Winning at Innovation
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The fifties and sixties saw the disk drive companies continue to innovate to increase the utility of their storage devices for the main frame business. This was sustainable innovation. The flaw? Incremental changes made to existing products allowed them to miss out on new innovations on the periphery of their product lines.
The seventies and eighties showed the problems in the disk drive business which still focused on main frame computers. Taking off-the-shelf technology and repackaging it in new ways allowed new, small companies to address the needs of the personal computing industry with smaller, more easily packaged disk drives. The drives were less efficient, yes, but they addressed the needs of personal computer size - and price - requirements nicely. These were disruptive technologies. The disruptive companies ended up owning the business (Christensen).
It would be easy to preach that innovating for a disruptive technology is the only way to succeed and that sustainable innovation is the way to lose out over time. That sermon would miss out on other ways to grow, however, ways that large companies (normally tagged with the sustainable innovation moniker, not that of disruptive innovators) are best advised to address.
Cross-boundary, disruptive innovation does things differently. A big company eyes a possible new application for its capabilities. Apple jumps into music, for instance, and succeeds in ways that traditional players didn't. WalMart enters healthcare with their with their low cost doctor's offices in local stores a radical change for the heath care - and retail - environments. GE has a huge opportunity to enter the automotive marketplace with an electric automobile because of its skills in batteries and energy from atypical sources (Grove).
Incremental changes on your existing product line? You're probably innovating sustainably. Big companies do all right at this.
Disruptive, incremental changes on an existing product - into a new marketplace? You're probably innovating disruptively. Start-ups do a better job here.
Got skills and innovations applicable in a new marketplace that no one is properly addressing? Cross boundary disruptions by an big company into a new market make more sense. GE's deep pockets make a foray into the hugely regulated automotive marketplace sensible says Grove. A start-up disruptively addressing the market will have a harder time.
Microsoft and Intel have continually upgraded their offerings, lately in a sustainable manner. Negroponte at MIT pointed out the need for a low cost computer for third world applications, He designed it, sought funding, and went to market. What had been seen as a huge opportunity for a startup has in fact ended up being an opportunity for the sustainable Microsofts and Intels of the world to act disruptively by introducing a low cost alternative as well, if only to protect themselves (Stecklow).
The theory says that the big companies should fail and that Negroponte's One Laptop Per Child program should succeed. My suspicion is that there is another alternative: a company outside the normal technology realms, but with large ties to the Third World, will win at this battle by wrapping its contacts and marketing prowess with someone else's technology to sell a lot of cheap computers. The beauty of all this is that we get to wait and see.
Andy Grove says GE has an opportunity in electric cars. It looks like someone else has an opportunity in cheap laptops.
What are the opportunities for your expertise in other industries?
References
Christensen, Clayton M. The Innovator's Dilemma. When New Technologies Cause Great Firms to Fall. Harvard Business School Press. 1997. [Chapter One. How Can Great Firms Fail? Insight from the Hard Disk Drive Industry. http://www.businessweek.com/chapter/christensen.htm ].
Grove, Andy. Think Disruptive. Portfolio magazine. December 2007. http://www.portfolio.com/views/columns/2007/11/15/Innovation-At-Big-Companies
Stecklow, Steve and James Bandler. A Little Laptop With Big Ambitions: How a Computer for the Poor Got Stomped by Tech Giants. Wall Street Journal. 24-25 November 2007. A1. http://online.wsj.com/public/article/SB119586754115002717.html