Disruption of firms happen due to major innovations, right? Digital cameras disrupted Kodak. Cars disrupted horse and buggy companies. Quartz watches disrupted mechanical watchmakers. These were major innovations that led to disruption of incumbents.
Disruption by minor innovations
You may be surprised to know that incremental innovations can also cause disruption. I studied the history of CT scanner industry for my Ph.D. thesis on innovation by incumbent firms. I found incremental innovations were responsible for more disruptions than major innovations were. I also found that a disruptive innovation didn’t always disrupt the incumbents.
CT Scanners as a Major Innovation
CT scanner technology is a result of combining X-ray technology with algorithms. It was a major breakthrough. It could provide a tomographic image of a body rather than a super impressed image from an x-ray. A CT scan allows you to see what you would see in a slice of a body if you actually cut it. This was not possible before the CT scanner arrived on the scene.
When customers went to buy a CT scanner versus an X-ray machine, they were looking at new criteria. Can the machine look inside a body without invasive surgery? This was not possible with an X-ray machine. Since it changed the purchase criteria it is a disruptive technology. But to be fair, CT technology never replaced the entire demand for X-ray machines.
Newcomer Takes over the market
Before the arrival of CT scanners, X-ray market was dominated by GE and Picker. EMI, an outsider to the x-ray market, brought this disruptive technology. GE and Picker really struggled to create their own CT scanners. As a result, EMI became the leader in the CT scanner market while GE and Picker watched from the sidelines.
GE and Picker struggled because they did not understand algorithm technology in CT scanners. It took them several years to learn it. During that time, EMI continued to be a leader.
Incremental Innovation Race Begins
Within 5 years, both GE and Picker had launched their own scanners. At that time, the industry had begun a race to build a better scanner. Better scanners meant higher resolution and higher speeds. As various participants began to improve the scanners, a lot of give and take in market share took place. As a result, each player incrementally improved its products. Within the next 5 years, both GE and Picker has improved their technologies to surpass that of EMI.
The Pioneer falls off the cliff
As EMI fell behind in the technology, it also fell behind in the market share. As a result, EMI found it harder and harder to compete with GE and Picker. It exited the CT scanner market within 12 years of creating a highly lucrative market. This was a stark example of disruption by incremental innovations.
The case of Apple versus Blackberry
Although the CT scanner story is from the 70s, it has repeated in many industries. In the recent past, Apple disrupted Blackberry in a similar fashion. Instead of one major innovation, Apple came out with many minor innovations.
Blackberry was a successful smartphone company that brought the web and email to your phone. Apple improved that phone with a better browser and a touchscreen. Blackberry continued to improve its phones. It brought a better browser and a touch screen but could not catch up on the incremental innovations of Apple. It lost its dominant position in the industry.
In short, disruption by incremental innovations takes place often. We just fail to register it.
Do you look at the cadence of innovation as a driver of disruption in your industry?
References
The inside story of how the iPhone crippled blackberry. (2015). The inside story of how the iPhone crippled blackberry. Wall Street Journal.
Chopra, A. (2007). Inter-temporal Effect of Technological Capabilities on Firm Performance: a Longitudinal Study of the U.S. Computed Tomography Industry (1972-2002). Dissertation, Ph.D.
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