Destructive Technologies for Industrial and Corporate Change
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Destructive technology is a radical innovation, (a new product and/or process) which with high technical and/or economic performance destroys the usage value of established techniques previously sold and used in markets, generating technological, industrial, economic, and social change.
Disruptive technologies … introduce a different performance package from mainstream technologies and are inferior to mainstream technologies along the dimensions of performance that are most important to mainstream customers. As such, in their early development they only serve niche segments that value their non-standard performance attributes. Subsequently, further development raises the disruptive technology’s performance on the focal mainstream attributes to a level sufficient to satisfy mainstream customers …. disruptive technologies … with their lower performance, appeal to the low end, low-profit portion of the mainstream market.
Calvano (2007) suggests the concept of “destructive creation,” in which “a monopolist has the option, at the beginning of each period, to destroy the usage value of all units previously sold and simultaneously introduce a new, perhaps improved, vintage at some cost c ≥ 0…Such cost is interpreted as any expenditure incurred in the process of destruction as well as in the process of creating, developing and marketing the new versions.”
Theories of Disruptive Technologies in Industrial Competition
Theory of Revolutionary Innovations by Abernathy and Clark
This theoretical framework recognizes that innovation is not a unified phenomenon: some innovations disrupt, destroy, and make obsolete established competences; others refine and improve existing technologies. In particular, Abernathy and Clark (1985, pp. 4ff and pp. 12–13, original emphasis) claim: “An innovation is .… derived from advances in science, and its introduction makes existing knowledge in that application obsolete. It creates new markets, supports freshly articulated user needs in the new functions it offers, and in practice demands new channels of distribution and aftermarket support. In its wake it leaves obsolete firms, practices, and factors of production, while creating a new industry .… innovation that disrupts and renders established technical and production competence obsolete, yet is applied to existing markets and customers, is … labelled ‘Revolutionary.’ It thus seems clear that the power of an innovation to unleash Schumpeter’s ‘creative destruction’ must be gauged by the extent to which it alters the parameters of competition, as well as by the shifts it causes in required technical competence. An innovation of the most unique and unduplicative sort will only have great significance for competition and the evolution of industry when effectively linked to market needs.”
Theory of Disruptive Technologies by Christensen
Christensen (1997) identifies disruptive technology with specific characteristics: (a) the performance trajectory provided by disruptive technology and (b) the performance trajectory demanded by mainstream market. Christensen et al. (2015) claim that disruptive technologies or innovations are generated by small firms with fewer resources that successfully challenge established incumbent businesses. Innovative firms, generating disruptive innovations, grow more rapidly than other ones (Tushman and Anderson 1986, p. 439; Abernathy and Clark 1985). Christensen’s (1997) approach also shows that disruptive innovations generate significant shifts in markets (cf., Henderson 2006). In general, technological and market shifts embody competence-destroying and competence-enhancing because some firms can either destroy or enhance competence existing in industries (cf., Hill and Rothaermel 2003; Tushman and Anderson 1986). New firms tend to generate competence-destroying discontinuities, based on disruptive technologies that increase the environmental turbulence, whereas incumbents focus mainly on competence-enhancing discontinuities that decrease the turbulence in markets. Disruptive innovations change habits of consumers and undermine the competences and complementary assets of existing producers (Christensen and Raynor 2003; Garud et al. 2015; Markides 2006; cf., Coccia 2005). Disruptive innovation speed is also important to sustain competitive advantage of firms amidst rapidly changing business environments (Kessler and Chakrabarti 1996, p. 1143). A sector with several disruptive innovations is biopharmaceutical industry because of revolution generated by molecular biology and nanotechnology (Coccia and Finardi 2012, 2013; Coccia 2012, 2014, 2015; Coccia et al. 2012; Coccia and Wang 2015). Christensen (1997) observes that established firms face an “innovator’s dilemma,” which is associated with the problem of internal resource allocation leading them to systematically underinvest in Research and Development (R&D) of disruptive technologies (cf., Garud et al. 2015; Coccia 2006). However, research alliances and acquisitions may help incumbents to overcome this inertia both in the initial stage of research and in the later stage of development of disruptive technologies (Coccia 2014, 2015). Coccia (2020) shows new disruptive technologies given by deep learning methods in cancer imaging that can generate a shift of technological paradigm for diagnostic assessment of any cancer type and disease.
Theory of Competitive Substitution Between Technologies by Fisher and Pry
Disruptive technologies often supplant for more mature technologies in markets (Coccia 2019b). This dynamic behavior between technologies leads to the dominance of a new disruptive technology on established one in markets (cf., Coccia 2017). A model that operationalizes this competition between technologies is suggested by Fisher and Pry (1971). This model fits to data of competition between synthetic vs. natural fibers, synthetic vs. natural rubber, etc. (cf., Fisher and Pry 1971). In this context, Sahal (1981, p. 79ff) describes the competition between steamship and sailing ship that generates in the long run the dominance of steamship (a disruptive innovation) as means of transportation of goods and people (cf., Graham 1956; Rosenberg 1976). Another example of disruptive technology is the diffusion of Solvay process that in the 1900s destroys the Leblanc process in the production of soda (Freeman 1974). In agriculture, farm tractor can be considered a disruptive technology because it has generated a substitution of mechanical for animal power (Sahal 1981; Walker 1929). In general, disruptive technologies have the characteristics of substitutes with a powerful force in markets that generates technical, industrial, and economic change (Porter 1980).
Theory of Predator-Prey Relationship Between Technologies
The competition between technologies can generate a predator-prey relation (Pistorius and Utterback 1997, p. 74). In this case, (emerging) disruptive technology can slowly reduce market share of (mature) established technology. Farrell (1993) applies Lotka-Volterra equations to examine the predator-prey competition between technologies, such as between nylon and rayon tire cords, telephone and telegraph usage, etc. Utterback et al. (2019) show a predator-prey relation in a specific period between plywood and oriented strand board (OSB is a composite of oriented and layered strands, peeled from widely available smaller trees). The behavior of predator (disruptive) technologies is especially relevant to explain how a new technology destroys old technologies and generates corporate and industrial change (cf., Porter 1980).
Theory of Killer Technologies and Speed of Creative Disruption by Coccia
B < 1, whether new killer technology Kl destroys at a lower relative rate of change the old victim technology (low speed of disruptive technology in markets)
B = 1, killer technology Kl substitutes victim technology at a proportional rate of change (proportional speed of disruptive technology in markets)
B > 1, whether killer technology Kl destroys victim technology at greater relative rate of change (high speed of disruptive technology in markets)
Examples of killer technologies are into the market of devices for data storage, such as the development of Universal Serial Bus (USB) technology by Intel Corporation in 1995 to standardize the connection of computer peripherals (Coccia 2017, 2018a). In 1998, the Personal Computer iMac G3 by Apple Inc. was the first consumer computer to discontinue legacy ports (serial and parallel) in favor of USB technology (Coccia 2018a). This innovation strategy by Apple Inc., a market leader, has paved the way for a market of solely USB peripherals (disruptive technology) rather than other ports for storage devices. New USB technology in interaction with host technologies, such as Personal Computers, has destroyed the market of other storage devices because of more efficient operations of storage (higher velocity of transfer data, larger storage capacity of data, etc.; Coccia 2018a, b; 2019a, b; Coccia and Watts 2020). In short, USB technology, as killer technology, has destroyed the use of 3.5-inch floppy disks, Compact Disc, etc. generating industrial and corporate change (Coccia 2018a). Emerging cloud computing (based on computing services, such as servers, storage, databases, networking, etc. over the Internet “the cloud”) is generating a further shift in these markets destroying other devices of data storage. Finally, general properties of killer technologies (Coccia 2019a, b) are (1) killer technology has a disproportionate growth in relation to victim technologies in markets; (2) killer technology has a series of major and minor technological advances of its own that pave the way for the dominance over other established technologies in markets; and (3) learning via diffusion and diffusion by learning are a driving force underlying the development and adoption of killer technology in markets.
Conclusions and Managerial Implications
Calvano (2007) argues that “we highlight the role of destruction rather than creation in driving innovative activity. The formal analysis shows that destructive creation unambiguously leads to higher profits whatever the innovation cost” (cf., Tripsas 1997). Christensen (1997) claims that “disruptive technologies” offers a novel mix of attributes compared to established technology (cf., Adner and Zemsky 2005; Christensen 2006). The disruptive technology is, therefore, initially purchased by consumers in a secondary (niche) market segment who place high value on new technology’s attribute mix. As disruptive technology matures and improves its performance, it is able to enter into the primary (mainstream) segment. Christensen (1997) shows this dynamic behavior with a variety of technologies, including laser and inkjet printers, hydraulic, and steam-powered earthmoving equipment, etc.
Adner and Zemsky (2005) argue that the disruptive threat is greater when firms can price discriminate across market segments. In particular, disruption occurs when new-technology firms pursue a high-volume and low-price strategy that allows to break into the primary segment. For example, the lower the marginal costs of new-technology firms, the more attractive is a high-volume strategy and hence the greater the threat of disruption by new technology. Moreover, the lower the marginal costs of the established-technology firms, the greater their output and hence the lower the scope for new-technology firms to increase their volumes by disrupting the primary market. In short, the lower the costs of established-technology firms, the lower the threat of disruption. Despite disruption is associated with low costs for new technology, Adner and Zemsky (2005) claim that the lowest-cost new-technology firm is not necessarily the one that initiates disruption. Adner and Zemsky (2005) find that technology improvement can lead to disruption and highlight the importance of market structure as an important driver of the dynamics of disruption because it determines the extent to which consumer surplus from each technology increases over time (cf., Coccia 2016). Finally, Adner and Zemsky (2005) also show that a) social welfare can unambiguously increase because prices for both products (based on established and new technology) fall with disruption and that b) concentration tends to increase with disruption because the effect of cost asymmetries on market share is amplified by the increased number of competitors (cf., Coccia 2016).
Disruptive technology is always associated with some comparable established technology in markets.
In the short run, disruptive technology can induce incremental technological advances of established technologies that have a prospect of being supplanted by a (new) disruptive technology.
In the long run, disruptive technology has a series of technological advances of its own resulting from various major and minor innovations that pave the technological direction to be a dominant technology over other established technologies in markets.
The long-run behavior and evolution of any disruptive technology is not independent of the behavior of other comparable technologies.
The learning via diffusion and diffusion by learning are a driving force underlying the development and adoption of disruptive technology in turbulent (complex and fast changing) markets.
Overall, then, disruptive technology is a specific radical innovation that generates a disruptive creation in industrial dynamics. Disruptive technology affects the behavior of other technologies, generating a process of actual substitution of a new technique for the old one and, as a consequence, technical, industrial, and corporate change. The characteristics of disruptive creation can support innovation strategy of firms and policymakers of nations on critical decisions of when to invest in R&D of new disruptive technologies, abandon the old technology, or pursue an intermediate level of R&D investment between old and new technology for sustaining and safeguarding competitive advantage in turbulent markets (cf., Coccia 2018c, 2019d). To conclude, for scholars, disruptive technologies highlight the question of the boundaries of technology competition and how those boundaries change over time (Adner 2002). For managers, disruptive technologies highlight the danger posed to incumbent firms from too quickly dismissing new technologies as inferior and therefore irrelevant to their market positions.
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