated needs, actually, they do not have much difficulties on succeeding this objective in order to develop their sustainable technology. It is hardly for managers in a good business to pursue in worse margins. But this is the problem, they were too focused on their high-end markets and the low-end disruptive technologies markets sometimes do not make sense to them. That’s why DEC’s leaders and engineers viewed PCs as underpowered toys. However, DEC finally went out of business.
DEC’s PDP and VAX products were considered the most popular minicomputers for both scientific and engineering industries during the 1970s and 1980s. Their management team was considered as the best team in the industry. However, the emergence of microcomputers had destroyed DEC finally. This was the problem of their business model. The mainstream market for DEC was customers who brought high-end minicomputers at high margins. These computers were wealth to buy powerful computers. In contrast of DEC’s minicomputers, microcomputers were mass produced to customers who were expected to use low-cost computers with little help from the manufacturers at low margins. Initially, microcomputers could not meet the high-end markets but over a successive improvement, they met the most demanding markets.
The reason of the collapse of DEC rather than the microcomputers corporations such as Apple, Dell was that DEC was too focused on their high-end markets and could not develop new markets for their products. DEC was forced by those microcomputers corporations to concentrate on their high-ends markets and customers in which the margins were considered as better and more profitable. However, after improvement of microcomputers performance, most of the microcomputers could do the most jobs as well as the minicomputers did. The dream of DEC was finally over and the most-demanding market was low cost microcomputers ultimately.
The other example was Eastman Kodak which missed out the digital photography revolution. In the past, Kodak dominated the chemically based photographic process markets. Their only competitor was the Japanese company, Fuji, but actually did not make too much threat to Kodak at that moment.
In the past, Kodak had put hundreds millions of dollars into a chemically based system which focused on satisfying their mainstream customers needs. Nevertheless, an emergence of a disruptive technology – digital photography revolution had made a huge punch to Kodak chemically based photographic process business. Digital photography technology was created in Japan. When the first Japanese VHS and Betamax camera systems were available in the markets, Kodak’s Polaroid chemically based system no longer made sense when compared to digital photography. Nevertheless, Kodak’s did nothing and tried to ignore this tidal wave approaching on them. Finally, they missed the chance of digital photography revolution and lost hundreds millions of dollars of investment which was equivalent to billions dollars today. Although digital photography was developed finally in Kodak nowadays, Kodak had to pay a huge price for their delay in digital photography revolution. The digital transformation required a series of layoffs and facilities closure, cutting 12,000-15,000 jobs around the world. A 20%-25% reduction in its workforce was happened since 2000.
In conclusion, refer to the examples of DEC and Kodak illustrated in the previous paragraphs it is not a good practice for successful, on-going companies too focused on satisfying their existing customers stated needs. They should develop their wider field of views into a new market and make significant preparation to resist the tidal wave from others disruptive technologies.