Disruptive Technology

Cannibalism (the business kind)

Business cannibalism happens when a firm launches a new product or service that takes sales away from one of its own existing offerings. Even though that sounds harmful, it can be strategically smart when the new product prevents a rival from capturing the market first. Managers often need to decide whether hurting an older product is better than losing the entire category to someone else.

Sources: Professor study guide; Investopedia - Cannibalization

Cash Cow

A cash cow is an established product or business unit that generates steady profits and requires relatively little new investment to keep operating. Firms often become overly attached to cash cows because they finance the rest of the company, but that dependence can make managers resist disruptive alternatives that threaten current profits.

Sources: Professor study guide; Investopedia - Cash Cow

Creosote Bush

In this chapter, a creosote bush is a metaphor for a dominant product or business that grows so aggressively it blocks new ideas from getting the space and resources they need. The danger is that a firm may protect the incumbent so strongly that it unintentionally prevents the next generation of innovation from developing inside the company.

Source: Professor study guide; Textbook: 4.2 Recognizing and Responding to Disruptive Innovation

Disruptive Technology / Disruptive Innovation

Disruptive innovation is a change that begins by serving overlooked, lower-end, or new-market customers with a simpler or cheaper offering and then improves enough to challenge mainstream incumbents. The threat is not always that the new product is better at first. It is that managers dismiss it too early because it looks less profitable, less polished, or less attractive to their current customers.

Sources: Professor study guide; Harvard Business Review - What Is Disruptive Innovation?

Fixed Costs

Fixed costs are costs that a firm must pay regardless of how many units it sells in the short run, such as product development, studios, salaries, servers already purchased, or factory rent. In digital markets, fixed costs can be very high at the beginning, but once the product is created they can often be spread across a huge number of users.

Sources: Professor study guide; Investopedia - Fixed Cost

Key Performance Indicators (KPIs)

KPIs are the most important measurable signals a firm uses to judge whether it is meeting strategic goals. The problem in disruptive settings is that firms often choose KPIs tied to the current business, which makes promising new technologies look weak simply because they do not perform well on old metrics.

Sources: Professor study guide; IBM - Key performance indicator (KPI)

Long Tail

The long tail describes a market pattern where a very large number of niche products collectively generate meaningful demand, especially when digital distribution makes it cheap to store, search, and sell them. This matters because digital businesses can profit not only from blockbuster hits, but also from serving many smaller niches that physical shelf space once made impractical.

Sources: Professor study guide; Investopedia - Long Tail

Marginal Costs

Marginal cost is the additional cost of producing one more unit of a good or service. For digital goods, the marginal cost of an extra copy can approach zero because duplication and delivery are cheap, which changes pricing, competition, and the economics of scale compared with physical products.

Sources: Professor study guide; Investopedia - Marginal Cost of Production

Atoms to Bits from slides

The shift from atoms to bits means moving from physical goods to digital goods. Once a product becomes digital, storage, duplication, distribution, and search often become cheaper and faster, which can shrink marginal cost, expand the long tail, and make disruption more likely in industries that once depended on physical constraints.

Source: Class slides; Textbook: 4.4 Netflix versus the Competition: Big Players, Bold Plans, but It’s Getting Crowded

Sustaining Innovationfrom slides

Sustaining innovation refers to improvements that make an existing product better for a company’s current customers, usually along performance dimensions the market already values. These innovations help firms compete in established markets, but they can also make managers less likely to notice disruptive alternatives that initially seem weaker or less profitable.

Sources: Class slides: 06 - Disruptive Technologies

Intrapreneurship from slides

Intrapreneurship is entrepreneurial behavior inside an established company, where employees develop new products, services, or business models from within the firm. It matters in this chapter because incumbents need internal champions who are willing to build future businesses even when those new ideas compete with the company’s current revenue sources.

Sources: Class slides; Investopedia - Intrapreneurship