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The iPad and Disruptive Innovation

February 2nd, 2010 · 9 Comments · VC, tech

After hearing about Clayton Christensen’s bestseller The Innovator’s Dilemma and seeing it referenced time and time again, I recently decided to pick up a copy for myself. Christensen, a professor at HBS, begins by discussing the concepts of sustaining technologies versus disruptive technologies. Sustaining technologies are those that “improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued.” But while “user-centered innovation is perfect to drive incremental innovation,” it hardly generates breakthroughs, says Roberto Verganti. Disruptive technologies, on the other hand, are innovations that “result in worse product performance, at least in the near-term,” innovations that are not necessarily centered on what users say they want or need at the time but ultimately change an industry. Digital photography versus traditional film photography is a simple example. Or a car versus a faster horse, as described by the famous Henry Ford quote.

Furthermore, because sustaining technologies lead companies to “overshoot the market,” or give their customers “more than they need or ultimately are willing to pay for,” Christensen concludes: “[This] means that disruptive technologies that may underperform today, relative to what users in the market demand, may be fully performance-competitive in that same market tomorrow.”

Look at where digital photography is today, relative to its predecessor! And netbooks, popularized over the past year couple of years, surely fall into this category as well, in terms of “underperformance” in a market where computer manufacturers often provide much more computer than the average user may need.

In the same vein, is it not feasible to presume that the iPad could be in the same camp? Instead of viewing it as an upgrade for Amazon’s Kindle DX and e-readers more generally, perhaps a more accurate perspective is to view this new tablet device as a new (though currently underperforming) replacement for the current paradigm of notebook computing, as Jobs suggested. Sure, there are many flaws that people point out, and who knows if the iPad will be as dominant in the tablet space as the iPhone has been in the mobile space; but it does not seem too farfetched to think that tablet devices may soon be “fully performance-competitive” in the computing market.

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  • Dresdon

    We'll be here all day if we try to define the exact root of “disuptive technologies” but in short, if we go off conventional understandings, the iPad is not going to be disruptive–at least, not in its current form. There are several software enhancements that can be achieved, but those will only go so far unless the hardware catches up. The back-end may be vastly upgraded, but to the common consumer, these hardware capabilities are little different from others that they're familiar with already. The real value add with the iPad is in the partnerships for content that they're able to strike and the subsequent–and arguably more important–presentation of said content. I wouldn't be surprised if there are several others in the wings that they chose not to announce last week. That said, it's questionable if even these will be game-changing. Sure; you can buy one article from a newspaper. Sure; you can buy one magazine online. This is a new subscription financial model. As far as I'm concerned, that's game-changing insomuch as it tips the old model (read: does not topple it), but will be vastly overshadowed by the ever-more free and open internet that's come out of the woodworks in the last year. In short: Apple needs to haul ass if it intends on competing seriously on this plane, because while they can strike certain agreements with certain content heads, there are several others who are already in the race.

    Love your blog, Mark, and know that you're a brilliant guy, but just for fun could you pick a side rather than just waiting it out? =P

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  • http://www.socentvc.com/ Mark

    Well, I do have a good chunk of my Roth IRA in AAPL, so perhaps you could say that I've put my money where my mouth is! That said, I can't say that I like AAPL's volatility, especially as it relates to Jobs and his health.

  • Matilda

    Better e-reader or (currently) worse computer? Both. The point of e-readers isn't necessarily accessibility to content–it's the fact that it's a more accessible version of the traditional book-reading experience that we all know and love. And with regards to a computer, it has the processing speed of a smart phone and the memory of an iPod Touch. It can't even begin to compare. Enter: Chrome OS!

  • http://www.dxstuff.com/ Derrick

    Despite the relationships that Apple is building with publishers, the LCD screen makes it hard to accept as a normal ebook reader. We'll have to see how people react to long-term usage/reading with the device, but on top of that, I'd like to see Apple continue to “innovate” with their ebook usage (perhaps allowing for comments, highlighting, etc.)

    As for it being a replacement for netbooks (not notebooks) – I think it really depends on how you are. For more tech heavy users, I think a netbook, at least currently, still wins out – a full OS, multitasking, storage, etc. – for people who are doing more than just email and web browsing, the iPad just isn't ready/capable (yet). But if we're talking about the mom or person who ONLY is looking for some light web browsing, occasional email checks, and whatever is available on the App Store (probably someone who doesn't know what flash is, doesn't see the iPad for what is “missing”), I think this does replace the need for a netbook, which would be far too “complicated” for what they need/use.

  • http://www.socentvc.com/ Mark

    To some extent, I think these comments are still missing the point. The fact that the current device is a downgraded or less “capable” when compared to current mainstream devices IS the point exactly. As Christensen explains disruptive technologies are ones that practically _by definition_ that underperform today relative to what users in the market demand. A disruptive technology doesn't “improve on” current technology in the way sustainable technology does but rather changes the way that things are done.

    To go back to the initial example of digital photography, it was obvious that the initial quality of digital photos was horrendous relative to film, and purists today would still claim that film is superior. However, the whole point of digital wasn't to improve on film but to change the way pictures are taken, stored, edited, distributed, and displayed.

    Perhaps it's a bit difficult to explain this concept fully in a short blog post, and maybe I have not explained this concept as well as I could have, but feel free to pick up the book yourself to get a better idea of the argument that Christensen is making (as well as see the research he has to back up his claims).

  • Extract9

    Netbooks are dead… See latest sales… Disruptive proof?

  • http://www.iphoneipadproducts.com/ iPad Case

    Great article! I learned a lot from this.