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Notes
- 1.
In March of 2014, Disney’s Frozen surpassed Toy Story 3’s gross box office receipts to become the top-grossing animated film of all time. It is notable that since Pixar merged with Disney, the Pixar brain trust is running Disney’s animated division, with John Lassiter acting in the executive producer role for Frozen, just as he did for Toy Story 3. In fact, Pixar’s biggest accomplishment may well be the revitalization of Disney’s moribund animation studios, which went nearly 20 years without a certifiable hit after The Lion King.
- 2.
For a complete understanding of the theory and the observations it was drawn from, I encourage you to refer to Christensen’s original works, in particular The Innovator’s Dilemma (Boston, MA: Harvard Business School Press, 1997) and The Innovator’s Solution (Boston, MA: Harvard Business School Press, 2003) co-authored with Michael Raynor. However, for practical application, you shouldn’t need more than is presented in the first section of this book.
- 3.
The iPhone is an example of such a breakout innovation. It was positioned in the market as a phone (or as a smartphone). But in reality, it was the first handheld computer that was simple enough—and with elegance of design integration—for the consumer market versus the business market, where products such as the RIM Blackberry already had a stronghold. The iPhone was inferior to the Blackberry in two major ways at its introduction (from the perspective of incumbent “business users”). It lacked the security that made the Blackberry a favorite of IT departments, and it was initially offered through a single carrier—AT&T—exclusively. RIM also attacked the iPhone for not having a keyboard, but consumers did not see that as a compelling disadvantage. As a superior internet appliance, it competed against non-consumption in the consumer markets, eventually disrupting the Blackberry’s business user market as well.
- 4.
While Twitter is a powerful example of a new-market disruptor, it is also a special case, since it was never purpose-built or marketed for any of these applications. Much of the general applicability of Twitter comes from its constraints (limited number of characters to type a message, transience of messages, lowest common denominator nature of text-only messages initially) together with the fact that it is a free service. Most of the things it is used for would likely not have emerged if users had to pay for them. It is also a low-end disruptor for many of the markets it disrupts, both because its price is “free,” and because of its limited function when compared with broadcast media, for example. Often, the most successful disruptors have properties of both new-market and low-end disruption, as Twitter does.
- 5.
One of the greatest battles never fought occurred during the American Civil War when, after Atlanta was defeated and burned to the ground, Sherman’s army marched on Savannah. In a matter of days, Sherman was able to blockade Savannah and put it under siege. Though the Confederate army under General William Hardee had 10,000 men stationed in good positions to fight for Savannah, after the demoralizing devastation of Atlanta, Hardee decided to decamp and fled Savannah with his troops during the night on hastily built pontoon bridges across the Savannah river. With no soldiers left to defend the city, the mayor of Savannah rode out to meet Sherman the next day to formally surrender, based on a promise that his city would not suffer the same fate as Atlanta. This is the reason why Savannah, to this day, has one of the best-preserved antebellum historic districts in the country.
- 6.
In dynamic markets, it is very difficult to keep figures accurate and up-to-the minute, so rather than rewrite the story, I have added this footnote to update the figures just before publication of this book. The value of APPL fell back by nearly 40% by mid-2013 after Steve Jobs’s death and with no significant new products being introduced, trading at a ridiculously low P/E ratio of around 8 (significantly lower than virtually any other blue chip stock), before a 7 for 1 stock split and significant dividend distribution was announced. With Apple Pay now available and Apple Watch expected in early 2015, the price for APPL has fully recovered and is again trading at near all-time highs for a total market cap of about $625 billion, nearly $200 billion more than the second largest company. At a current P/E ratio of approximately 16.5, APPL is still one of the most conservatively valued blue chip stocks. Though Apple no longer appears to be a serial disruptor, it is still a market leader with highly popular products generating extraordinary demand for new releases.
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© 2014 Paul Paetz
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Paetz, P. (2014). Disruptive Innovation. In: Disruption by Design. Apress, Berkeley, CA. https://doi.org/10.1007/978-1-4302-4633-6_1
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DOI: https://doi.org/10.1007/978-1-4302-4633-6_1
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