How Does Christensen & Rosenbloom's Notion of 'disruptive Technology' (1995) Develop Our Understanding of Why Successful Firms Fail?

How does Christensen & Rosenbloom's notion of 'disruptive technology' (1995) develop our understanding of why successful firms fail?

The evolution of technology has helped many organizations prosper and reap the rewards of innovative thinking. Organisations have been able to form products or services in order to make the lives of their target market more efficient, enjoyable or offer it something completely new. Christensen and Rosenbloom (1995) discussed the notion of 'disruptive technology' and how it caused successful organisations to fail. The findings of Christensen and Rosenbloom's text will be summarized, explaining the definition of disruptive innovation. These theories, along with theories from alternative literature will be applied to Nintendo Co Ltd (Nintendo), a leading player in the video game market. The analysis will begin with a brief history of Nintendo and will be followed by how Nintendo faced adversity due to innovations from its competitors and what they did to overcome this failure. This information will be backed up by marketing information, provided by Mintel, as well as additional web research. Finally, the analysis will be concluded, summarising the purpose of this text; why successful firms fail as a result of disruptive technology.

Christensen and Rosenbloom (1995) explain two reasons as to why successful organisations fail as a result of disruptive innovation. In addition to these two rules, they provide a third.

They begin by explaining that the market's incumbent firms innovate in a manner which focuses on what their customers are happy with and develop the features of their existing product so that the performance increased. However, new entrants have the effect to destabalise these firms by introducing 'radical' technological innovations into the market, providing them with an 'Attacker's Advantage'

This gives way to the first of the three reasons of why businesses fail. The scale of technological capabilities of the incumbent and the new entrant is one reason why a successful firm might fail. Firms with a product categorise the product into two sections. These are: The core concepts of the technology involved and the design architecture of the product- how the product functions when all of the components are assembled. Depending on whether the technology in the componentry is improved or completely overturned and the design architecture is changed or unchanged, then different types of innovation can be classified. To better illustrate this concept, Henderson and Clark's (1990) table is cited. It shows the different types of innovation depending on how the product has been altered.

Thus depending on the makeup of the core technological concepts and the design architecture, there is potential for a new technological paradigm. In an established technological paradigm, innovation only affects the components or the design architecture and not both. A change in product architecture, i.e. a change in how the system functions with the same components, is never changed. Abernathy and Utterback (1978) were cited. It explained that rather than changing the design architecture of the product, the firm focuses on improving the way the product is produced and is a reason why when newer technologies emerge; entrant firms have an attacker's advantage. Simply, incumbents cannot adjust the design architecture to provide a product within the new technological paradigm.

Christensen and Rosenbloom also explain that there have been occasions where technological perspectives do not account for phenomena in innovation. National Cash Register overcame difficulty through the availability of new technology in office information systems. These phenomena brought on a second wave of research and the second reason as to why businesses might fail in light of new technology; organizational dynamics of technological innovation.

Despite innovation being either modular or incremental, Christensen and Rosenbloom's literature explains that incumbent firms do have the potential to innovate through means of a changed product design architecture. However, such firms are unable to make the transition due to the organizational dynamic of the firm. This is due to the precedence of the success of previous decisions. Firms are therefore very risk averse in changing the culture which has made them so successful in the first place. And although the opportunities of embracing a change in the technological changes in the market are not out of bounds for incumbents financially or technically, the ability to change is suffocated by the culture of organisations.

The final reason as to why businesses fail due to disruptive innovation is highlighted by Christensen and Rosenbloom (1995) as the understanding of firms' current markets and the value new technology would bring to it. It is theorized that the products created by one company could be part of a 'hierarchically nested set of constituent systems and components.' Christensen and Rosenbloom state that a nested hierarchy of product architectures creates a value network and used the disk drive industry as their prime example. Value networks also show that salient attributes may defer. One value network may profit from performance higher than the cost of operations, whereas another may succeed in focusing on keeping the cost of its operations at a minimum. IBM's 14-inch disk drives were part of a value network. They produced the disk drives, which in turn was used as a component in another product, mainframes completing a corporate management information system. The underlying problem was that although incremental innovation helped keep the likes of IBM at the top, overlooked technological solutions would come back to haunt them. Smaller storage systems, which offered less cost and ease of portability like the 8.25 inch disk drives and later the 5 inch and 3.5 inch drives respectively, would deem its predecessor obsolete. Due to the inferior storage space available in the new technology, the predecessor took no notice. However, as firms like Maxtor further innovated on their products enabling extra storage capacity, sooner or later, the companies its predecessors were providing for, went for the cheaper, smaller solution. With the micro computers, desktop computers and portable computers emerging, smaller and cheaper disk drives were needed. The entrants were focusing on capturing their competitor's existing consumers as well as broadening their scope onto non consumers for future technologies. This type of innovation is known as disruptive innovation as suggested by Christensen and Bower (1996). This is where a new technological paradigm has redefined the product's performance trajectory (Figure 2) and created a new market