Disruptive Technology: Use and Abuse of the Concept Dr. Michael Bell Chief of Naval Operations (N61F)

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Disruptive Technology Use and Abuse of the
ConceptDr. Michael BellChief of Naval
Operations (N61F)

• Presentation to the Information Age Metrics
  Working Group
• 23 April 2004

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The Innovators Dilemma
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The Dilemma

• One of the most consistent patterns in business
  is the failure of leading companies to stay at
  the top of their industries when technologies or
  markets change.
• Why is it that companies like these invest
  aggressively and successfully in the
  technologies necessary to retain their current
  customers but then fail to make certain other
  technological investments that customers of the
  future will demand? Undoubtedly, bureaucracy,
  arrogance, tired executive blood, poor planning,
  and short-term investment horizons have all
  played a role. But a more fundamental reason lies
  at the heart of the paradox leading companies
  succumb to one of the most popular, and valuable,
  management dogmas. They stay close to their
  customers.

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Definitions

• Performance trajectory the rate at which the
  performance of a product has improved, and is
  expected to improve, over time
• Sustaining technologies tend to maintain a rate
  of improvement that is, they give customers
  something more or better in the attributes they
  already value
• Disruptive technologies introduce a very
  different package of attributes from the one
  mainstream customers historically value, and they
  often perform far worse along one or two
  dimensions that are particularly important to
  those customers. Performance trajectory the
  rate at which the performance of a product has
  improved, and is expected to improve, over time

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Disruptive Technology
The Impact of Sustaining and Disruptive
Technological Change
Progress due to Sustaining technologies
Performance demanded at the high end of the market
Product Performance
Performance demanded at the low end of the market
Disruptive technological innovation
Time
Source C. Christensen, The Innovators Dilemma
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Managing Disruptive Technology

1. Marketing and financial managers, because of
   their managerial and financial incentives, will
   rarely support a disruptive technology.
2. Lead customers are reliably accurate when it
   comes to assessing the potential of sustaining
   technologies, but they are reliably inaccurate
   when it comes to assessing the potential of
   disruptive technologies.
3. Small, hungry organizations are good at placing
   economical bets, rolling with the punches, and
   agilely changing product and market strategies in
   response to feedback from initial forays into the
   market.
4. In the history of the disk-drive industry, every
   company that has tried to manage mainstream and
   disruptive businesses within a single
   organization failed.

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Value Networks

• A companys revenue and cost structures play a
  critical role in the way it evaluates proposed
  technological innovations.
• Value network the context within which a firm
  identifies and responds to customers needs,
  solves problems, procures input, reacts to
  competitors, and strives for profit
• Within a value network, each firm's competitive
  strategy, and particularly its past choice of
  markets, determines its perceptions of the
  economic value of new technology.

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Sample Value Network
Modems, etc.
Word processing and spreadsheet software
Zenith Toshiba Dell
Light and compact Rugged Easy to use
CISC microprocessor
Displays, etc.
Ruggedness Low power consumption Low profile
Connor Quantum Western Digital
Thin-film disks
AT/SCSI embedded interface, etc.
Cost Availability in high unit volumes
Applied Magnetics
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Skunkworks

• The strategy of forming small teams into
  skunk-works projects to isolate them from the
  stifling demands of mainstream organizations is
  widely known but poorly understood.
• Creating a separate organization is necessary
  only when the disruptive technology has a lower
  profit margin than the mainstream business and
  must serve the unique needs of a new set of
  customers.

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Questions

• What drives and maintains a rate of capability
  growth in the technology beyond what is demanded
  by the market?
• How does technology cross the valley of death
  between markets (value networks) if there is no
  market in the gap?

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Asymmetry

• Mobility is upward because development costs must
  be recovered or justified
• Attack is from below because that is how the
  value networks are merged

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Whats Wrong with this Picture?
The Impact of Sustaining and Disruptive
Technological Change
Progress due to Sustaining technologies
No technology, no market
Performance demanded at the high end of the market
Product Performance
Performance demanded at the low end of the market
Disruptive technological innovation
Disruption at bottom of market
Time
Source C. Christensen, The Innovators Dilemma
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Improved Picture
The Impact of Sustaining and Disruptive
Technological Change
Progress due to Sustaining technologies
Performance demanded at the high end of the market
Product Performance
Performance demanded at the low end of the market
Disruptive technological innovation
Time
Source C. Christensen, The Innovators Dilemma
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Implications for Defense

• What is our (DoDs or DoNs) value network?
• Do we have multiple value networks?
• Aviation, surface warfare, undersea warfare,
  expeditionary warfare, special operations
• Asymmetry
• Attack is from below
• Mobility is upward
• This could explain the blurring we have seen
  between scales of conflicts

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Competition vs. Conflict

• Companies compete to satisfy their customers the
  market decides
• VHS format meets customer needs better than Beta
• Militaries attack one another the battlefield
  decides
• Improved precision (air) strike is not the same
  as better air/missile defense

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The Defense Market

• High end high-intensity conflict
• Low end whatever we are told (generally assumed
  to be a lesser included case)
• Is this really a single market?
• In peacetime, our customers are internal
• E.g., the UK Equipment Capability Customer

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Delivering Innovation
Hand-off to institutionalize
Prototype Decision SJFHQ and its enabling
concepts (Chairmans Guidance letter, 26
November, 2002)
Future Prototype Decisions
Joint Concept Development Focus, FY03-05 (Joint
Chiefs of Staff and Combatant Commanders Approval
- Jan 03)
Rapid Decisive Operations (RDO) - featured
Millennium Challenge 2002 (MC02) concept (CJCS
Guidance, 17 April, 2000)
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Capability Growth

• The typical framework of intersecting S-curves
  is a conceptualization of sustaining
  technological changes within a single value
  network.

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Anti-Disruptive Technology
J. H. Helms, Ford Research Lab.