DISRUPTIVE TECHNOLOGY

A disruptive strategy is a strategy in which an organization uses a disruptive innovation or disruptive technology to introduce a modified product or service with a different package of attributes often to a niche segment during the inception stages. This strategy is often observed in the domain where there is high scope of continuous innovation in technology or product, although these innovations may be minor or in a nascent stage and are continuous in nature.
The disruptive innovation strategy is generally characterized by offering the product or service with a set of values and attributes which differ from the benchmark product that customers value and may even might not be valued by the current customers. It generally serves to a niche segment of customers who value the changes more, like mew markets or new customers i.e. in other words disruptive technologies do note serve to current customers.
A disruptive technology differs from a potentially sustaining technology, because sustaining technology caters to the large base of current customers and is expected to be around for a long period of time.

Disruptive technology – an example in hard disk drive industry

The diameters and size of hard disk drive decreased continuously due to continuous innovations and the new designs provided more disk storage than the earlier ones. It was such a volatile industry that in a very short period many new firms came up with a disruptive technology providing a more spacious and smaller sized hard disk drive. And the established market leaders of this industry who did not recognize this prospect and were very much engaged in serving their current markets suffered huge loss. Even the market was so volatile that every new firm with a disruptive technology gave way to another new firm which replaced it with a better product, and thus numerous players emerged and exited the market in a very short span of time.

Why Firms miss the opportunity of investing in disruptive technology?

Front line companies with a high market share and addressing a large customer base often miss the bus to innovate the future technologies. These firms are so reoccupied with their current business and meeting the current customer demands that they fail to make technological investments that customer of the future may demand.
There an also be a variety of other reasons prevailing in the organisation such as bureaucracy, arrogance and poor planning.
The most important reason can be attributed as; the firms are wedded to their organizations. In other words, the management is totally concentrated on current customers and markets. Although these firms also survive the technological changes in the long run, by altering their technology, because they generally use sustaining technology, which has a long life term.

How do firms figure out a disruptive technology?
The most important thing to be monitored from the organizational point of view is to figure out which technology is disruptive and which sustaining.
Most of the disruptive innovations are figured out in the disagreements in the organizations for new product development and new technology development. There might not be enough support from the mid level managers of the organization due to their financial incentives.
Also a disruptive technology cannot be found out effectively by surveying the customers, who have little idea about the disruptive innovations. In other words the thriving sustaining technology can be forecasted properly with the help of customer surveys and their needs, but a disruptive technology might not be perceived properly by customers.

How Firms incorporate and deal with disruptive technologies?

Firms should identify potential disruptive technologies and should measure their possible future implications on their sales.
Their current techniques and processes which are serving their current customers cannot be derailed, hence a completely different department or organization should be formed, from the mainstream business.
The managers should track the performance trajectories of a product or technology and should make a possible forecast if the particular domain is exposed to disruptive innovations.

Big Firms vs Small Firms – from the disruptive technology perspective

Big firms don’t find it profitable to invest in disruptive technologies, because the potential revenues from these innovations is small as compared to the huge revenues earned from their current operations, and there is a high uncertainty about the future size of this disruptive innovation. They generally have 2 approaches to deal with a threat of disruptive innovations. The firm should either go down-market indulging into this new disruptive technology which provides a low margin business as a simultaneous operation alongside its mainline business or it should go up-stream and concentrate on the sustaining technology and maintain its large customer base.
But small firms have a different outlook to such technologies; they find it as an opportunity for a new business and enact quickly.

References:

1. By: Kennedy, Shirley Dugun. Information Today, Jun2008, Vol. 25 Issue 6, p19-21, 2p

2. By: Bower, Joseph L.; Christensen, Clayton M.. Harvard Business Review, Jan/Feb95, Vol. 73 Issue 1, p43-53

3. By: Claunch, Carl. eWeek, 3/3/2008, Vol. 25 Issue 7, p26-26, 1p,