Disruptive Innovations

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In "The Lessons of New-Market Disruption," writer Clark Gilbert recounts Teradyne's and HP's separate attempts to launch new technologies that had "enormous potential to cause new market disruptions." Teradyne accomplished its goal while HP failed.

The difference between their attempts: Teradyne didn't place any large short-term revenue expectations on its project, allowing it to develop an entirely new market for its product, while HP set such high revenue targets, it forced the developers to approach an existing market to reach financial goals -- even though that market was less interested in a new solution and more interested in maximizing the use of the existing one.

The moral of Gilbert's story: Companies interested in developing disruptive innovations need to retain flexibility and be financially realistic to capitalize on new opportunities.

Clayton Christensen discussed the topic of disruptive innovations with Nancy J. Lyons in a February 2002 article, "The Disruptive Start-Up: Clayton Christensen On How To Compete With The Best." In it, he says, "the best run of the large corporations -- those that are well managed, pay attention to their customers, and invest in new technology -- are vulnerable to being outwitted by disruptive innovators."

Why? Because, quite often large companies are less motivated to support new ideas that don't help the established company make more money (case in point, Gilbert's HP example). Christensen goes on to say: "Remember that when a new idea emerges in an established company, it needs to get funded. And the only ideas that get funded are those that help the established company make more money. That process favors the ideas that create improved products for existing customers, and tends to reject more innovative, or disruptive, ideas. That is what creates disruptive entrepreneurial opportunities."

If you take both Gilbert's examples and Christensen's advice, it would seem that taking a piece of the big guys' action isn't so difficult afterall. It just takes realizing that innovative ideas don't always have the most immediate payoff but can still result in success over the long-term.