CSTECHNO-Module 4

Manuel S.
Enverga University Foundation 1

Lucena City, Quezon
College of Computing and Multimedia Studies
COURSE TITLE: CSTECHNO - Technopreneurship

M1_Lesson 4: Disruptive Innovation; Industry Value Chain & Value Network Analysis
Duration: 45 minutes
Session Type: Synchronous
Time for Asynchronous: February 11, 12:00-03:00 & 05:00-08:00
Via: NeoLMS
LESSON PROPER
Disruptive Innovation
Clayton Christensen introduced the concept of “disruptive technology” (1995), later reframing it to be
“disruptive innovation” (1997). He reframed it as he recognized that few technologies are disruptive or
sustaining in character. It is the business model that the technology enables that creates the disruptive
impact.
Christensen's evolution from a technological focus to a business modelling focus is central to understanding
the evolution of business at the market or industry level.
“Disruptive innovations” are acts of technologies that disrupt markets. They create new markets or change
the value network in an existing market. The term “value network” first used by Clayton Christensen. It is
a similar concept to “industry value chain” but usually more focused on the whole system rather than for a
specific product/service type.
“Disruptive innovations” disrupt markets. “Disruption” describes a process whereby a smaller company
with fewer resources can successfully challenge established incumbent businesses. Specifically, as
incumbents focus on improving their products and services for their most demanding (and usually most
profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants
that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by
delivering more suitable functionality frequently at a lower price. Incumbents, chasing higher profitability
in more demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering
the performance that incumbents’ mainstream customers require, while preserving the advantages that
Submitted By: Reviewed By: Approved By:
Darwin Kim Q. Bulawan Roselyn A. Maano Rodrigo C. Belleza, Jr.

Instructor Department Chair Dean, CCMS
Manuel S. Enverga University Foundation 2
Lucena City, Quezon
drove their early success. When mainstream customers start adopting the entrants’ offerings in volume,
disruption has occurred.
6 Typical Results of Market Disruption
• Change the value network in the market (how value is created and captured)
• Change the product categories in the market
• Change the type of companies involved in the market
• Change the actual companies in the market
• Change the business models being used in the market
• Change the power relationships in the market
“Innovator’s Dilemma”. Christensen identified the “innovator’s dilemma”. Effective established companies
study the needs of their customers. The companies innovate to meet these customer needs. The companies
sell new products/versions to their customers. The most important existing customers are the high-end ones
who spend the most so the focus is on them. The dilemma is that the more a company focuses on the needs
of their high-end customers, the more likely it is that they will miss opportunities in emerging technologies.
Examples: Kodak and digital camera, Microsoft and their Operating System, and Blockbuster and online
movie streaming.
According to Christensen, innovations can be either disruptive or sustaining. Disruptive innovations

disrupt markets (i.e., they create new markets or change the value network in an existing market) while
sustaining innovations sustain markets meaning there is no change to the value network in the market.
Two Types of Disruptive Innovation
Christensen distinguishes two types of disruptive innovations between “low end disruption” where there
are customers who do not need the full functionality or performance of products already on the market so
cheaper alternatives can take over, and “new market disruption” there are customers who have needs that
were not being addressed by existing products.

Lucena City, Quezon
Figure 19. Disruptive Innovation Model
Value Chains
To understand “value network”, we must study “value chain”. Value chain was introduced first by Michael
Porter (Father of Company Strategy) in 1985 in his best-selling book: “Competitive advantage: Creating
and sustaining superior performance”. Typically, it describes how value is added within different business
units of a company and how products pass through stages and value is added at each stage. It is deemed to
be more suited to manufacturing physical goods than IT and has been extended to show how value flows
through an industry.
Industry value chains. An industry value chain is how value is created and passed on between participants
in an industry. Diagrams can show how value flows through the industry. Value may be from licensing a
technology, selling a product, providing a service, etc.

Lucena City, Quezon
Figure 20. Microprocessors Industry Value Chain (Example)
Source: http://iveybusinessreview.ca/cms/1070/intel-outside-breaking-into-mobile-3/2012
Use of Value Chains/Networks. Analyzing value chains/systems/networks is useful for: Understanding an

industry (including relationships between companies); Understanding your company’s position within the
market; Deciding where your company wants to be within that market; and looking for opportunities for
disruptive innovations
Summary
• Established companies doing the right thing (i.e., listening to their customers) may not see disruptive
innovations coming
• Established companies can learn to notice potentially disruptive innovations at an early stage and act
• Understanding value chains/networks is useful:
o If you are an established company:
▪ In understanding emerging threats
▪ In designing a strategy to disrupt a market
o If you are a startup:
▪ In disrupting a market
o If you are in corporate IT: In understanding how products and solutions may change

Lucena City, Quezon
REFERENCES
Christensen, C. M. (1997). The innovator's dilemma. Harvard Business Press

Christensen, C. M.; Raynor, M. E. & McDonald, R., (2015). “What Is Disruptive Innovation?”, Harvard
Business Review, December, pp. 44-53.
Christensen, C.M. and Raynor, M.E. (2003). The Innovator's Solution: Creating and Sustaining Successful
Growth. Boston: Harvard Business School Press. pp. 48
Gasiorek, M. SG 2016: Clayton Christensen, Godfather of Disruptive Innovation | Startup Grind .


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Manuel S.

Enverga University Foundation 1

College of Computing and Multimedia Studies

COURSE TITLE: CSTECHNO - Technopreneurship

Submitted By: Reviewed By: Approved By:

Darwin Kim Q. Bulawan Roselyn A. Maano Rodrigo C. Belleza, Jr.

College of Computing and Multimedia Studies

6 Typical Results of Market Disruption

According to Christensen, innovations can be either disruptive or sustaining. Disruptive innovations

Two Types of Disruptive Innovation

Submitted By: Reviewed By: Approved By:

Darwin Kim Q. Bulawan Roselyn A. Maano Rodrigo C. Belleza, Jr.

College of Computing and Multimedia Studies

Figure 19. Disruptive Innovation Model

Submitted By: Reviewed By: Approved By:

Darwin Kim Q. Bulawan Roselyn A. Maano Rodrigo C. Belleza, Jr.

College of Computing and Multimedia Studies

Figure 20. Microprocessors Industry Value Chain (Example)

Use of Value Chains/Networks. Analyzing value chains/systems/networks is useful for: Understanding an

Submitted By: Reviewed By: Approved By:

Darwin Kim Q. Bulawan Roselyn A. Maano Rodrigo C. Belleza, Jr.

College of Computing and Multimedia Studies

Christensen, C. M. (1997). The innovator's dilemma. Harvard Business Press

Submitted By: Reviewed By: Approved By:

Darwin Kim Q. Bulawan Roselyn A. Maano Rodrigo C. Belleza, Jr.

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