In 1995, Prof. Clayton brought a novel management concept for catching the new wave by introducing innovative tools—disruptive technologies. Since then, there has been a widespread acceptance of the role of Disruptive technologies in management preaching. However, is adopting disruptive technologies good enough to catch the new wave of growth? Is there a role of Reinvention dynamics in creating successes and failures in pursuing disruptive technologies?
Despite profitability, all the companies in the mature products business suffer from slow growth. Hence, they have been after finding a new wave of growth. The purpose of disruptive technologies has been to reinvent existing matured products to create this new wave. However, technology competence, availability of risk capital and complementary assets, brand value, performance records, and many other common factors are not sufficient. For example, despite inventing LED technology and having all kinds of competencies needed to leverage it to catch a new wave of lighting, GE left it to a new entrant for suffering from disruptive consequences. On the other hand, close to $100 billion in investment yet to catch a new wave of transportation out of autonomous driving technologies.
Pursuing a new wave by adopting disruptive technologies through reinventing matured products is not straightforward. It suffers from (i) inferior and loss-making beginning of a new wave, (ii) lack of availability of nonconsumption market, (iii) technology uncertainty, (iv) hype cycle, (v) unclear Innovation diffusion patterns, (vi) crossing the chasm challenges and (vii) decision-making Dilemma. Hence, this article reviews Prof. Clayton’s work on disruptive technologies and improves it further by elaborating challenges in caching new wave through the reinvention of matured products by disruptive technologies.
Review of Prof. Clayton’s work on disruptive technologies
Disruptive technologies refer to emerging technology cores for reinventing matured products, giving birth to new waves that grow and cause disruption to the business of matured products. Prof. Clayton expressed his disappointment about the failure of firms with track records of investing in technologies to retain existing customers to pursue technology possibilities that may form a new wave. To explain this paradox, he pointed to one of the most popular and valuable management doctrines—“stay close to their customers.” Unfortunately, mainstream customers reject radically new technologies or product concepts because they do not address their needs as effectively as the matured products—let alone offer them improved and less costly alternatives to get their jobs done.
Hence, as Prof. Clayton states, ignoring new technology possibilities has been a repeated pattern among high-performing companies. Instead, they keep incrementally improving their profit-making proven products to meet their mainstream customers’ immediate needs.
That is precisely the reality Kodak, GE, IBM, and RCA faced with digital cameras, LED light bulbs, personal computers, and Transistor radios. Unfortunately, they suffered from disruptive consequences due to listening to their mainstream customers and showing reluctance or avoidance to those disruptive technologies. Hence, Prof. Clayton suggested that managers must be aware of the likely consequences of ignoring emerging technologies that do not meet mainstream customers’ needs.
Therefore, he recommended (i) assessing whether candidate technologies are suitable for sustaining the advancement of matured products or pursuing the path of reinventing them, (ii) determining the strategic significance of the disruptive technologies, (iii) locating the initial market for disruptive technologies, (iv) assign the mission of leveraging disruptive technologies to new organizations, and (v) keep disruptive technology pursuing organizations independently functioning. However, despite the merit, such suggestions are insufficient to overcome the challenges of pursuing disruptive technologies. For example, assessing whether candidate technologies are disruptive faces enormous scientific challenges that could not be revealed initially by extrapolating past data.
Besides, early progress may cause a misleading impression. Hence, management competence mastered by business schools may not be sufficient to address challenges and opportunities posed by candidate disruptive technologies. Furthermore, his work lacked details on pursuing disruptive technologies; he did not leave much advice for the High-tech Startups.
Of course, Prof. Clayton explained why management preferred serving mainstream customers while ignoring potential disruptive technologies. He provided examples to support his narrative, notably from the hard disk industry. However, his work falls short of offering further details about the challenges organizations, whether incumbent or new entrants (startups), face in pursuing disruptive innovations and how to overcome them. Besides, his suggestion of establishing an independent organization to pursue disruptive technologies does not always appear prudent. Furthermore, he did not share any insights on whether the same technology could be used for both sustaining and disruptive purposes. Hence, this article sheds light on the difficulties and suggests approaches to leveraging disruptive technologies through reinventing matured products.
Examples of disruptive technologies
- Personal Computer—in the beginning, personal computers were high-tech toys, creating appeal to hobbyists. However, due to the advancement of the microprocessor, memory, and disk drive, the personal computer started to grow as a disruptive technology, unleashing disruption in the minicomputer market and expanding the market of computers. However, if Moore’s law had not remained alive due to the advancement of lithography, personal computers could not have risen as a disruptive force.
- Transistor or Solid-State Switch—despite size, weight, and energy advantage, at the early stage of the life cycle, transistor offered poorer performance than vacuum tubes. Hence, the mainstream radio, television, and other consumer electronics markets rejected it. Surprisingly, the transistor started unleashing its disruptive potential due to intensive R&D pursued by early adopters like Sony and Fairchild.
- Electronic Image sensor—Kodak’s first digital camera prototype in 1974 had only 10,000 pixels, far less than the minimum 2 million pixels needed by mainstream customers. Hence, Kodak did not pursue a digital camera, getting a patent for it. Due to long technology insights and persistence in R&D, Sony succeeded in unleashing its disruptive potential.
- Light Emitting Diode (LED)—upon inventing red LED in 1962, GE engineers could not succeed in having perfect blue. Hence, GE gave it up upon facing an insurmountable barrier, leaving the opportunity for tiny Nichia to pursue it. However, Nichia had to sponsor Nobel prize-winning scientific discoveries to tap into latent potential.
- Online Video Delivery—in the mid-1990s, numerous .com companies pursued the idea of delivering videos over the internet. Unfortunately, they all suffered from setbacks by the end of the 1990s. Ironically, Netflix became successful later due to timing, which created synchronized responses.
- Autonomous driving—upon triggering hype through showing initial success, autonomous driving has been caught in the chasm. Consequentially, close to $100 billion in investment made by startups and incumbent firms through independent organizations yet to succeed in rolling out the reinventions for the mainstream market.
- Solid state disk drive—in 1959, an Egyptian engineer, Mohamed M. Atalla, and a Korean engineer, Dawon Kahng, invented floating-gate MOSFET (FGMOS) at Bell Labs. After almost 25 years, while working for Toshiba, Fujio Masuoka advanced FGMOS and invented flash memory, opening the door to solid-state disk drive. Although Toshiba leveraged it in reinventing its disk drives, at the beginning, Toshiba management could not recognize well its business potential. Hence, Toshiba gave away business prospects to others, resulting in creating disappointment and Fujio Masuoka’s departure from Toshiba.
- Lithium-ion batteries for electric vehicles—within the context of Tesla’s pursuit of automobile reinvention by turning them into electric vehicles, lithium-ion is a disruptive technology. However, unlike Tesla, Toyota has been pursuing the purpose of sustaining innovation in gasoline automobiles by developing hybrid models. Instead of plunging into automobile reinvention with one go, Toyota has taken intermediary steps of leveraging battery technology to migrate to plug-in electric vehicles. Hence, as Prof. Clayton suggested, a separate organization for pursuing EVs does not appear prudent for Toyota.
Leveraging disruptive technologies
Broadly, within the context of the evolution of products, technologies could be pursued for the purpose of sustaining existing products through incremental advancement or reinventing them by changing the matured technology cores. Although Prof. Clayton did not show any insights about using the same emerging technology core for sustaining and disruptive or reinvention purposes, in some cases, the same technology could be suitable to serve both purposes. For example, Toyota has been leveraging battery technology, unlike Tesla, to sustain and disrupt possibilities.
Unlike pursuing sustaining innovation, identifying possibilities and leveraging disruptive possibilities of technologies are fraught with pervasive uncertainties. Let’s look into a few examples to get insights into creating and catching new waves by leveraging disruptive technologies.
Examples of successes and failures in catching a new wave
- IBM, Microsoft, and Intel in pursuing PC wave—due to the growing popularity of personal computers among hobbyists and individuals, IBM decided to design and release the IBM PC in 1981. However, IBM could not predict its exponential growth, let alone likelihood of unleashing disruptive effects on its mini and mainframe computers. Hence, it offered CPU jobs to Intel and OS jobs to Microsoft. Due to this rational decision-making error, IBM lost the opportunity to recover from the rise of disruptive PC technology and suffered from burnout in its core business. However, PC’s rise from humble beginning to disruptive technology was due to the exponential growth of semiconductors and the adoption of graphical user interface technology.
- Sony and RCA in reinventing radio and television—before Sony, RCA tested transistor radio. Due to its inferior performance to its mature vacuum tube-based radios, RCA’s mainstream customers did not show interest. However, due to its smaller size and weight, college students found Sony’s transistor radio a better alternative to having no radio to enjoy music with friends in neighborhood hangouts. However, the success of Sony’s reinvention of the radio through changing the vacuum tube technology core with the transistor needed continued refinement. This refinement was so deep that one of its Engineers got a Nobel prize in 1974.
- Kodak and Sony in digital cameras—upon getting the first patent for digital cameras, Kodak management did not see the possibility of improving the resolution of the electronic image sensor to 2 million pixels, the minimum needed for the mainstream market. Hence, it was left to someone else to pursue. It happens that Sony’s leadership saw the possibility, which led to 15 years of refinement before seeing the take-off of the digital camera—disrupting Kodak.
- Sony in LCD and OLED displays and portable music players—not always that incumbent firms profiting from matured technology fail to catch new waves from emerging technologies. For example, Sony championed LCD despite having a solid position in Trinitron CRT display for TV. Subsequently, Sony pursued OLED displays to destroy the business of LCD. However, Sony missed the opportunity to reinvent the Walkman, leaving the chance to Apple.
- GE and Nichia in LED light bulb—upon inventing the red LED in 1962 and succeeding with the Green one, GE could not overcome the hurdle of inventing a perfect blue LED for producing high-contrast white light. However, Nichia’s team had to make a Nobel prize-winning scientific discovery to leverage it in creating new wave of LED light bulb for the mainstream market.
- IBM and Apple in Smartphone—in 1994, IBM released the first smartphone in the world—Simon. However, Apple leveraged it to unleash a disruptive effect on the mobile handset business. IBM withdrew it from the market as it could not find enough customers, only 50,000 for the first release. The underlying cause has been a deficiency in many component technologies, like batteries and the wireless data network.
- Netflix and video on demand .com—Due to hitting the ball at the right time, Netflix succeeded in the online delivery of videos, which was discarded by many videos on demand .coms in the late 1990s.
Challenges of succeeding in reinvention for catching a new wave
It appears that leveraging disruptive technologies to catch a new wave is far more than a management decision. If underlying science does not support and organizations do not focus on technology acquisition, refinement and fusion, no amount of management practice taught at the business school will succeed in catching a new wave. Here are several challenges for leveraging disruptive technologies to catch new waves out of reinvention.
(i) Justifying inferior and loss-making beginning of a new wave—invariably, all reinvention waves out of emerging candidate disruptive technology cores show up as primitive alternatives to mature products. Hence, they begin the journey at a loss. Besides, no invention shows up as disruptive technology. They grow as disruptive through additional advancement. Therefore, deciding to pursue candidate disruptive technology is quite daunting.
(ii) Dealing with rejection and finding a nonconsumption market—due to an inferior beginning, the mainstream market will be rejecting reinventions. As a result, a new wave faces barriers to growth. To address it, Prof. Clayton suggested finding a nonconsumption market. However, does it exist for all reinventions and in all countries? Unfortunately, no. For example, although the military served as a nonconsumption market for US companies to fuel the growth of reinventions at the early stage, companies operating in all other countries do not have this access. For example, Japanese companies are barred from accessing the military market.
(iii) Managing technology uncertainty—technology possibilities are fraught with pervasive uncertainties such as embryonic beginning, competing multiple technologies, misleading early progress, varying life cycles, and Premature Saturation. Hence, managing technology uncertainty plays a vital role in catching a new wave.
(iv) Overcoming hype and selecting the right time—early demonstration success and potentially large market run the risk of inflating expectation, fueling hype. However, any technology possibility requires synchronization with other technologies and externalities like infrastructure. Hence, avoiding hype and choosing the right time highly matter to leverage disruptive technologies.
(v) Avoiding misleading models of innovation diffusion—thesuccess of disruptive technologies depends on the diffusion of reinventions. So far, the risk-based Rogers’ model has been dominating management minds regarding how innovations diffuse. Unfortunately, such a risk-based model is highly erroneous in interpreting and predicting how reinventions will likely diffuse and what needs to be done to diffuse them through different market segments. As a result, innovators get misguided in catching a new wave out of reinventions.
(vi) Staying on course in crossing the chasm challenges—upon showing the initial success of diffusing through the nonconsumption market, candidate disruptive technologies face a high barrier to progress from making their reinventions capable of diffusing through the mainstream market. As a result, they suffer from a pause in diffusion, giving birth to the chasm concept. For example, LED technology was caught in a chasm upon serving the nonconsumption, the market of indicators. Similarly, autonomous vehicles are now caught in a chasm. Hence, staying on course in crossing the chasm is highly challenging. In some cases, they may need significant scientific discoveries.
(vii) Pursue dual usages of technologies, sustaining and disruptive— Based on the purposes of innovation they serve, Prof. Clayton broadly classified technologies into two groups: sustaining and disruptive. However, a single technology can be leveraged for both purposes: improving existing waves and gradually migrating to a new wave. Hence, taking the opportunity to reduce risk is a significant management challenge.
(viii) Overcoming decision-making challenges—as Prof. Clayton outlined in his innovators’ dilemma book, management of incumbent firms profiting from matured products suffer decision-making dilemmas. The decision-making dilemma is whether to keep incrementally advancing from sustaining matured products or reinventing them. However, catching a new wave from the possibilities of candidate disruptive technologies is far more than taking a one-time decision. The challenge has been to make a series of rational choices amid uncertainty. Often, such decision-making demands a sound understanding of Wealth creation dynamics from disruptive technologies in a globally connected competitive market and deep-down knowledge about the underlying science.
Summing up
By narrating the evolution of hard disks and a few other high-tech products, Prof. Clayton delineated management’s challenges in pursuing disruptive technologies. More surprisingly, his finding about how managing dogmas in favor of serving your best customers could be a recipe for missing a new wave is intriguing. More surprisingly, sustaining innovation to serve your high-value mainstream customers increasingly better could be a pathway to facing disruptive consequences for the rise of a new wave, which is a valuable lesson for management.
However, how to overcome this reality is fraught with pervasive challenges. Hence, this article has shed light on challenges and how to overcome them through deep knowledge of reinvention dynamics and disruptive technologies. Hopefully, this article will take Prof. Clayton’s findings one step closer to implementation. It will likely empower management to get further clarity about the challenges they need to address to catch a new wave instead of getting disrupted by it.
