Inspiration

• The Innovator's Dilemma
• Asymco

Disruptive Innovation

The process by which a smaller company, typically with fewer resources, can challenge an established business (often referred to as an “incumbent”) by entering the market at the bottom and then moving up-market.

• Incumbent businesses innovate and develop their products or services to appeal to their most demanding and profitable customers, ignoring the needs of those downmarket.
• Entrants target this ignored market segment and gain traction by meeting their needs at a reduced cost compared to what the incumbent offers.
• Incumbents don’t respond to the new entrant, focusing on their more profitable segments.
• Entrants eventually move upmarket by offering solutions that appeal to the incumbent’s “mainstream” customers.
• Disruption has occurred once the new entrant has begun to attract the incumbent business’s mainstream customers en masse.

Historical Examples of Disruption

• Telecommunication Mobile phones disrupted landline phones.
• Music Transition from buying physical to digital music. Streaming music platforms replace music purchases.
• Photography Digital photography's rise led to the decline of film-based systems (e.g., Kodak).
• Automotive Japanese cars gained significant market share over American-made cars.
• Data Storage Small hard drives displaced large hard drives.

Key Characteristics of Disruptions

• Often involves technological advancements.
• While disruptive innovation typically leverages software or computer-based components, they are not always explicitly high-tech.

Types of Changes

• sustaining technology
• Things get faster and faster, cheaper and cheaper
• disruptive technology
• Things get replaced

Sustaining Technology

iterative improvements that primarily bolster the existing market dynamics and do not radically change them

• x86 chips get faster and faster
• SSD drives replacing hard drives
• Cars get better and better MPG
• Evolution from Gasoline -> Diesel -> Hybrid cars
• These are not disruptive; they support the status quo

Disruptive Technology

Introduces a paradigm shift, leading to the replacement of the old with the new.

• Apple Silicon vs. Intel

Summary of Lehman's Laws

Incorrect Reason for Disruption

Firms fail because they cannot keep up with changing technology

• Not the case
• Disrupted industries often lead in the technology that disrupts them
• Good business practices result in avoiding changes needed to meet disruption
• The current company structure cannot make money in the new environment

Low-End Disruption

How Does Software Fit In?

• Disruptive companies often have a more agile process
• In many companies, software (and more) has left the Evolution lifestage
• In high-tech (software, hardware), move to more interesting jobs

Solutions?

• Self-Disruption Organizations and individuals need to innovate proactively, even if it means cannibalizing their existing products or services
• Continuous Learning Must constantly improve, even if uncomfortable