Disruptive technology

A confusing technology or confusing addition is an addition that helps actualize a fresh bazaar and amount network, and eventually goes on to agitate an absolute bazaar and amount arrangement (over a few years or decades), displacing an beforehand technology there. The appellation is acclimated in business and technology abstract to call innovations that advance a artefact or account in means that the bazaar does not expect, about aboriginal by designing for a altered set of consumers in the fresh bazaar and after by blurred prices in the absolute market.

In adverse to confusing innovation, a comestible addition does not actualize fresh markets or amount networks but rather alone evolves absolute ones with more acceptable value, acceptance the firms aural to attempt adjoin anniversary other's comestible improvements. Comestible innovations may be either "discontinuous"1 (i.e. "transformational" or "revolutionary") or "continuous" (i.e. "evolutionary").

Sustaining innovations are about innovations in technology, admitting confusing innovations are about innovations in marketing. For example, the auto was a advocate abstruse innovation, but it was not a confusing innovation, because aboriginal automobiles were big-ticket affluence items that did not agitate the bazaar for horse-drawn vehicles. The bazaar for busline about remained complete until the admission of the lower priced Ford Archetypal T in 1908.2 The banal auto was a confusing innovation, because it afflicted the busline market. The automobile, by itself, was not.

The accepted abstract compassionate of confusing addition is altered from what ability be accepted by default, an abstraction that Clayton M. Christensen alleged the "technology mudslide hypothesis". This is the simplistic abstraction that an accustomed close fails because it doesn't "keep up technologically" with added firms. In this hypothesis, firms are like climbers scrambling advancement on crumbling footing, area it takes connected upward-climbing accomplishment aloof to breach still, and any breach from the accomplishment (such as abundance built-in of profitability) causes a accelerated decline slide. Christensen and colleagues accept apparent that this simplistic antecedent is wrong; it doesn't archetypal reality. What they accept apparent is that acceptable firms are usually acquainted of the innovations, but their business ambiance does not acquiesce them to accompany them back they aboriginal arise, because they are not assisting abundant at aboriginal and because their development can booty deficient assets abroad from that of comestible innovations (which are bare to attempt adjoin accepted competition). In Christensen's terms, a firm's absolute amount networks abode bereft amount on the confusing addition to acquiesce its following by that firm. Meanwhile, cipher firms abide altered amount networks, at atomic until the day that their confusing addition is able to access the earlier amount network. At that time, the accustomed close in that arrangement can at best alone bulwark off the bazaar allotment advance with a me-too entry, for which adaptation (not thriving) is the alone reward.3

The assignment of Christensen and others during the 2000s has addressed the catechism of what firms can do to abstain abeyance brought on by abstruse disruption.

History and usage of the term

The appellation confusing technologies was coined by Clayton M. Christensen and alien in his 1995 commodity Confusing Technologies: Catching the Wave,4 which he co-wrote with Joseph Bower. The commodity is aimed at managing admiral who accomplish the funding/purchasing decisions in companies rather than the analysis community. He describes the appellation added in his book The Innovator's Dilemma.5 Innovator's Dilemma explored the cases of the deejay drive industry (which, with its accelerated generational change, is to the abstraction of business what bake-apple flies are to the abstraction of genetics, as Christensen was brash in the 1990s6) and the excavating accessories industry (where hydraulic actuation boring displaced cable-actuated movement). In his sequel, The Innovator's Solution7 Christensen replaced the appellation confusing technology with confusing addition because he accustomed that few technologies are intrinsically confusing or comestible in character; rather, it is the business archetypal that the technology enables that creates the confusing impact. The abstraction of confusing technology continues a continued attitude of the identification of abolitionist abstruse change in the abstraction of addition by economists, and the development of accoutrement for its administration at a close or action level. However, Christensen's change from a abstruse focus to a business modelling focus is axial to compassionate the change of business at the bazaar or industry level. For example, Christensen's abreast accent on the activated business archetypal rather than the technology itself was developed by Henry Chesbrough's beat angle of Open Innovation.

In befitting with the acumen that what affairs economically is the business model, not the abstruse composure itself, Christensen's approach explains why abounding confusing innovations are not "advanced technologies", which the technology mudslide antecedent would advance one to expect. Rather, they are generally atypical combinations of absolute off-the-shelf components, activated cleverly to a small, apprentice amount network.

The theory

Christensen defines a disruptive innovation as a product or service designed for a new set of customers.

    "Generally, disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches. They offered less of what customers in established markets wanted and so could rarely be initially employed there. They offered a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream."8

Christensen argues that disruptive innovations can hurt successful, well managed companies that are responsive to their customers and have excellent research and development. These companies tend to ignore the markets most susceptible to disruptive innovations, because the markets have very tight profit margins and are too small to provide a good growth rate to an established (sizable) firm.9 Thus disruptive technology provides an example of when the common business-world advice to "focus on the customer" ("stay close to the customer", "listen to the customer") can sometimes be strategically counterproductive.
How low-end disruption occurs over time.

Christensen distinguishes between "low-end disruption" which targets customers who do not need the full performance valued by customers at the high end of the market and "new-market disruption" which targets customers who have needs that were previously unserved by existing incumbents.10

"Low-end disruption" occurs when the rate at which products improve exceeds the rate at which customers can adopt the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments. At this point, a disruptive technology may enter the market and provide a product which has lower performance than the incumbent but which exceeds the requirements of certain segments, thereby gaining a foothold in the market.

In low-end disruption, the disruptor is focused initially on serving the least profitable customer, who is happy with a good enough product. This type of customer is not willing to pay premium for enhancements in product functionality. Once the disruptor has gained foot hold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate. The incumbent will not do much to retain its share in a not so profitable segment, and will move up-market and focus on its more attractive customers. After a number of such encounters, the incumbent is squeezed into smaller markets than it was previously serving. And then finally the disruptive technology meets the demands of the most profitable segment and drives the established company out of the market.

"New market disruption" occurs when a product fits a new or emerging market segment that is not being served by existing incumbents in the industry.

Business implications

Disruptive technologies are not consistently confusing to customers, and generally booty a continued time afore they are decidedly confusing to accustomed companies. They are generally difficult to recognize. Indeed, as Christensen credibility out and studies accept shown, it is generally absolutely rational for bounden companies to avoid confusing innovations, back they analyze so abominably with absolute technologies or products, and the deceptively baby bazaar accessible for a confusing addition is generally actual baby compared to the bazaar for the accustomed technology.

Even if a confusing addition is recognized, absolute businesses are generally afraid to booty advantage of it, back it would absorb aggressive with their absolute (and added profitable) abstruse approach. Christensen recommends that absolute firms watch for these innovations, advance in baby firms that ability accept these innovations, and abide to advance abstruse demands in their amount bazaar so that achievement stays aloft what confusing technologies can achieve.

Disruptive technologies, too, can be cautiously disruptive, rather than acutely so. Examples accommodate agenda photography (the aciculate abatement in customer appeal for accepted 35 mm book blur has had a deleterious aftereffect on free-riders such as accelerate and bittersweet blur stocks, which are now added big-ticket to produce) and IP/Internet telephony, area the backup technology does not, and sometimes cannot about alter all of the non-obvious attributes of the earlier arrangement (sustained operation through borough ability outages, civic aegis antecedence access, the college amount of accuracy that the account may be life-safety analytical or admirable of college apology antecedence in catastrophes, etc.).

Disruptive technologies not generally clean earlier technologies off the face of the earth, or out of the business apple altogether. But they do generally clean out accurate firms. Generally accustomed firms will abscond upmarket aggravating to accomplish up the revenues and margins absent to the disruption ascent from below. They generally eventually fail. Many decades later, their aboriginal technologies may still acquisition acceptable applications in animal activity and commerce. But they will no best be bogus by those aboriginal firms of the ancient generations, and the amount networks about them will be essentially altered from the aboriginal ones. For example, bias-ply tires for passenger-car use still exist, and they are still bogus and bought and sold. However, today they absorb smaller, hobbyist-oriented automotive apology amount networks, admitting 40 years ago they were what best boilerplate car-tire buyers were buying, application a larger, lower-margin, added commonsensical amount network. Today adorable tires absorb that beyond network. Bias-ply tires' bartering actuality has diminished to a baby upmarket niche, and in the eyes of a broad abatement mass-market annoy dealer, they accept actual little value.