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Disruptive Technologies: Riding the Wave. Sometimes a technology and
resulting business innovation comes along to radically change the business
landscape and environment. These innovations are loosely called “disruptive.”
(Christensen, 2003). What makes a technology disruptive? In some cases,
disruptive technologies are substitute products that perform as well as or bet-
ter (often much better) than anything currently produced. The car substituted
for the horse-drawn carriage; the word processor for typewriters; the Apple
iPod for portable CD players; digital photography for process film photography.
In these cases, entire industries were put out of business. In other cases,
disruptive technologies simply extend the market, usually with less function-
ality and much less cost, than existing products. Eventually they turn into
low-cost competitors for whatever was sold before. Disk drives are an example:
Small hard disk drives used in PCs extended the market for disk drives by
offering cheap digital storage for small files. Eventually, small PC hard disk
drives became the largest segment of the disk drive marketplace.
Some firms are able to create these technologies and ride the wave to profits;
others learn quickly and adapt their business; still others are obliterated because
their products, services, and business models become obsolete. They may be
very efficient at doing what no longer needs to be done! There are also cases
where no firms benefit, and all the gains go to consumers (firms fail to capture
any profits). Table 3.1 describes just a few disruptive technologies from the past.
Disruptive technologies are tricky. Firms that invent disruptive technologies
as “first movers” do not always benefit if they lack the resources to exploit the
technology or fail to see the opportunity. The MITS Altair 8800 is widely
regarded as the first PC, but its inventors did not take advantage of their first
mover status. Second movers, so-called “fast followers” such as IBM and

TABLE 3.1 DISRUPTIVE TECHNOLOGIES: WINNERS AND LOSERS
TECHNOLOGY DESCRIPTION WINNERS AND LOSERS
Microprocessor chips Thousands and eventually millions of Microprocessor firms win (Intel, Texas Instruments)
(1971) transistors on a silicon chip while transistor firms (GE) decline.
Personal computers Small, inexpensive, but fully functional PC manufacturers (HP, Apple, IBM), and chip
(1975) desktop computers manufacturers prosper (Intel), while mainframe (IBM)
and minicomputer (DEC) firms lose.
Digital photography Using CCD (charge-coupled device) image CCD manufacturers and traditional camera companies
(1975) sensor chips to record images win, manufacturers of film products lose.
World Wide Web A global database of digital files and Owners of online content, news benefit while traditional
(1989) “pages” instantly available publishers (newspapers, magazines, and broadcast
television) lose.
Internet music, video, Repositories of downloadable music, video, Owners of Internet platforms, telecommunications
TV services TV broadcasts on the Web providers owning Internet backbone (ATT, Verizon), local
(1998) Internet service providers win, while content owners
and physical retailers lose (Tower Records, Blockbuster).
PageRank A method for ranking Web pages in terms of Google is the winner (they own the patent), while
algorithm their popularity to supplement Web search traditional key word search engines (Alta Vista) lose.
by key terms
Software as Using the Internet to provide remote access Online software services companies (Salesforce.com)
Web service to online software win, while traditional “boxed” software companies
(Microsoft, SAP, Oracle) lose.

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