30-Second Briefing

By Ed de la Fuente

A: “Disruptive technology”, as defined by Clayton Christensen (The Innovators Dilemma: When New Technologies Cause Great Firms to Fail, HBSP, 1997), usually enters at the low end of the product market and provides a lower cost alternative to the established product platform. The entrant technology is filling a gap that is created by the established players’ focus on enhancing the functionality of the incumbent technology, which often provides more performance than the majority of the user base needs. A common example is the impact on the mainframe computer industry (E.g. the extinction of Digital Equipment Corporation) caused by the entry of the personal computer into the enterprise market. Besides introducing a new technology to fulfill a user need, the disruptive technology is typically supported by a innovative business model or economics than the established industry value chain.

In the telecommunications industry, one of the disruptive technologies currently under development is IP telephony.  Some areas under attack include global long distance, local exchange service, and PBX systems.

Here are some key ways to keep abreast of this and other disruptive technologies.

1)   Listen to your customer’s basic needs, not the current product view.

Companies often make the mistake of conducting research patterned along the current product and business model.  To gain an understanding of current customer needs, market research must address the value proposition for the customer and the developing buying behaviors in the market.  Consider, for example, the growing acceptance of pre-paid long distance and wireless services by certain segments. When evaluating the IP telephony opportunity, are end users more concerned about reliability, quality, feature capabilities, basic voice communication, or price? The answers will be different in each market segment.

2)   Separate development resources from your core business.

Your product development teams are likely too connected with the current platform and business model to consider solutions outside the current realm. If you have the resources, a separate team that is charged with addressing specific market segment needs has a better chance of identifying solutions that are customer-focused and value-based. Stirring up some competition with the established business units can lead to creative solutions by all units as well!

3)   Use small-scale tests and trials to learn.

Since there is little market information available when considering new technology platforms and market segments, testing is a very important learning tool. Market trials can be difficult in an infrastructure-based business like telecom, but will provide realistic feedback and identify technical and operational obstacles. Also track new uses by niche market segments; technology innovations often enter as niches and develop rapidly toward the broader market. 

By taking these steps, you can become aware of disruptive technologies before they are a threat to you.  Use them to your advantage to provide your customers more value and become the threat to your competitors.

Done