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The concept shares many similarities with biological Evolution . By contrast, "sustaining technology or innovation" improves product performance of established products. Sustaining technologies are often incremental; however, they can also be radical or discontinuous. HISTORY AND USAGE OF THE TERM The term ''disruptive technology'' was coined by '', which he coauthored with Joseph Bower. He describes the term further in his 1997 book '' The Innovator's Dilemma ''. In his sequel, '' The Innovator's Solution '', Christensen replaced ''disruptive technology'' with the term ''disruptive innovation'' because he recognized that few technologies are intrinsically disruptive or sustaining in character. It is the strategy or business model that the technology enables that creates the disruptive impact. The concept of disruptive technology continues a long tradition of the identification of radical technical change in the study of Innovation by economists, and the development of tools for its management at a firm or policy level. THE THEORY 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 could previously not be served profitably by the incumbent. "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 that is inferior by most measures of performance fits a new or emerging market segment. The Linux Operating System (OS) when introduced was inferior in performance to other server operating systems like Unix and Windows NT . But the Linux OS distributed through Red Hat is supposed to be inexpensive compared to other server operating systems. After years of improvements in this easily available operating system, the functionality has improved so much that it threatens to displace the leading commercial UNIX distributions. Not all disruptive technologies are of lower performance. There are several examples where the disruptive technology outperforms the existing technology but is not adopted by existing majors in the market. This situation occurs in industries with a high investment into the older technology. To move to the new technology, an existing player not only must invest in it but also must replace (and perhaps dispose of at high cost) the older infrastructure. It may simply be the most cost effective for the existing player to "milk" the current investment during its decline - mostly by insufficient maintenance and lack of progressive improvement to maintain the long term utility of the existing facilities. A new player is not faced with such a balancing act. Some examples of high-performance disruption:
EXAMPLES OF DISRUPTIVE INNOVATIONS Not all technologies promoted as disruptive innovations have actually prospered as well as their proponents had hoped. However, some of these technologies have only been around for a few years, and their ultimate fate has not yet been determined. Unresolved examples of technologies promoted as 'disruptive innovations'
BUSINESS IMPLICATIONS Disruptive technologies are not always disruptive to customers, and often take a long time before they are significantly disruptive to established companies. They are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is often entirely rational for incumbent companies to ignore disruptive innovations, since they compare so badly with existing technologies or products, and the deceptively small market available for a disruptive innovation is often very small compared to the market for the established technology. Even if a disruptive innovation is recognized, existing businesses are often reluctant to take advantage of it, since it would involve competing with their existing (and more profitable) technological approach. Christensen recommends that existing firms watch for these innovations, invest in small firms that might adopt these innovations, and continue to push technological demands in their core market so that performance stays above what disruptive technologies can achieve. Disruptive technologies, too, can be subtly disruptive, rather than prominently so. Examples include digital photography (the sharp decline in consumer demand for common 35mm print film has had a deleterious effect on free-riders such as slide and infrared film stocks, which are now more expensive to produce) and IP/Internet telephony, where the replacement technology does not, and sometimes cannot practically replace all of the non-obvious attributes of the older system (sustained operation through municipal power outages, national security priority access, the higher degree of obviousness that the service may be life-safety critical or deserving of higher restoration priority in catastrophes, etc). SEE ALSO REFERENCES
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