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Disruptive innovation is changing the world, but what does it really mean?
The man who has been made famous for a theory about disruptive innovation is the Harvard Professor, Clayton Christensen. He created a theory called innovators dilemma.
To illustrate the theory, he took as an example the disc drive industry, because this is an industry that has changed very rapidly. Christensen found that the key players in the disc drive business changed every time there was a switch in the preferred size of disc drive.
As disc drives changed from 12 inch, to nine inch, to 5¼ inch, to 3½ inch, there was a shift in the make-up of the industry. The key players changed, often replaced by companies that a few years earlier were quite small.
The shift in disc drives corresponded with a shift in the preferred form of computer, from mainframe, to minicomputers, to desktop to laptop.
Intriguingly, when the disc drive makers researched the market and investigated the new technology, they often received feedback from their clients that the new type of disc drive would not be a success. Often hearing clients say words to the effect: ‘this new-fangled 5¼ inch drive is little more than a toy.’ By the time that the new disc drive started to take over, it was too late for the incumbents, who found that smaller, nimbler companies had too great a head start.
Disruptive innovation comes in many shapes. It can be a new technology; it can come about because of a cultural shift. Take as an example the tale of Encyclopaedia Britannica, Encarta and Wikipedia. When Encarta was first launched, executives at Encyclopaedia Britannica did not take the threat seriously. However, PCs equipped with CD ROMs took-off, and so Encarta took ever more market share and Encyclopaedia Britannica eventually went bust. Forward wind the clock a few years, a new idea emerged, that of a new cooperative culture, and the idea that people would add entries to a product for free. It has been calculated that if Bill Gates, along with the second and third richest men in the world, had committed their entire fortune to paying for articles for Encarta, that would have still created less articles than make-up Wikipedia.
Intriguingly, Encyclopaedia Britannica is back, and has filled a niche in the markets, for entries, written by highly qualified academics, that students writing essays at university can cite as a source.
Disruptive innovation therefore changed the encyclopaedia business.
Disruptive innovation may mean new products, such as a smart phone, or MP3 players that had a transformative effect. It may mean a new product that applies the internet, such as social media, disrupting media, for example. It may simply relate to a different way of doing something, such as sharing, or contributing for free to a review service.
Examples of disruptive innovations that use the internet and focus on a new kind of mind-set, include Uber and Trip Advisor, which have disrupted the taxi business and the travel industry, respectively.
Examples of new disruptive technologies include autonomous or electric cars. We may see a convergence between an Uber style model, and autonomous cars, and the result will be massive disruption of the car industry.