Thoughts on innovation based on a Christensen reading

Christensen's basic premise in the Innovator's Dilemma, which reflects prior management observations as he dutifully points out, is that firms that introduce a new technology focus their resources on incremental improvements of that innovation (sustaining innovation) because of the alignment between the needs of the stakeholders/customers that constitute their "value networks" and the middle management incentives to pursue projects with higher probability of success and higher margins for the firm. This creates a "northeast migration" as these firms try to penetrate the higher margin/higher volume upscale product markets and they and their clients fail to see the potential of the next "disruptive innovation".

Christensen's framework appears to work for the disk drive industry (his primary case) as well as the cable/hydraulic shovel market and the steel industry. This framework seems harder to apply in other industries like aviation, automotive, CPUs, and consumer electronics to name a few. Even for the disk drive industry, some of the laggards (e.g. Seagate appears to have recovered and continue to wield significant market power). These observations are not intended to invalidate the theory (firstly they are just that -- i.e. observations and not based on exacting research) but rather to identify the other driving forces that allow for these 'exceptions' and also visualize what the effect would be to the afore mentioned industries when disruptive innovation catches up with them.

Firstly a qualitative support of why I see them as different:
1. CPUs: Intel and AMD have been wielding a duopoly game for quite a while. Motorola's recently divested Freescale moved out of the PC business once Apple moved to Intel. No new entrants from below -- incremental innovation sustains the game as long as Moore's law works.
Potential game breaker: quantum computing and the new entrants that will start serving some currently unsuspected markets (talking robot friends, GPS's, autos?). Verdict: the rate of improvement of the industry's product is high enough that does not yet allow for new successful entrant.

2. Autos. The big two and a half are still there and going (perhaps not strong) but going. Toyota, Honda, Nissan, Renault, Fiat have been around for a while and are at varying degrees successful. Huyndai and the Chinese that follow their cost model are entering the market from below but not with a disruptive innovation technology. Hybrids (and electrics) were introduced by the established players... Is the patent conspiracy true? What happens to the innovators that have water-powered cars? (just joking) There are some start-ups that try to cater to the environmentally-conscious crowd with some interesting and innovative designs -- could they be the next wave? Verdict: the value chain is too big to recreate -- there is no under market and we are talking about a finished consumer product.

3. Electronics. Sony, Toshiba, Motorola, Phillips etc are all there. Diverse industry that allows for flops in one segment and recapturing later. Several waves of disruptive innovation technologies (records, cds, dvds, sacds, hd-dvd-- film, digital cameras -- matrix, ink-jet, laser ) yet no memorable underdog led the attack in any of these. It was a big league game all along. Verdict: consumer products and scale of the players allow the continuity. Competition IN the industry is so tough that brings forward the disruptive innovation within the established firms or perhaps that ability to embrace and further develop disruptive innovation is not atrophying fast enough due to the high clock speed of the industry.

4. Aviation. The manufacturers have been a duopoly for quite a while. Only incremental innovation since the jet propulsion (and even this is arguable). The regulatory and market structure and the physics of the product are such that minimizes the potential of an innovation from below. Besides, aircraft is and end product as well. Innovation like the BWB, propfans, etc will likely come from within.
For airlines, the disruptive innovation of low cost point to point travel has not rendered full service legacy carriers out of the market despite the upheavals. Although Southwest attacked from below in a textbook Christensen format that innovation was not enough to sustain the attack while the move of Southwest (and the rest of the LCCs) to the northeast quadrant of high margin business travel has not been complete.

To summarize, the following conditions make the exact repetition of Christensen's theory harder:
1. Final consumer products as opposed to OEMs suppliers (diffused customer base).
2. Regulatory and market conditions (e.g. scale and network economies) that support oligopolies hinder new entrants by the sheer size (critical mass) of the players.
3. Clockspeed: slower clockspeed industries allow adaptation of incumbents and very high clockspeed industries keep incumbents with honed skills in either seeking or embracing disruptive innovation.