HRM628 VU GDB Solution Spring 2012

In 1997, Clayton M. Christensen authored a book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, proposing a shocking idea: good management practices can lead to the failure of successful organizations – and the reason is Disruptive Technologies. Disruptive technology, he explains, is any innovation that disrupts current market, creates new market or changes value-network. He argues that it is very difficult for existing successful companies to take full advantage of technological breakthroughs such as the internet because the habits, which led to success, get in the way and as the change is inversely proportional to the organizational size so it is difficult for them to change.

As there is a solution of every problem, what can be the possible solutions for dealing with disruptive technologies? Discuss with appropriate reasoning.

Solution:Disruptive technologies are not always disruptive to customers, and often take a long time before they are significantly disruptive to established companies. They are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is often entirely rational for incumbent companies to ignore disruptive innovations, since they compare so badly with existing technologies or products, and the deceptively small market available for a disruptive innovation is often very small compared to the market for the established technology.

Even if a disruptive innovation is recognized, existing businesses are often reluctant to take advantage of it, since it would involve competing with their existing (and more profitable) technological approach. Christensen recommends that existing firms watch for these innovations, invest in small firms that might adopt these innovations, and continue to push technological demands in their core market so that performance stays above what disruptive technologies can achieve.
Examples of disruptive technology (current and historical) include:
• VOIP, which is destroying voice telecoms revenues while increasing data revenues. The
internet in general has both created and destroyed many markets.
• Digital cameras, which are destroying the market for photographic film, but at the same
time creating markets for storage devices and photo printers.
• Railways, which displaced many forms of transport such as canals while creating demand
for fuel, steel and other materials they needed. They also encouraged the emergence of
new services.
• Video recorders and television hugely reduced the cinema industry, but the film industry
benefited from new income streams.
• Wikipedia has replaced Traditional encyclopedias books.