Disruptive Technologies

Introduction

For firms to maintain their lead in the market, they should be ready to disrupt technologically and not just focus only on the present cash-cow business operations. The failure of big firms to embrace technological revolution will leave them to play catch-up with start-up firms that use innovation to build customer base and market competitiveness.

Innovator’s dilemma

Innovator’s dilemma refers to the need for organizations to meet the customer’s needs, who are not aware of such needs themselves. The customer needs are to an extent satisfied by the incumbent technologies but they improve with time, and at times even exceeding the performance expectation of the market. Even though disruptive technologies introduced into the market have performance attributes that do not meet the needs of existing customers, but they undergo enough improvement with time that they meet the markets expectation (Christensen, 225). All that is needed for disruptive innovations is a better performance that incumbents, but a performance good enough to appeal to customers’ needs at a lower cost. This means that disruptive technology is normally a market issue but not technological.  The puzzle in this case is that a firm does not always need to be a market leader to gain rewards from disruptive technology. However, the failure to be innovative and improve on the incumbent technology means that a firm will not be able to meet the changing customer needs.   The innovator’s dilemma comprises of various issues; sustaining technologies are not similar to disruptive technologies; the rate of change in technology normally goes before the market’s knowledge of the need (Christensen, 225).

 There major reason for failure of big firms is that they do not perceive the threats arising from disruptive technology. This is because they focused too much on acting for the interests of customers who are not aware of their technological needs until innovative technologies are introduced. Once they new technologies are introduced, customers no longer want the incumbent technology that the large firms were using to meet customer needs but which have poor performance.   Customers are not attracted to the new technology initially because their performance is poor. The poor performance means that margins from the disruptive technologies are worse than margins from incumbent technologies (Gallaugher, 3). The market do not look attractive to the big firms due to poor profit margins and big firms fail to allocate enough resources  for development of the new technology or care for the needs of an emerging customer base.  The focus of the firm is the traditional cash-cow operations but not the disruptive technologies. The focus on market demand and firm’s financial performance serve as a veil that prevents firms from foreseeing the emerging technologies.

 The innovator’s dilemma whether to focus on traditional cash-cow ventures, and hence satisfy market needs or focus on emerging technologies, makes the big firms to lag behind ( Gallaugher, 4). Before they adjust to the new market, the start-ups have been embracing the disruptive technologies long enough to amass expertise and reap benefits from improving scale and increasing customer base.  The new brands of organization spearheading the disruptive innovations are now associated with new technology and the big firms can only play catch-up ( Gallaugher, 4). Few of these big firms are able to catch-up with the new market leaders. The innovator’s dilemma helps to explain the failure of big firms, since they are focused on sustaining technologies with high margins and ignore the disruptive technologies. Customer demands that the large firms focus on change the moment the offerings from disruptive technologies are introduced, and which satisfy market needs that customers were unaware of.  Executives who are overpowered by organizational forces such as shareholder interests fail their firms once faced with disruptive technologies ( Gallaugher, 4).

The reason for Kodak’s failure was essentially too much focus on the present success that it failed to see the onslaught of disruptive technology. The company failed to re-invent itself and align its incumbent photography technology to the emergence of digital technology, which means that there was little left to do. The focus on the present means that Kodak’s management had their attention fixed on their cash-cow business operations based on an analogue photography which satisfied the market needs.  The focus was on satisfying the prevailing market demand and investing little to emerging technological trends.  The first digital photos were of poor quality and had little appeal for the market, meaning that the new start-ups offerings had little emerging in comparison to the incumbent Kodak’s traditional offerings. Such margins did not attract the interest of Kodak to allocate resources for the digital disruptive technology in photography. The market stuck to the offerings by Kodak since they satisfied their needs became aware of the need for digital technology only after it was introduced into the market. Customers had to turn away from Kodak’s analogue offering since they hardly satisfied the new found needs for digital photography.

 The management of the firm failed to notice the digital revolution and allocate resources and experts to work on the new technology. Its technology could not be sustained in the long-run and hence, margins started plummeting. By the time Kodak’s management realized the nature of influence digital revolution had on photography, the start-up firms that were not building their customer base and their margins were improving. For Kodak to adapt to the new digital era, it had to play catch-up to these firms that had already created an influence in the market.  The only positive thing was that the firm was able to capitalize on the present market demand and the brand earned enough from this. It developed a competitive edge that could not be matched at the time and took advantage of customer loyalty to succeed with the incumbent technology.  However, such success could not be sustained due to disruptive technology.

Micro-soft is among the firms that are threatened by disruptive technology. The firm may slide into irrelevance in the coming 10 years if it fails to make adequate progress in the tablet and smartphone market. This can be attributed to the fact that the decline in PC market will continue, as the trend has indicated over the past years.  Microsoft introduced its own tablets and while this may seem logical, it may add up to playing it safe and competing rather than disrupting (Arthur, 1). The firm’s offering has to compete with notebook that are ultra-thin and desk-top OS with products such as Android tablets and Apple iPad that may push it out of the market.

Conclusion

 A firm has to be ready to disrupt if it has to embrace technological disruption by not only focusing on the present but the future in order to remain relevant. Allocating resources to emerging technology may bear little returns presently but it will ensure that firms remain competitive in the market. Since customers may be unaware of their technological needs until offerings are introduced in the market, a firm should maintain a lead in innovation.

References

Arthur, Charles.Microsoft threatened as smartphones and tablets rise, Gartner warns.2013. Retrieved from: https://www.theguardian.com/technology/2013/apr/04/microsoft-smartphones-tablets

Christensen, Clayton. The innovator's dilemma: when new technologies cause great firms to fail. Harvard Business Review Press, 2013. 225

 

Gallaugher, John. Information Systems: A Manager's Guide to Harnessing Technology. Disruptive Innovations: Understanding the Giant Killers and Considerations for Avoiding Extinction v. 2.0. (n.d). 3-4