HBS Professor Clayton Christensen sees disruptive innovation as a threat to everything from Microsoft to Japan—and even to a certain prominent business school.
But through that disruption comes improved quality of life—and major opportunities for institutions that can disrupt rather than be disrupted.
At a plenary session at the HBS Global Alumni Conference 2001, Christensen expanded on the work highlighted in his 1997 book, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail.
Disruptive technologies such as the personal computer have the ability to sink market leaders, who are focused on their existing and most profitable markets and don't see the threat coming from below. Exhibit A: The death of Digital Equipment Corp., which, along with a string of other minicomputer firms, was taken down by the PC revolution.
But such innovation only becomes disruptive to a market where customers are being overserved by the prevailing offerings. The concept of "overshooting" suggests that companies try to keep prices and margins high by developing products with many more features than customers can absorb. Who has ever used all of the features in Microsoft's Word, for example?
The problem: Overshooting the market can open the way for disruptive technologies that are cheaper and simpler to take root. So Xerox was eventually disrupted by less expensive copiers from Ricoh and Canon, Western Union by the telephone, and big steel mills by the minimill.
To market leaders, "overshooting is always inconceivable, and overshooting always happens," Christensen said.
Once disruption takes hold, it typically enables a larger population of less-skilled or less affluent people to do things in a more convenient, lower-cost setting—things that previously could only be accomplished by specialists in less convenient, centralized settings. PCs, for example, brought computing power to individuals at a fraction of the cost of minicomputers, replacing the minicomputer specialist and centralized data centers in the process.
"Disruption has been one of the fundamental causal mechanisms through which our lives have improved," Christensen said.
Health Care Takes A Hit
At the conference, Christensen looked forward to areas where disruptive technologies could soon or are already taking hold: health care, Microsoft, and campus-based management education programs or, as we like to call it, Harvard Business School.
In health care, Christensen set the scene by outlining the four layers of health care professionals: The specialist and sub-specialist physicians top the pecking order, followed by family/personal care physicians, nurse practitioners and, finally, self-care.
Microsoft has way overshot what the customer needs.
Christensen said that disruptive technologies in health care are coming in the form of better and more targeted drugs and rapidly improving test, diagnosis, and other technologies that allow personal-care physicians, nurses, and even self-care practitioners with some level of training to do work once performed only by specialists. Disruptive innovation, in this way, always moves upmarket, Christensen said.
Not only will this affect individual medical professionals, but also the institutions they serve. Why are more and more beds in hospitals vacant? With improving technology, complex work done only at hospitals can now be accomplished at stand-alone sub-system centers, out-patient and in-office care, and through in-home care.
The ability to improve the healthcare system through disruption will be helped if the participants realize the process going on around them and embrace the change. "We need to have people not fight over it," Christensen said.
Microsoft: Let It Be
Should Microsoft be broken up? Christensen said the best course might be to do nothing and allow disruption to do the work of the US Department of Justice.
Already the software powerhouse's dominant position is being eaten away by thousands of companies who are faster, more responsive, and offer a level of customization that Bill Gates' crew can't match. Meanwhile, Microsoft is turning out costly products with far too many features and software based on proprietary and interdependent architectures. "Microsoft has way overshot what the customer needs," Christensen said.
Potential threats: Sun's Java technology, the Linux operating system, and the Internet Protocol are all eating away at Microsoft's lead. "Microsoft is getting disrupted," Christensen said.
But the Harvard Business School? While HBS is clearly poised for significant growth and serving its markets well, such campus-based management education programs are likely to feel pressure from below from ever-expanding and low cost corporate-training efforts, according to Christensen.
From Harvard's perspective, companies offer training, not education, Christensen said. But employees already get a lot of their education on the job, and training programs are becoming much more sophisticated.
What should HBS do? Facilitate the trend. Christensen said the school should work with companies, offering up cases and other course material. Make it simple for corporate trainers to teach great material, he said. "Harvard could have a huge effect" on how management is taught in the future, he said.