The Netbook: A disruptive force?

At MIT, I had the pleasure of listening to the great Clay Christensen author of The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business (Collins Business Essentials)among other well-known books.

He is well known for coining the term, Disruptive Technology a technology or product that comes into a market and takes over from an existing market leader or incumbent. For this to happen, Christensen proposes three requisites:

1. It must be cheaper than in incumbent.
2. It must under-perform the incumbent. Why? To the incumbent, the technology seems trivial and unimposing so much so that the incumbent fails to 'see it coming'.
3. It must offer ancillary benefits.

Netbooks seem to fit that bill, or do they? Let's look at the prerequisites carefully.

1. Cheaper: Indeed Netbooks are cheaper. The Cheapest of Netbooks start around $150. Cheap laptops start somewhere near $300.

2. Underperforming: This requisite is also satisfied by Netbooks. They offer less computing power. Most of them have smaller hard drives and many simply do not have a hard drive. Of course, being smaller Netbooks have smaller screens.

3. Ancillary Benefits? I am not too sure about this one. The sales pitches mention lesser weight, smaller size, etc., but these simply mean one benefit: portability. Yes, low power consumption is another. Another pitch is the case for a small form factor. Is this really a benefit? Then I have seen the case made for 'Internet ready applications' and improved user friendliness for Ubuntu Netbooks. Pulling at straws, aren't we?

I remember an article comparing the Netbook to a second car. Guess that would be a good sell. Sometimes a second car is preferable, if the first one is the big family car and if I needed to pickup a few beverages in a hurry. I would not plan on giving up the family car, though.

Read more...

Prof. Clay Christensen's Visit

' Disruption always attacks from beneath!'

On the 25th of April, Clay Christensen, the authority of Disruptive Technologies graced our Disruptive Tech class. 'In his book, he hac defined a Disruptive Technology as a trivial technology that disrupts an existing well established business model.

Disruptive Technology is a misnomer', he admitted. Andy Grove,Intel's former CEO convinced Clay that what the latter meant was a 'Disruptive business Model'. A disruptive technology/business model creates a new market, thus creating a disruption and hence a new business model, and brings along with it new metrics of measurement. It is a simple affordable technology as compared to the well established incumbent.

Examples of these business models are those created by the PC and Voice over IP market. The Cisco router could not be used in Lucent Circuit switches. when they first came out. As VOIP got better, Lucent lost customers.

The components of firms can be classified into resouces, processes and values. Resources include products, technology and brands. These are the easiest to copy. Processes/Business processes like the South West Airline Business model are hard to copy. Values like innovation is where the disruption takes place.

Compaq was first approached by Flextronics with a proposal that the latter would manufacture their circuit boards. Through this deal, Compaq saw that it would get the same revenue but could minimize cost. Compaq accepted.
With similar proposals, Felxtronics graduallly acquired Compaq's Logistics, Supply chain and design. Then Flextronics approached Best Buy to carry its own brand, thus eating away from Compaq's market. In effect, they commoditized their customer. If Compaq had not outsourced at the beginning, it would probably have faced extiction earlier. Sure enough,it could not buy Flextronics as it was on a mission to write off its huge assets from its balance sheet.

Hyundai and Kia have stolen market share form Toyota causing the latter to eliminate its Corona and Tercel models. Christensen warns that all automobile manufacturers must be worried about cars manufactured in China and India.

Wimax can cause a disruption to Broadband and Vanu can disrupt Bose's market with its software radio.


For the most part I did become a believer that Prof Christensen's theories held true many times, but:

Counter example1:
A quote from the CEO of Dyson,maker of the cyclone Vacum cleaner, probably a disruptive vacum cleaner.
'Dont design down to price. Let the product do what it needs to do.'

Some Chrsitensen statements:
1.The probability of something new growing out of something old is zero.
As Prof. Utterback pointed out, IBM 360 and 3M products serve as counter examples.
2. Established companies never innovate in a disruptive manner.
Again As Utterback mentioned the IBM 360 was the first solid state computer.

3. New company innovation is always driven by a crisis. Is this true?

Read more...