Editing Disruptive innovation (section)

==Theory==
The current theoretical understanding of disruptive innovation is different from what might be expected by default, an idea that [[Clayton M. Christensen]] called the "technology mudslide hypothesis". This is the simplistic idea that an established firm fails because it doesn't "keep up technologically" with other firms. In this hypothesis, firms are like climbers scrambling upward on crumbling footing, where it takes constant upward-climbing effort just to stay still, and any break from the effort (such as complacency born of profitability) causes a rapid downhill slide. Christensen and colleagues have shown that this simplistic hypothesis is wrong; it doesn't model reality. What they have shown is that good firms are usually aware of the innovations, but their business environment does not allow them to pursue them when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from that of sustaining innovations (which are needed to compete against current competition). In Christensen's terms, a firm's existing ''value networks'' place insufficient value on the disruptive innovation to allow its pursuit by that firm. Meanwhile, start-up firms inhabit different value networks, at least until the day that their disruptive innovation is able to invade the older value network. At that time, the established firm in that network can at best only fend off the [[market share]] attack with a me-too entry, for which survival (not thriving) is the only reward.{{sfn|Christensen|1997|p=47}}

In the technology mudslide hypothesis, Christensen differentiated disruptive innovation from '''''sustaining innovation''''', whose goal is to improve existing product performance.<ref>{{Cite book|title=Marketplace Lending, Financial Analysis, and the Future of Credit: Integration, Profitability, and Risk Management|last1=Akkizidis|first1=Ioannis|last2=Stagars|first2=Manuel|date=2016|publisher=John Wiley & Sons|isbn=9781119099185|location=West Sussex, UK|pages=70}}</ref> On the other hand, he defines a disruptive innovation as a product or service designed for a new set of customers.
{{quote|Generally, disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches. They offered less of what customers in established markets wanted and so could rarely be initially employed there. They offered a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream.{{sfn|Christensen|1997|p=15}}}}

Christensen also noted that products considered as disruptive innovations tend to skip stages in the traditional product design and development process to quickly gain market traction and [[competitive advantage]].<ref>{{Cite book|title=Architecting Enterprise: Managing Innovation, Technology, and Global Competitiveness|last=Rajagopal|date=2014|publisher=Palgrave Macmillan|isbn=9781137366771|location=Basingstoke, Hampshire|pages=201}}</ref> He argued that disruptive innovations can hurt successful, well-managed companies that are responsive to their customers and have excellent research and development. These companies tend to ignore the markets most susceptible to disruptive innovations, because the markets have very tight [[profit margin]]s and are too small to provide a good growth rate to an established (sizable) firm.{{sfn|Christensen|1997|p=i-iii}} Thus, disruptive technology provides an example of an instance when the common business-world advice to "[[marketing#Customer orientation|focus on the customer]]" (or "stay close to the customer", or "listen to the customer") can be strategically counterproductive.

While Christensen argued that disruptive innovations can hurt successful, well-managed companies, O'Ryan countered that "constructive" integration of existing, new, and forward-thinking innovation could improve the economic benefits of these same well-managed companies, once decision-making management understood the systemic benefits as a whole.

[[File:Disruptivetechnology.png|thumb|upright=2|How low-end disruption occurs over time{{Clarify|reason=Can someone explain what is depicted here?|date=November 2017}}]]
{{Anchor|Technological_disruption_low-end_vs_new-market}}Christensen distinguishes between "low-end disruption", which targets customers who do not need the full performance valued by customers at the high end of the market, and "new-market disruption", which targets customers who have needs that were previously unserved by existing incumbents.{{sfn|Christensen|Raynor|2003|p=23-45}}

=== Low-end disruption ===
"Low-end disruption" occurs when the rate at which products improve exceeds the rate at which customers can adopt the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments. At this point, a disruptive technology may enter the market and provide a product that has lower performance than the incumbent but that exceeds the requirements of certain segments, thereby gaining a foothold in the market.

In low-end disruption, the disruptor is focused initially on serving the least profitable customer, who is happy with a good enough product. This type of customer is not willing to pay premium for enhancements in product functionality. Once the disruptor has gained a foothold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate. The incumbent will not do much to retain its share in a not-so-profitable segment, and will move up-market and focus on its more attractive customers. After a number of such encounters, the incumbent is squeezed into smaller markets than it was previously serving. And then, finally, the disruptive technology meets the demands of the most profitable segment and drives the established company out of the market.

=== New market disruption ===
"New market disruption" occurs when a product fits a new or emerging market segment that is not being served by existing incumbents in the industry. Some scholars note that the creation of a new market is a defining feature of disruptive innovation, particularly in the way it tend to improve products or services differently in comparison to normal market drivers.<ref name=":1">{{Cite book|title=The Butterfly Effect in Competitive Markets: Driving Small Changes for Large Differences|last=Rajagopal|date=2015|publisher=Palgrave Macmillan|isbn=9781349493128|location=Basingstoke, Hampshire|pages=108}}</ref> It initially caters to a niche market and proceeds on defining the industry over time once it is able to penetrate the market or induce consumers to defect from the existing market into the new market it created.<ref name=":1" />

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The [[Linux]] [[operating system]] (OS) when introduced was inferior in performance to other server operating systems like [[Unix]] and [[Windows NT]]. But the Linux OS is inexpensive compared to other server operating systems. After years of improvements Linux is now installed in 87.8% of the worlds 500 fastest [[supercomputer]]s.<ref>{{cite web|author=Gary Montry |url=http://www.top500.org/stats/list/32/osfam |title=Operating system Family share for 11/2008 &#124; TOP500 Supercomputing Sites |publisher=Top500.org |access-date=August 13, 2010}}</ref>
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=== Critics ===
The extrapolation of the theory to all aspects of life has been challenged,<ref name="Lepore_2014-06">{{Citation  |last=Lepore |first=Jill | author-link = Jill Lepore |date=June 23, 2014 |title=Annals of enterprise: The disruption machine: What the gospel of innovation gets wrong. |magazine=[[The New Yorker]] |url=https://www.newyorker.com/reporting/2014/06/23/140623fa_fact_lepore |postscript=. Published online June 17, 2014 under the headline 'What the Theory of “Disruptive Innovation” Gets Wrong'.}}</ref><ref name="Weeks 2015">{{Citation  |last=Weeks |first=Michael |date=2015 |title=Is disruption theory wearing new clothes or just naked? Analyzing recent critiques of disruptive innovation theory. |journal=Innovation |volume=17 |issue=4 |pages=417–428 |doi=10.1080/14479338.2015.1061896 |s2cid=146250314 }} |Innovation: Management, Policy & Practice 17:4, 417-428</ref> as has the methodology of relying on selected case studies as the principal form of evidence.<ref name="Lepore_2014-06" /> [[Jill Lepore]] points out that some companies identified by the theory as victims of disruption a decade or more ago, rather than being defunct, remain dominant in their industries today (including [[Seagate Technology]], [[U.S. Steel]], and [[Bucyrus-Erie|Bucyrus]]).<ref name="Lepore_2014-06" /> Lepore questions whether the theory has been oversold and misapplied, as if it were able to explain everything in every sphere of life, including not just business but education and public institutions.<ref name="Lepore_2014-06" /> [[W. Chan Kim]] and [[Renée Mauborgne]], the authors of ''[[Blue Ocean Strategy]]'', also published a book in 2023, ''Beyond Disruption'', criticizing disruptive innovation for the social costs it tends to incur.<ref>{{Cite journal |last=Carton |first=Guillaume |date=September 15, 2023 |title=Can Entrepreneurs Innovate Without Disrupting Industries? |url=https://eiexchange.com/content/can-entrepreneurs-innovate-without-disrupting-industries |journal=Entrepreneur and Innovation Exchange |language=en |doi=10.32617/939-65044516eeed5|doi-access=free }}</ref>