When do new technologies emerge that overtake existing technologies? What can organizations do to be prepared for such an eventuality and make sure they are not dislodged by new entrants? A framework developed by Clayton Christensen of Harvard Business School provides a good answer. A proven technology improves over a period of time to produce rates of performance improvement well beyond customer needs. When customer needs are more than satisfied, the differentiated offerings of existing players lose their meaning3 . Under such circumstances, if a new technology fares relatively low on some of the currently accepted attributes, but scores heavily on a new attribute, it has the potential to unseat the older technology. Thus, in the disk drive industry, capacity became less important and factors such as physical size and reliability became the important attributes. So, smaller disk drives began to gain popularity.
Many established firms are overtaken by new technology, not because they do not invest sufficiently in research and development, but because their business philosophy and deep rooted culture act as stumbling blocks. As Christensen has explained, they are so much glued to the needs of existing customers that they
overlook what other segments are looking for. Moreover, when overheads are high, there is a tendency not to take seriously new technologies with little revenue or profit potential in the short run. On the other hand, for smaller nimbler rivals, even small markets can be quite lucrative. Consequently, smaller companies who are not glued to the existing customers and who have an open mind, come up with innovations that dislodge well entrenched market leaders. In his book, “Mastering the Dynamics of Innovation,” James Utterback describes the extent to which established players go to resist all efforts to understand new technological developments and instead strengthen their commitment to the older products: “This results in a surge of productivity and performance that may take the old technology to unheard-of heights. But in most cases this is a sign of impending death… Industry outsiders have little to lose in pursuing radical innovations.
They have no infrastructure of existing technology to defend or maintain… Industry insiders… have huge investments in the current technology; emotionally they and their fortunes are heavily bound up in the status quo and from a practical point of view, their managerial attention is encumbered by the system they have – just maintaining and marginally improving their existing systems is a full-time occupation.”
Often the impact of an innovation depends on complementary inventions. Many new components may be needed to develop a larger technological system that can fully exploit the new technology. Laser needed fibre optics, to be used in telecommunications. The computer industry could take off only after the integrated
circuit had been developed. Established companies are handicapped by the tendency to compare the new technologies with the older technologies they are going to replace. They overlook the fact that the cumulative effect of several improvements within a technological system over time can sometimes be immense. Consequently, their commitment to new technologies is often inadequate.
Many companies fail to assess the impact of a new technology. Bell Labs for instance did not think it necessary to apply for a patent covering the use of laser in telecommunications. Only later did it realize what a powerful combination laser and fiber optics made. Inventors, owing to their highly technical orientation, often
fail to assess correctly how the technology will be used. Marconi, the inventor of the radio is a good example. He felt that it would be used between two points where communication by wire would be impossible. Potential users he identified were shipping companies, the navy and newspapers. Marconi, however, failed to
consider the possibility of communicating with several people at the same time. The full potential of a new technology is sometimes recognized only decades later. Take the case of the telephone. Even though the telephone has been around for more than 100 years, only now have applications like voice mail and data
transfer emerged. Identifying uses for new technologies is very difficult. Aspirin, one of the world’s most widely used drugs has been around for 100 years, yet its efficacy in reducing the incidence of heart attack due to its blood thinning properties was discovered only recently.
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