Cloud Computing: A Sustaining or Disruptive Innovation?

Is cloud computing a disruptive innovation, as defined by Clayton Christensen? CIO.com's Bernard Golden explores whether internal data centers will go the way of companies that are innovated out of business.

By Bernard Golden
Wed, March 16, 2011

CIO — If you've read this blog over the past couple of years, it should be no surprise that I am a huge advocate of the theories of Clayton Christensen, author of "The Innovator's Dilemma." Christensen and his book were brought to mind this week by the cover story in Forbes about his severe health problems, his experience with the U..S healthcare system, and his prescriptions for how to fix it.

Slideshow: What is Cloud Computing?

Christensen posits two type of innovation: sustaining and disruptive. Sustaining innovation is that which extends existing technologies, improving them incrementally. As an example, at one point auto manufacturing moved from body-on-frame to unibody construction. Christensen points out that it is very difficult for a new market entrant to gain traction with an incremental innovation, since the market incumbents can easily incorporate the new technology while maintaining their other advantages like brand awareness, cost efficiency, and so on.

By contrast, disruptive innovation represents entirely new technology solutions that bring a new twist to an existing market — typically at a far lower price point. Christensen offers numerous examples of disruptive innovation; for instance, transistor radios disrupted the existing market for vacuum tube-based radios. Christensen notes that typically, disruptive innovations come to market and are considered inadequate substitutes for existing solutions by the largest users of those solutions. Tube radio manufacturers evaluated transistor capability and found that transistors could not run table radios with large speakers that required significant power to generate sound volume.

Consequently, disruptive innovations must seek out new users who are, in Christensen's term, overserved by existing solutions and are willing to embrace less capable, cheaper offerings. Transistor radios were first embraced by teenagers who wanted to listen to rock and roll with their friends and wouldn't be caught dead listening to it in the company of their parents, at home, in front of the vacuum tube-powered table radio. They didn't mind that their cheap transistor radios sounded tinny. They were affordable and allowed teenagers to listen to their music in the company of friends.

Sending Old Solutions Packing

The denouement to this dynamic is that disruptive innovations gradually improve over time until they become functionally equivalent to the incumbent technology, at which point they seize the market and consign the previous champion to the dustbin of history. One of the most poignant comments about this process I've ever read was the statement by a former Silicon Graphics executive lamenting how SGI was put out of business by the shift to x86-based graphics systems — he said that everyone at the company had read The Innovator's Dilemma, but, even knowing the likely fate of their company if they didn't dramatically change direction, were unable to do so, and inexorably found themselves in bankruptcy.

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