“Disruptive technologies are cheaper, simpler, lower-performing, and are targeted at the least profitable part of a market. The incumbents do not respond because they are focused on their most profitable, premium, customers. The disruptive technology gets better and better until one day, whoops, even the best customers are selecting the disruptive product.”
(quote from Michael Wolfe, CEO, Pipewise, Inc).
This brilliant insight has helped to explain the success and failure of many businesses and indeed is the primary reason for why capitalism - as long as it doesn’t devolve into cronyism - is such a powerful force for innovation. So given the fact that we’ve just had the release of IPhone 5 I thought it would be interesting to see what Mr. Christensen had to say about the IPhone when it was first introduced in 2007.
“They’ve launched an innovation that the existing players in the industry are heavily motivated to beat. History speaks pretty loudly on that, that the probability of success is going to be limited.”
Not exactly Nostradamus.
How could the world’s foremost expert on innovation fail to comprehend the innovative power of the most iconic product of our age? Because of what I call the How/What problem. Experts (including yours truly) are very good at explaining the “How” of the problem. They are superb at providing the intellectual framework for understanding how the broad dynamic works, but they are no better than the layman at applying their theories to real life. The “What should I do with this info?” is a question that they often cannot answer well.
That’s why when you follow a guru, be it in business or trading, it is very important to learn how to draw your own conclusions. You can learn the “How” from someone else. But you can only learn the “What” from your own hard work be it in markets or in life.