Hello, everyone. Today's presentation is on the topic of Disruptive Innovation. Now, this is a topic that is quite popular in studies on innovation in corporations, in other organizations that are interested in examining how innovation happens, what it means, what are the types of innovation. So this phrase, disruptive innovation, you will come across quite a bit in your studies on innovation. This term actually goes back to the term disruptive technologies. And that was popularized by and written up by the gentleman that you see in this photograph, Professor Clayton Christensen, a business professor at the Harvard Business School. And there's an explanation of innovation that Clayton Christensen, has talked about before that we've encountered in this course in an earlier presentation. Which is Christensen talking about the fact that innovation isn't as unpredictable as people think. So there is a certain process, a certain methodology. It's not completely a well defined recipe as one might find in a cookbook, but we're getting there. So this explanation of innovation, is something we've seen before. But then Clayton Christensen, in a book called The Innovator's Dilemma, talks about something that he refers to as disruptive technologies. And then in a follow-up book which he referred to as, The Innovator's Solution, he changed the term disruptive technologies to disruptive innovation. Because he recognized that technologies, by themselves, may not be disruptive, it is what we do with them, it's what the company does with them, it's what business model is created around those technologies that make them disruptive or not disruptive. So he changed the phrase disruptive technologies to disruptive innovations, and then he goes on to describe what it means. So there's a bit of misunderstanding of this term, the way Christensen had described it, that we need to get into a little bit more detail. So he says, that disruptive innovations don't necessarily bring better products to established consumers in existing markets, right? So there are three things here, better products, established customers, in existing markets. So that's important to keep in mind. It's not that, it's something else, so what exactly is it? Rather, what he says, is they disrupt that trajectory of better products, established customers, existing markets. They disrupt that by introducing products and services that are actually not as good. It would seem a little bit contradictory, these products. So disruptive technologies, when they are first introduced, are typically not as good. So they're worse than what exists right now, which is interesting. But what's interesting about them which makes them disruptive is it has a bunch of other benefits, and what are those? Those benefits are that they're simpler, they're more convenient and, more importantly, they're less expensive. So important thing to keep in mind, disruptive innovations are not necessarily things that are better. They actually could be worse, they very often are, but they're more convenient and they are less expensive. Other thing to keep in mind is, often, they completely open new markets. So there appeal is to less demanding consumers. So if you're a company that's making a product and you have a group of established customers that you sell to here, you have a loyal consumer base that you sell to. Disruptive technologies typically do not appeal to that group. It appeals to a different group. So what happens, the way Christensen describes it, is that you have a large company, maybe a large multi-national, that has a well established product that it's selling to a well established consumer base. What happens with disruptive technologies is these new technologies come out, they're typically created by smaller organization, a smaller company, in some cases it could be a start-up. They introduce this technology, it comes in at a lower price, it's not as good. [COUGH] So your established consumers will not buy that. But there'll be a whole new market for those technologies that then end up becoming a disruptive innovation, right? So that's something important to keep in mind. So, in this book, The Innovative Solution, Christensen, describes how this happens. So if you look at this graph, if you look at this chart, what you see here is this is what's established. That you have a high quality product that a company is producing. You have an established consumer base, that is very demanding, that requires and looks forward to this high quality product. But what happens is something comes in from underneath, right? He talks about this as coming from underneath. That is a low quality use, maybe medium quality, it's not as good. And that actually creates this disruption. It comes in from underneath, and it often unseats what exists right now, over time, right? So if an established company is doing well with a product that's out in the market, it's more expensive, it's high quality, it has lots of features, something else comes in from underneath which is low cost, more convenient, not so good, but eventually, over time, it gets better and better and better, and this, then, ends up replacing this. So what happens is the reason these technologies are referred to as disruptive, or these innovations are referred to as disruptive, is because they end up replacing this. So, Clayton Christensen, also talks about something called the innovator's dilemma. What is that dilemma? So if you're a large corporation that an established product, you see somebody else coming into the market with something that is low cost, low quality but they're starting to have impact to the market, what do you do? Do you, as a company, start now producing a lower quality product thereby losing the consumers that you have? Thereby maybe cannibalizing your own market? Or do you continue to focus on the market that you have right now, and not even get into that business? That's the innovator's dilemma. But it's important for companies to recognize that sometimes these new technologies, these disruptive innovations, come in, and they will take over this market over time, right? So that is what a disruptive innovation is. So we have to keep in mind that it's not necessarily something that's a brand new technology, a brand new product that completely changes everything, that might be referred to as a breakthrough innovation. But that may not always be a disruptive innovation, right? So that's something important, something for us to keep in mind. So then Christensen, goes on to give an example of the computer industry, right. He does quite a bit of explanation of disk drives that people are used to using. But he talks about how, when computing first arrived, the way to do computing was through what's referred to as mainframe computers. And what you see in this image are mainframe computers. These were massive computers in size. They often filled up entire rooms. They had tapes and spools, and all kinds of technologies that were part of these mainframe computers. So these were fairly large, fairly expensive. You only had one of these things in an organization. A university might have one of these mainframe computers, a large corporation might have one of these and they were really expensive. So that is a mainframe computer. What happened, as new technologies came into the market, was something called a mini-frame, a mini-computer. So these were smaller technologies, they're smaller in size, lower cost. As you can see in this image, it's much smaller, it doesn't fill up the entire room. That then was replaced by the personal computer which got even smaller, right? These can fit on a desktop, these are desktop computers. And now, what we have today is laptops, which get even smaller, and the smartphone, right? So what we have seen is a series of technologies, disruptive technologies that have changed the market over time. So it started off, it's really large, very expensive. A smaller, more convenient thing comes into the market. They're typically not as good, but now, as you know, today, our smartphones, over time, have become so powerful in terms of the computing quality and the computing power that they can do just the kinds of stuff that mainframe computers were doing several decades ago, right? So these are some examples of disruptive innovations that Christensen talks about. Some other examples, the whole world of printed knowledge that is encyclopedic in nature, for example, Encyclopedia Britannica. Which was sort of a gold standard in encyclopedia information, several volumes, big books, rather expensive. Very often it's only university libraries that could afford to have them, or wealthy individuals. That was replaced by something called Wikipedia, which is something that people in today's generation completely access all the time. They may not even know about the presence of things like Encyclopedia Britannica. So what happens in this case, Wikipedia, which is something that's created by a group of individuals that offer a free service. They upload information that they know, it's vetted by people across the world, and this free service disrupted the encyclopedias that were printed and out there in the world. So this is another example of something that's low quality, right? So we do not know for sure if this information on Wikipedia is correct. It's low cost, it's entirely free, can't argue with that. And it comes in from the bottom of the market and completely takes over the established organizations. This is another example of disruptive innovation. A third example, x-rays, or what could be referred to as radiography. Radiography is something that is done, it still continues to happen, but it's being replaced slowly by things like the ultrasound. The ultrasound machine, which is low cost. You don't get as good of a resolution, you may not be able to see all that you can in x-ray. But, over time, this is slowly disrupting the radiography by these ultrasound images by sonography. So a few things to keep in mind. Disruptive innovation is not breakthrough innovations, right? So breakthrough innovations could be something that could be a new technology that transforms a market. Might be the same consumers, same overall product category but a better way to do it, right? Disruptive innovation is not that. Disruptive innovation is something that comes in with a worse product, lower quality, lower cost and new market, right, new consumer. So those are some of the things to keep in mind. Very often there's confusion about this, that disruptive innovation might be seen as breakthrough innovation, but keep in mind that they are not the same thing. And that's a primary difference that Clayton Christensen talks about. So what you learned today is an understanding of one form of innovation, which is disruptive innovation, which is different than breakthrough innovation. But essentially, something that has been really popularized by Christensen, in his book, The Innovators Dilemma. Thank you.
