Why do so many leading companies fail to keep their positions when faced with an intrusion by a new technology? They stay close to their customers!Goodyear and Firestone were late to radial tires, Xerox watched Canon create the small copier market, Bucyrus-Erie let Caterpillar and Deere take over the excavator market, and Sears gave way to Wal-Mart. The reason, according to these authors is that: (1) they misread the new technology that was used to move them out of leadership, and (2) they did this because they paid too much attention to their then current customers. Current customers like the technologies they are using, and they urge those leaders to keep making them better; they want technological progress, but only as it sustains their current operations. Disruptive technologies are not wanted by the current customers, and the leaders are led down the road to trouble.The article points out many examples of this problem, and perhaps the best story concerns Control Data Corporation (CDC). CDC successfully dominated the 14-inch drives for mainframe computers. But they misjudged the 8-inch and allowed engineers to be overassigned to work on problems of current customers on the 14-inch. They never got more than 5% of the 8-inch drive market. But, when the 5.25-inch drive arrived, CDC set up a separate organization in Oklahoma to attack this opportunity. This time they ended up with a profitable 20% of the new market.Note the conditions here: (1) a leading firm in a technology-based market, (2) the arrival of a potentially disruptive technology of little interest to current customers, (3) development of the new technology by a small or newly entered competitor, selling small quantities to smaller customers, (4) improvement of the new technology over time to increase its competitiveness with the old, and perhaps most important, (5) a change in the customer market that permits the new technology to be more useful than the old. An example of the latter lies with the mainframe computer. Even though disruptive technologies tend to have a steep rise in productivity once established, this is not the key reason for their success. The PC never outproduced the mainframe. Rather the PC allowed user markets to set up fileservers, networks, etc., to serve their needs better than mainframes did.For this reason, anyone who tries to study a new technology often misreads its value--value is mistakenly measured in the current use, not a future use. The latter requires more creativity, initiative, and objectivity.The authors propose a method for avoiding being caught by a disruptive technology. We can only hit the highlights of that method here (as we have had to do in the first part of the article above.) First, determine whether a new technology is disruptive or sustaining--does it threaten the current business or extend and strengthen it? Watch who you ask--for example, look to see who is supporting it. If marketing and finance, it is probably not disruptive.Second, define the strategic significance of the disruptive technology. Here is the toughest part of all, and managers tend to ask the wrong people the wrong questions. This is where the opening statement comes in--don't depend on your current customers to tell you. They are seeking other things, they have not really studied the new, they are demanding you work more on the present technology, and besides, they assure you the productivity of the new is so very low (the PC point, above).Third, locate the initial market for the disruptive technology. But don't use market research for this assignment--no concrete market now exists. You mustcreate the information that lets you answer this question, and this means spending lots of time and energy in the new area.Fourth, this means to place the responsibility for meeting the new technology in an independent organization. Not a skunkworks--skunkworks are best for speedy development of new sustaining technologies. Here, the need is for a whole new business, one that will stand alone and grow. It will, in time, probably replace the old one entirely but should at least remain independent throughout the time the firm is adjusting to the new technology.
