Jerry Lawson, in eLawyerBlog, points to Blogs As A "Disruptive Technology", based on Clayton Christensen's description in the classic "The Innovator's Dilemma." I agree completely, and the current application of blogs fits well. (Read more ... )
Christensen distinquishes "sustaining technologies," those that allow businesses to operate their existing business models better, from "disruptive technologies" which disrupt the established business models by offering a cheaper, less functional alternative that improves rapidly without substantial increase in cost. He points out that at first, disruptive technologies appeal only to those operating with low or zero profit margins ... hobbies and free services. Those with which the nascent technology will ultimately compete see it as no threat, because it does not offer the advanced features sought by their high-margin customers. As a result, it is disregarded, even scorned, by established operations.
We see exactly this happening today, as blogs are used primarily for zero-margin publishing of free opinions and denigrated by some. At the same time, we see for-profit organizations (like About.com) adopting blog tools to supplement or enhance its low margin operations.
Among the characteristics of a disruptive technology, as Christensen describes it, is that it improves much faster and is far more efficient than the established technology it replaces. So, even though it starts at the bottom of the economic food chain, it steadily improves and moves "up market" faster than do customers' requirements. As it does, it continually becomes competitive with higher and higher margin business, as companies using established technology (with higher fixed costs and margin expectations) abandon the lower margin business to the upstart's inroads.
Managers behave quite rationally in shrugging off losses of low-margin bits of business seen as unimportant compared to its high margin "best business." Adopting the new technology would mean radical change in their business model, marketing relationships and profit expectations, all usually unacceptable to existing managers and shareholders.
This process continues, the disruptive tech moving steadily up the margin curve as it rapidly improves, taking better and better business, the established competitors now fighting a defensive battle. Eventually, the established technology companies are left with insufficient high-margin business to sustain their business models, marketing channels and compensation structures. They are forced to restructure or fail, usually the latter, all while making decisions that are perfectly rational at the time ... under business analysis appropriate to other technologies.
Christensen, a Professor at Harvard Business School, lays all of this out with a hundred years of historical examples in "The Innovator's Dilemma." He has recently released "The Innovator's Solution," which offers guidance to business managers on how to avoid being obsoleted by this phenomenon.
Posted by dougsimpson at September 28, 2003 04:42 PM | TrackBack