Disruptive Innovation Model (DIM):

A Primer for Entrepreneurs*

T
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:

D
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.

D
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.
D 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. Wal-
Mart 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.

D 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).

B 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