Dim-disruptive Innovation Model, Purdue University

Disruptive Innovation Model (DIM): A Primer for Entrepreneurs*

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he term disruptive technology was coined by Clayton M. Christensen and introduced in his 1995 article Disruptive Technologies: Catching the Wave, which he coauthored with Joseph Bower. He describes the term further in his 1997 book The Innovator's Dilemma. In his sequel, The Innovator's Solution, Christensen replaced disruptive technology with the term disruptive innovation because he recognized that few technologies are intrinsically disruptive or sustaining in character. It is the strategy or business model that the technology enables that creates the disruptive impact. For strategists this has become a hot topic in today's rapidly evolving markets. However, in order to make the concept more useful in the Introduction to Entrepreneurship & Innovation setting (ENTR20000), it is useful to distinguish between different categories of disruptive innovations that all have unique characteristics and consequences:

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isruptive Technologies: Some technologies have displaced other technologies to offer a whole new sphere of possibilities at lower prices. (See picture of 5 meg hard drive to left in 1956 picture!) In the computer industry, CD-ROMs have displaced floppy disk drives because they support storing much more information at lower prices. In turn, thumb drives are quickly replacing CD-ROMs. In turn, widely available “free” online storage space is replacing mechanical storage, for instance, www.box.com. See also Adrive.com. In the telecommunication industry, internet telephony (VoIP) is another example of a technology that is steadily replacing older telecommunications technologies and is being widely adapted by phone companies themselves. In roughly two years time, the VOIP competitive arena has gone from few players (Vonage, Skype, Packet8), to many, and now players are quietly folding their tents (SunRocket). With time, disruptive technologies often become enablers for disruptive products, processes and business models.

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isruptive Products: These are products or services that replace similar existing products or services based on their superior attributes or lower price. As an example, mobile phones have become an important complement and often substitutes for fixed line phones. Digital music players, such as the Apple iPod have disrupted similar products like the CD-based walkman. Introduction of the iPhone June 29, 2007 is another prime example. The iPhone has the potential to replace typical cell phones, iPods, GPS devices, web access devices, and a host of others. When the DIM was first created in 2007, Netbooks did not exist; now they are storming the country. I have owned three and really like them for their light weight and extended battery life.

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isruptive Processes: Processes that are of disruptive nature often outperform the traditional ways of working and give the adopting company a competitive advantage due to superior performance or lower cost. When Dell adopted just-in-time delivery for the electronics parts of its computers, it substantially cut warehousing and depreciation costs and outperformed its competitors. Similarly, integrating supply chain management from the customer all the way to the supplier has given Cisco a competitive edge in selling internet routers. WalMart has become a master at supply-chain management as a competitive tool. Perhaps the best example is Zappos, the online shoe company. (YouTube video at this link) Zappos has integrated Kiva’s robotic pick, pack and go system seamlessly into their order system making it a very disruptive process.

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isruptive Business Models: Business Models that are disruptive do business in new and innovative ways in established and sometimes new areas. In the airline industry, so-called no frills airlines emerged with their low-cost business model and strongly competed with traditional flag carriers. In the US, SouthWest and JetBlue are examples. . Similarly, Google.com has disrupted online advertising and created a new revenue stream by placing highly targeted text ads alongside the search results of its search engine. As this is being revised (May 9, 2009) the US Government is attempting to remake the business models of GM and Chrysler toward being much more responsive to competitive pressures and agile in design and stewardship of the environment. The Web 2.0 business model based on providing free service combining various aspects of “Wisdom of the Crowds” such as YouTube and now hundreds of video sharing web sites has shattered extant business models. Hulu and Sling.com are attempting to accomplish a like feat in the TV industry. Even the major networks are getting into the act. ABC is launching icaught in an attempt to cut into the amateur video supply chain. Essentially, the entire video industry, from content originating to delivery to consumption is in total chaos caused in large part by a convergence of all components of this Disruptive Innovation Model (DIM).

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ottom Line: Managing these different types of disruptive innovations and

detecting them early enough in one's competitive landscape is definitely an art. Companies that excel at one or several of these disruptive design areas will be the leading innovators of the years to come. The ability to employ and deploy such innovation(s) is the essence of successful entrepreneurship and is what the entrepreneurship certificate program @ Purdue University is all about. ________________________ *The DIM developed above is based on Alex Osterwalder’s original concepts and information generally available from Wikipedia.org and web-based news sources. It is Open Source. Hank Feeser CopyLeft July 18, 2007, Revised May 2009