Week #7(’11.10.19)

When are technologies disruptive?
A demand-based view of the emergence of competition
Ron Adner
Strategic Management Journal Vol.23, 667-688 (2002)

Summary

This article develops a demand-based view of technology competition that resolves these open questions surrounding disruptive technologies by formally modeling the role of the demand environment in shaping competitive dynamics. Ron Adner introduced preference overlap and preference symmetry two elements of the relationship between market segment preferences to characterize the structure of demand. And He presents a model that examines how technology improvements can blur the boundaries that divide market segment and lead to different competitive environments. The model examines the nature of three distinct competitive regimes that arise under varying configurations of demand: competitive isolation, competitive convergence,competitivedisruption.The results of the analysis highlight the relationships among consumer preferences and consumers’ willingness to pay for performance improvements as key factors that give rise to technology disruptions. And the focus of the analysis is the relationship between market segment’s value trajectories and on the emergence of competitive isolation, convergence and disruption. According to modeling, we can categorize demand structure by preference overlap and preference symmetry and find demand structure focuses on the differential market incentives that firms face as their technologies advance. In the face of continues performance improvements, this dynamic may lead to a blurring of the market’s underlying heterogeneity which, in turn, influences the emergence of different competitive regimes. That is, consumers with sufficiently satisfied functional requirements are more concerned with differences in absolute price than with differences in price/performance points. Finally this paper proposes that while disruption is enabled by sufficient performance, it is enacted by price.

Contributions and Critique

This article expands some discussions about disruptive technologies from Christensen. Building on Christensen, he developed a formal modeling approach to characterize the nature and evolution of demand in various market segments and identified which kind of market structures are susceptible to disruption. And He tried to refine the distinction and recognition of disruptive threats. Additionally, the author makes great role of a demand-based view of completion and it presents a complementary approach to examine many of the dynamics that are interest to the strategy field.

One question that has been left unanswered in this: Does the disruptive technology occupy core market with technologically inferior performance or sufficiently lower unit price? Is a customer-oriented firm less apt to survive a technological change? Can we predict the disruptive technology ex ante ?