Disruptive Innovation- To Help Us Live and Work Better
Posted in Marketing & Strategy Articles, Total Reads: 1455
, Published on 22 July 2013
The term Disruptive Innovation has become a reference to some of the major shifts in product space, we saw in recent times. Changes that help us live and work better, changes that led to creation of wealth and fall of some industry giants. The very term may send chills through the hallowed rooms of the corporate think desks, when it comes to talk about change. Disruptive Innovation means a change in the current technology that will altogether create a new market and value network, and eventually goes on to disrupt the current market, displacing and earlier technology.
We like to have quirky gadgets, stylish designer watches, crazy flat display screens or we even let the smartphones make us think smarter. The plenty of products which has covered the markets like a hurricane, but in the midst of the storm, doomed the goods which were well established or were not ready to change with time.
It is natural to say that most executives and senior managements are worried about the big numbers, how the stock is performing and the quarterly sale figures. But it should be accepted that a new technological breakthrough is a gambit, takes time, patience and capital investment to reap its fruits. Looking ahead of the reigning profits to invest in an altogether new concept requires vision. Being risk averse can be harmful to the firm’s health. Technological advancement is a factor that can climb you to the top or leave you in peril. This article showcases some of these Disruptive innovations that left the Industry leaders flummoxed.
One of the finest examples is the Swiss watch industry. Pioneers in luxury watch making, almost went out of business in the 1970’s with the advent of digital watches. The first digital wrist watch was launched in 1972, named pulsar and was priced at $2000. These watches became more popular when James bond started using it as a sign of latest technology in his films: “Live and Let die”, “Octopussy”, and “The Spy Who Loved Me”. In 1976 Texas Instruments launched a digital watch that cost just $20. A big reduction in prices spurted a mass production of these devices. Everybody but the Swiss wanted one. The Japanese firms Seiko and Citizen together sold 1.8 million watches in 1974 and 19.7 million units in 1978. During the 70’s and 80’s more than 1000 Swiss watch makers went out of business. The Swiss Watch Industry was crumbling and would have disappeared had it not been the clever marketing by some of its major players.
The trend was offset by the mighty like ‘Tag Heuer’ who invested heavily in marketing and building a sporty image for its watches. ‘Rolex’ concentrated on positioning its products as a piece of jewelry. In 1980’s the market for digital watches became overpopulated and the status and appearance of mechanical watches was more appealing. In 1995, James Bond’s “Golden Eye” was released, and Mr. Bond was again seen wearing a mechanical watch. The Swiss Industry may have survived the disruptive technology, but it has learned a lesson at a high price. When nothing seems to work you go back to the basics. Adapt to the changes if you cannot fight it. Today the watch is more of jewelry than a timekeeper. The overall category is influenced by glamour and has become a style statement. The more affluent use it to set the status quo. Thus rightly said, “A watch is the only piece jewelry many men will allow themselves to wear”, and if it is made in Switzerland, they are sure to turn eyeballs.
Going back to square one, are we ready to accept the change? And if not how strong are our product fundamentals to survive the change.
Digging deeper in the technology space, we find an innovation that turned a diseased company into one of the most admired in the world, and in the shift, burned the category behemoth to ashes. The innovation happened in the smartphone space. Apple computers, a computers manufacturing specialist turned its attention to making smartphones. It came up with the touchscreen technology, which the industry was either too nascent or naïve to accept. The leaders Nokia and Blackberry were left puzzled when Apple ‘iPhones’ changed the market statistics. The first ‘iPhone’ was launched in 2007 and has grown in market share ever since.
Nokia was focused on creating a wide product base. It included more and more features to its multimedia handsets, but it used its old loyal Symbian OS, while its arch rival Samsung realized the trends and positioned itself strongly in the touchscreen phones with the latest Android OS.
The mobile phone category is itself growing increasing consumer base. And this growth is very deceptive. Nokia believed that it is growing gradually and slowly but the growing demand overshadows the fact that current technology is becoming obsolete, thus sending a false message that things are going well. This diminishes the sense of urgency for the firm’s to review itself.
The cause of problems is not always a small tech savvy group of people with a twinkle in eye to change the world; it is many a time the superiority complex and ardent nature of top company officials that lead to the fall. A more premier example of this destructive technology would be the rise of LCD’s. Remember what the television sets used to look like in the 80’s and the 90’s, big, clumsy and heavy. They would eat up the whole furniture space and occupy a large area on the main cabinet set. Prior to the launch of LCD, the major producers of the CRT televisions were the American and the European firms.
RCA an American firm was the pioneer and a dominant player in selling CRT TV sets. Research conducted by a group of RCA scientists developed an extensive knowledge about the Liquid crystal technology. These scientists claimed that the flat screen LCD’s would be much lighter, require less power and space, but they failed to convince the top management. The top management believed that it had a stable business by selling the CRT’s and meeting its major customer demands. The firm’s lawyers believed that cost of patenting the technology would be more than the returns form the technology itself. So the idea was dropped at RCA. A few more attempts were made at developing the technology further by some English scientist’s and the spin-offs were later sold to ‘Philips’.
In the early 70’s RCA was frequently visited by the Japanese who took keen interest in this new technology. And since RCA had dropped this idea, they were very generous in sharing its findings. The Japanese developed it much further and commercialized it. The balance of market dominance has now shifted from American firms to Japanese in the television category. The Japanese not only made TV sets but also used it in making, Video game screens, pagers, mobile screens, etc.
It is but surprising to see that how a technology majorly developed in the west was exploited by the Japanese to their favor. This downfall can be attributed to the negligence of the top management at RCA and others, to accept change and see the potential of innovation ahead of its regular profits.
This article has been authored by Moiz Shujaee from SIMSR Mumbai
Work and articles by Clayton Christenson on Disruptive Innovation
Definitions and terms were taken from various articles on Wikipedia.com
Readings from the Economic times and Times of India newspapers.
Secondary research done by self on the topic.
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