Innovating for growth: Now IS the time

Now might seem an odd time to talk about

growth. Some signs are promising, but corporate investments in new businesses this uncertain, there's
planning is complicated by unknowns involving very little cushion to absorb any bad-news outcomes.
economic prospects, capital markets, geopolitics, So it's reasonable to pull in one's horns as general
terrorism and pandemics. Shouldn't we be economic conditions sour.
hunkering down and just trying to survive? In a
word, these authors say "No." We believe growth doesn't need to be the kind of
gamble that most seem to assume. It is possible to bring
By Michael E. Raynor and Clayton M. Christensen a new level of predictability to innovation-driven
growth, the kind of predictability that makes it possible
Michael E. Raynor is a director with Deloitte to keep investing for growth when everybody else has
Research, the thought leadership arm of Deloitte, gone into a defensive crouch. The potential for
and a Professor of management at the Richard succeeding with any given growth opportunity can be
Ivey School of Business. Clayton M. Christensen assessed by answering three questions: is the opportunity
is the Robert and Jane disruptive? can you profit
Cizik Professor of from the opportunity? and do
Business Administration you have the capabilities to
at Harvard Business Growth is tough! pursue this opportunity? Our
School. This article is firm belief is that by
Four recently published studies converge on the estimate
based on their answering these questions,
that roughly one company in 10 succeeds at sustaining
forthcoming book, The you can predict with
growth. Chris Zook and James Allen found in their 2001
Innovator's Solution study "Profit from the Core" that only 13 per cent of their confidence which growth
(Harvard Business School sample of 1,854 companies was able to grow consistently opportunities will be
Press). over a 10-year period. That same year, Richard Foster successful and which won't.
and Sarah Kaplan published "Creative Destruction," a
study that followed 1,008 companies from 1962 to 1998. Is this opportunity
Why is it that as soon as They learned that only 160, or about 16 per cent of these disruptive?
the business horizon turns firms, were able merely to survive this time frame, and
cloudy so many companies concluded that the perennially outperforming company is Perhaps the most
get timid about investing for a chimera, something that has never existed at all. Jim powerful determinant of the
Collins also published his "Good to Great" in 2001, in
growth? We believe it's growth potential of an
which he examined a universe of 1,435 companies over
because growth has long 30 years (1965-1995). Collins found only 126, or about
innovation is whether or not
seemed a largely random nine per cent, had managed to outperform for a decade it is truly disruptive.
process. Such a belief is or more. The Corporate Strategy Board's "Stall Points" Disruptive innovations beat
perfectly understandable: findings show that five per cent of companies in the leading products and
the results of several recent Fortune 50 successfully maintained their growth, and providers at their own game,
studies suggest that no more another four per cent were able to reignite some degree but get their start by
than one company in 10 of growth after it had stalled. The studies all support our appealing to those customers
creates sustainable, assertion that a 10-per-cent probability of succeeding in a whom incumbents are happy
profitable growth (see box). quest for perpetual growth is a pretty reasonable to ignore or relieved to walk
With the outcome of estimate. away from. Disruptors then

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improve their products over time, moving upstream to
challenge established firms. Table 1 (in the Appendix)
provides a summary of some notable disruptions over
the past 100 years.
The kinds of innovations that successful companies
are good at are typically sustaining in nature; that is,
high-performing firms are
usually highly proficient at
delivering the sorts of
improvements and products The broader lesson is that to truly
that are valued by their
existing customers. profit from a disruptive
For example, when innovation, your organization
electronic cash registers has to understand how the basis
appeared in the 1970s, they
were a radical but of competition will be different
sustaining innovation that
undermined the market for from what it has been in your
electromechanical cash
registers, which was established markets
dominated by National
Cash Register. NCR
managed to survive on service revenues for over a year,
then introduced its own electronic cash register and
rapidly regained lost ground. The attempts that IBM
and Kodak made in the 1970s and 1980s to beat Xerox
in the high-speed photocopier business are another
example. They were far bigger and yet failed to out-
muscle Xerox in this established market, where the name
of the game was delivering a succession of sustaining
innovations.
Sustaining innovations are enormously important, and
they can generate real wealth. But the very fact that
incumbents are so adept at seeing and exploiting
sustaining innovations means that investors expect and
demand that they do so. As a result, share prices
typically have built into them the expectation that firms
will, at a minimum, achieve the levels of growth that
can be realized by exploiting opportunities for sustaining
innovation.
In contrast, innovation that creates the sort of growth
that delights investors is innovation that is genuinely
disruptive. Disruptive innovations typically
underperform established products along those
dimensions of performance that define competition in
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existing markets. At the same time, they gain a foothold
by overperforming along other dimensions that are
valued by market segments but unprofitable to
incumbent firms because they are small, generate thin
margins, or (as is usually the case) both. Over time,
improvements on the dimensions of performance that
are valuable to large, profitable markets enable
disruptive innovations to
capture market share from
incumbent firms. The
disruptive products
eventually provide
competitive levels of
performance on the
traditional dimensions, but
maintain the benefits that
gave them a foothold in the
first place.
Consider the attack on
the low end of department
stores' market by discount
retailers such as Wal-Mart
and K-Mart in the 1960s.
The discounters offered nationally branded hard goods
such as paint, hardware, kitchen utensils, toys and
sporting goods that were so familiar there was no need
for well-trained floor salespeople to assist customers.
The discounters' business model enabled them to make
money at gross margins of about 23 per cent, on average.
Their stocking policies and operating processes enabled
them to turn inventories more than five times annually,
so they also earned about 120 per cent annual ROCII.
The discounters did not accept lower levels of
profitability; their business model just earned acceptable
profit through a different formula.5
Over time, in product category after product category,
the discounters found ways to sell through their lower-
cost business model the products to which established
retailers were always retreating. The result, in Wal-
Mart's case, has been 25-per-cent annual growth for over
25 years. All that remains to the established retailers
are very high-margin perfumes and other quasi-luxury
goods that seem to depend on very expensive fixed-
cost infrastructure like ceramic tile floors, marble
countertops and halogen lighting.
The opportunities that hold the most promise for
Ivey Business Journal September/October 2003
 Figure 1 - The Process of Disruption

Performance
nt
ce that diffenreab
Performanse ents ca sorb
customer gm

ry
ecto
n t Traj
e
vem
Im pro
nt's ry
mbe ecto
Incu n t Traj
e
vem
Impro
or 's
upt
Disr

Time

Disruptive innovations typically take root with customers that are the least demanding with
respect to traditional dimensions of performance. As both incumbent and disruptor progress
along their respective improvement trajectories, the disruptor begins to take noticeable share
away from established competitors, who proceed to retreat upmarket to still more profitable
segments. Eventually however, there is nowhere left to run, while the disruptor has improved
sufficiently to appeal to mainstream customers.

growth for your organization, then, are those that are

truly disruptive to established firms. And to be
disruptive, you should target customers that incumbents
are willing-and even eager-to abandon, using business
models that incumbents have no interest in replicating
Where is the profit in this opportunity?
The value-chain elements that actually command
economic profit either through price premiums or
defensible cost advantages are rarely the same for
sustaining and disruptive innovations in a given market.
Whatever activities an incumbent relies upon to justify
its profitability in the sustaining arena will likely be of
little use when pursuing disruptive growth. So it is
critical for you to assess, for a given disruptive venture,
which activities generate the bulk of an innovation's
profitability.
It is facile to say that success in a market is at least
partly a function of delivering to customers more of
what they value in ways that the competition cannot
easily imitate. We can go much deeper, however, by
observing that different dimensions of performance are
valuable to customers at different stages in a product's
life cycle. We've found it helpful to think in terms of
four categories of product performance.
Initially, customers simply want something that
works; that is, those product attributes that define its
functionality are what matter most. When functionality
matters most, we say that functionality is the basis of
competition in a market at that point in time.
There is only so much functionality that customers
can use, so once functionality requirements have been
met, the basis of competition shifts to a new set of
attributes. Typically, once something works well,
customers want it to work consistently, and so the basis
of competition shifts to reliability.
Once customer needs for functionality and reliability
have been met, customer priorities tend to shift to
customizability or convenience; that is, customers want
this now high-functioning, highly reliable product to
be customized to their specific needs, or convenient and
easy to purchase and use. When the degree of
customizability offered outstrips what customers can
use, as manifested in their willingness to pay, they then
push hard for lower price.
Optimizing a product or service for different
dimensions of performance-in keeping with the basis
of competition in a market at a point in time-requires a

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firm to control different elements of the industry's value
chain. Those firms that figure out which configurations
are best suited to the basis of competition in a market
are usually the ones that dominate that market-at least
for a while-and with that dominance comes the lion's
share of an industry's profit.
The evolution of the computer industry provides a
helpful illustration. From the dawn of the commercial
computer industry in the mid-1950s until the early
1980s, the basis of competition was finding ways to
knit together the various components of a computer in
order to create faster, better, more functional devices.
To deliver against that basis of competition required a
tightly integrated value chain. IBM dominated the
industry by controlling everything from design through
many aspects of manufacturing, on to assembly, sales
and service. It captured 70 per cent of sales and 95 per
cent of profits.
By the time the personal computer had become
ubiquitous in the early 1990s, the basis of competition
at the level of designing and assembling computers was
no longer functionality. Functionality was (and
continues to be) determined by critical inputs such as
the microprocessor, memory and software, most of
which come from Intel, Hitachi and Microsoft.
However, consumers faced trade-offs in deciding
whether to spend their money for a faster processor, or
more memory, or a bigger screen, or a CD burner, and
so on. They quickly came to value very highly the
company that mastered this new complexity and was
able to meet their product customization needs. In other
words, the changing nature of the underlying
technological architecture shifted what customers were
willing to pay for; it changed the basis of competition
to customizability.
The computer-maker that capitalized on this shift most
effectively is Dell Computer. They have a very different
value chain configuration than did IBM when Big Blue
dominated mainframes, but the complexities they have
mastered are no less demanding. By tightly integrating
their supply chain with their customer relationship
management processes, and tying both into their state-
of-the-art assembly operations, Dell has been able to
provide customers precisely what they want, when and
how they want it.
The broader lesson is that to truly profit from a
disruptive innovation, your organization has to

Figure 2 - The relationship between the basis of competition and optimal organizational scope

Dimensions of Performance Optimal Organizational Scope Across

an Industies Value Chain
ints

...at a relatively low price... Element 1 Element 2 Element 3 Element 4

Price
stra
Con

...flexibly and easily in a Element 1 Element 2 Element 3 Element 4

decentralized setting...
Convenience

...in a consistent and Element 1 Element 2 Element 3 Element 4

Reliability robust manner...
es
tur
Fea

...the product does the Element 1 Element 2 Element 3 Element 4

Functionality job...

Optimizing performance against different bases of competition requires different organizational

configurations. Shown here for illustrative purposes only is a generic industry value chain
consisting of four elements. To deliver improvements in functionality, a firm must control
elements 1-3; reliability demands control of elements 2-4, and so on. This implies that as the basis
of competition in an industry shifts, the dominant firms in each era will have very different value
chain configurations. Staying successful therefore requires seeing and even anticipating these
shifts, and reconfiguring one's value chain accordingly.

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understand how the basis of competition will be different
from what it has been in your established markets. Only
by seeing the connection between the new basis of
competition that drives the success of a disruptive
innovation and activities in the value chain can you hope
to deliver against that dimension of performance more
effectively than competitors. By staking out the most
valuable territory in the
innovation's value chain,
you can position your
organization to capture the The aphorism we have found that
bulk of the profits.
is most appropriate to the
Do I have the capabilities challenges of starting new growth
to exploit this
opportunity? ventures is to be "patient for
To truly exploit the growth, but impatient for profit."
potential of an innovation,
your organization needs the
right capabilities. We
suggest decomposing the notion of organizational
capabilities (or "competencies") into three elements:
resources, processes and values. By understanding what
each of these is and the relationships between them,
you can create an organization that is able to exploit
disruptive innovations.
Resources
Resources are usually people or things, including such
assets as employees, equipment, technology, product
designs, brands, information and cash. Most resources
are visible and often are measurable, so managers can
readily assess their value. They tend to be quite portable
as well: it is relatively easy to transport them across the
boundaries of organizations.
Of the many and often idiosyncratic resources that
any given business needs, we've found that the one
resource that most consistently trips up businesses
focused on disruption is management. Senior executives
too often select the wrong people to run organizational
units focused on disruptive innovations. We suspect
the mistakes happen when firms choose managers based
upon an uninterrupted string of past successes, hoping
that more successes are in store.
In our view, there is a better way that draws on the
-5-
work of Professor Morgan McCall (see especially his
book High Flyers). McCall asserts that the management
skills and intuition that people apply are set by their
experiences in previous assignments in their careers.
Consequently, managers who have worked their way
up the ladder of a stable business unit would likely be
weak leading a start-up because the demands are so
different. Note that what
matters is having grappled
with similar problems in the
past and learned from the
experience, not necessarily
having succeeded.
This might seem
obvious, yet when a slowly
growing firm's leaders
decide they need to launch
a new growth business to
restore their company's
vitality, they typically tap
their own most successful executives-people whose
most salient experiences are likely to have little
relevance to the challenges they will face.
Consider the experience of Pandesic, the high-profile
joint venture between Intel and SAP that was launched
in 1997 to create a new market disruption selling
enterprise resource planning (ERP) software to small
businesses. The explicit plan was to develop and launch
a disruptive innovation in the ERP market. To lead this
new venture, Intel and SAP hand-picked some of their
most successful, tried-and-true executives.
So how did these managers go about seeking
Pandesic's fortune? The firm ramped to 100 employees
in eight months, and established offices in Europe and
Asia. Within a year it announced 40 strategic
partnerships and inked agreements with major IT
consulting firms that had so capably sold and
implemented SAP's large-company systems. The
product, initially intended to be simple ERP software
delivered to small businesses via the Internet, evolved
into a completely automated end-to-end e-commerce
solution.
Pandesic was a spectacular failure. It sold very few
systems, and shut its doors in February 2001 after having
spent more than $100 million. The problem here was
Ivey Business Journal September/October 2003
not managerial incompetence; it was managers with the
wrong competence. As a new venture, Pandesic faced
uncertainty regarding virtually every aspect of its
product design and business model, and needed
leadership adept at proceeding by trial and error.
McCall's theory could have predicted this failure. For
despite the extraordinary track records of Pandesic's
executives in managing the global operations of very
successful companies, none of them had faced any of
the challenges associated with managing a disruptive
innovation.
Processes
Organizations create value as employees transform
inputs of resources into products of greater worth. The
patterns of interaction, coordination, communication and
decision-making through which they accomplish these
transformations are processes. Processes include the
ways that products are developed and made, and the
methods by which procurement, market research,
budgeting, employee development and compensation,
and resource allocation are accomplished.
When creating a new unit to exploit a particular
innovation, the most crucial processes to examine
usually aren't the obvious value-adding processes
involved in logistics, development, manufacturing and
customer service. Rather, they are the enabling or
background processes that support investment decisions.
These include how market research is habitually done,
how such analysis is translated into financial projections,
how plans and budgets are negotiated, how those
numbers are delivered, and so on. It is by not tuning
these processes to the needs of new growth businesses
that many managers unwittingly sabotage their own
success.
The case of Prodigy Communications illustrates this
principle. Launched as a joint venture between Sears
and IBM in the early 1990s, Prodigy did not lack the
necessary resources: over $1 billion was invested in what
was at the time a very uncertain, but certainly potentially
disruptive, innovation.
The original business plan envisioned that consumers
would use on-line services primarily to access
information and make on-line purchases, and Prodigy's
computer and communications infrastructure were
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designed for these purposes. In 1992, management
realized that Prodigy's two million subscribers were
spending more time sending e-mail than downloading
information or making purchases on-line. Rather than
seeing this as signal to change strategy, Prodigy's
management sought to discourage the non-conforming
behaviour, and charged extra fees to subscribers who
sent more than 30 e-mail messages per month.
In contrast, America Online (AOL) entered the market
later, after it was clear that e-mail was a primary reason
for subscribing to an on-line service. With a technology
infrastructure tailored to messaging and its "You've got
mail" signature, AOL became much more successful
than Prodigy.
We would interpret this as a failure of the strategy-
making process: management's job was defined as
implementing the original strategy, and there were no
mechanisms to capture and act upon feedback from the
market. In our view, just as with selecting managers,
selecting processes should not be a function of their past
results, but the problems they were designed to solve.
Values
The third class of factors that affects what an
organization can or cannot accomplish is its values. By
corporate values we mean the standards by which
employees judge whether a customer's order is attractive
or unattractive, whether a customer is more important
or less important, whether an idea for a new product is
attractive or marginal, and so on.5
When it comes to the values that impinge upon a new
growth opportunity, among the most important are the
expectations management has for the performance of
the new business. It is not uncommon for new ventures
to be measured by sales growth in the early going; after
all, a start-up can hardly be expected to be profitable,
can it? Profits will come later, we tell ourselves.
In our view, this is most often precisely the wrong
way to measure success or set expectations. New
ventures that are targeted at exploiting disruptive
opportunities, almost by definition, are grappling with
a host of unknowns. A new venture that is required to
generate a profit quickly is forced to pay very close
attention to signals from the marketplace about its
Ivey Business Journal September/October 2003
answers to these questions. Somewhat perversely, profitable, consistent growth a defining characteristic
driving hard for sales growth in spite of mounting losses of your organization.
is tantamount to ignoring market feedback telling you
that the new venture's strategy isn't working.

An excellent example of this phenomenon at work is

how Honda ended up dominating the American
motorcycle market. Initially hoping to introduce "low-
cost muscle bikes" to U.S. motorcycle enthusiasts,
Honda stumbled badly, unable to marshal the resources
necessary to overcome the technological hurdles
associated with the long-haul riding that characterized
the most profitable customers of Harley-Davidson and
other incumbents.

Strapped for cash, Honda had to concentrate on the

one product it had that was selling: its small, 50cc
Supercub. Initially dubious of the merits of selling such
low-priced, low-margin vehicles through, of all places,
sporting goods stores (since motorcycle dealerships had
no interest in what they considered to be toys), Honda's
management was forced to respond to the market rather
than doggedly pursue their original strategy. What
emerged was a classic disruption: beginning with
unattractive market segments that had never before
purchased motorcycles of any kind, Honda was able,
eventually, to march upmarket and ultimately dominate
the motorcycle industry.

The aphorism we have found that is most appropriate

to the challenges of starting new growth ventures is to
be "patient for growth, but impatient for profit." That
is, new businesses must follow the money, since that is
likeliest to keep them focused on-or, as in Honda's case,
allow them to find-a truly disruptive opportunity. A
new venture that can generate profit is likeliest to involve
connecting with genuine customer needs, and so likeliest
to be able to follow that disruptive trajectory and become
a true growth business. In an almost Zen-like irony, the
best way to find growth is not to seek it.

Successful growth has typically been seen as a gift

from the gods rather than as the fruits of reasoned,
careful and repeatable analysis. Therefore, when the
outlook is uncertain, there is an understandable but
lamentable tendency to restrict investments in growth,
even though successful growth would be the best way
to effect the desired turnaround. We believe that by
answering these three critical questions you can make

-7- Ivey Business Journal September/October 2003

 Appendix

Table 1
The following table briefly summarizes our understanding of the disruptive roots of the success of several
companies. Because of space limitations, much important detail has been omitted. We ask our readers only
to regard this information as suggestive, rather than being definitive.

Company or
Description
Product

Technology

Bell Telephone Bell’s original telephone could only carry a signal for three miles, and therefore was rejected by Western Union,
whose business was long-distance telegraphy, because Western Union couldn’t use it. Bell therefore started a
new-market disruption, offering local communication. As the technology improved, it pulled customers out of
telegraphy’s long-distance value network into telephony.
Ford Henry Ford’s Model T was so inexpensive that he enabled a much larger population of people who historically
could not afford cars, now to own one.
Canon Until the early 1980s when we needed photocopiers, we had to take our originals to the corporate photocopy
photocopiers centre, where a technician ran the job for us. He had to be a technician, because the high-speed Xerox machine
in there was very complicated and needed servicing frequently. When Canon and Ricoh introduced their
countertop photocopiers, they were slow, produced poor-resolution copies, and didn’t enlarge or reduce or
collate. But they were so inexpensive and simple to use that we could afford to put one right around the corner
from our office. At the beginning we still took our high-volume jobs to the copy centre. But little by little,
Canon improved its machines to the point that today, immediate, convenient access to high-quality, full-
featured copying is almost a constitutional right in most workplaces.
Flat panel We normally think of disruptive technologies as being inexpensive, and many people are puzzled at how we
displays could call flat panel displays disruptive. Haven’t they come from the high end? Actually, no. Flat panel LCD
(Sharp et.al.) displays took root in digital watches; and then moved to calculators, notebook computers and small portable
televisions. These were applications that historically had no electronic displays at all, and LCD displays were
much cheaper than alternative means of bringing imaging to those applications. Flat screens have now begun
invading the mainstream market of computer monitors and in-home television screens, disrupting the cathode
ray tube. They are able to sustain substantial premium prices because of their 2-D character.
Embraer & The regional passenger jet business is booming, as their capacity over the past 15 years has stretched from 30 to
Canadair 50, 70 and now 106. As Boeing and Airbus struggle to make bigger, faster jets for transcontinental and
regional jets transoceanic travel, their growth has stagnated; the industry has consolidated (Lockheed and McDonnell
Douglas have been folded in); and the growth is at the bottom of the market.
Cisco Cisco’s router uses packet-switching technology to direct the flow of information over the telecommunications
system, compared to the circuit-switching technology of the established industry leaders such as Lucent, Siemens
and Nortel. The technology divides information into virtual “envelopes” called packets, and sends them out over
the Internet. Each packet might take a different route to the addressed destination; and when they arrive, the
packets are put in the right order and “opened” for the recipient to see. Because this process entailed a few
seconds’ latency delay, packet switching could not be used for voice telecommunications. But it was good
enough to enable a new market to emerge: data networks. The technology has improved to the point that,
today, the latency delay of a packet-switched voice call is almost imperceptibly slower than that of a circuit-
switched call, enabling VOIP, or voice-over-Internet-protocol telephony.

Financial Services

Merrill Lynch Charles Merrill’s mantra in 1912 was to “Bring Wall Street to Main Street.” By employing salaried rather than
commissioned brokers, he made it inexpensive enough to trade stocks that middle-income Americans could
become equity investors. Merrill Lynch moved upmarket over the next 90 years towards higher net-worth
investors. Most of the brokerage firms that held seats on the New York Stock Exchange in the 1950s and ’60s
have been merged out of existence, because Merrill Lynch disrupted them.
Bloomberg LP Bloomberg began by providing basic financial data to investment analysts and brokers. It gradually has

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Company or
Description
Product
improved its data offerings and analysis, and subsequently moved into the financial news business. It has
Bloomberg LP substantially disrupted Dow Jones and Reuters as a result. More recently, it has created its own ECN to disrupt
cont’d stock exchanges. Issuers of government securities can auction their initial offerings over the Bloomberg system,
disrupting investment banks.
Fidelity Created “self-service” personal financial management through its easy-to-buy families of mutual funds, 401k
management accounts, insurance products, etc. Fidelity was founded a few years after WWII; but began its disruptive
movements in the 1970s, as best we can tell.
Credit scoring A formulaic method of determining creditworthiness, substituting for the subjective judgments of bank loan
officers. Developed by a Minneapolis firm, Fair Isaac. Used initially to extend Sears and Penny’s in-store credit
cards. As the technology improved, it was used for general credit cards, and then auto, mortgage and now
small-business loans.

Education

Community In some states, up to 80% of the graduates of reputable four-year state universities took some or all of their
colleges required general education courses at much less expensive community colleges, and then transferred those
credits to the university—which (unconsciously) is becoming a provider of upper-division courses. Some
community colleges have begun offering four-year degrees. Their enrolment is booming, often with non-
traditional students who otherwise would not have taken these courses.
Concord School Founded by Kaplan, a unit of the Washington Post Company, this on-line law school has attracted a host of
of Law (primarily) non-traditional students. The school’s accreditation allows its graduates to take the California Bar
exam, and its graduates’ success rate is comparable to those of many other law schools. Many of its students
don’t enroll to become lawyers, however. They want to understand law to help them succeed in other careers.
University of A unit of Apollo, the University of Phoenix is disrupting four-year colleges and certain professional graduate
Phoenix programs. It began by providing employee training courses for businesses, often de facto, but sometimes by
formal contract. Its programs have expanded into a variety of open-enrolment, degree-granting programs.
Today it is one of the largest educational institutions in the United States, and is one of the leading providers of
on-line education.

Healthcare

Endoscopic Minimally invasive surgery was actively disregarded by leading surgeons because the technique could only
surgery address the simplest procedures. But it has improved to the point that even certain relatively complicated heart
procedures are done through a small port. The disruptive impact has primarily been on equipment makers and
hospitals.
Ultrasound Ultrasound technology is disruptive, relative to X-ray imaging. Hewlett-Packard, Accuson and ATL created a
multibillion-dollar industry by imaging soft tissues, which traditional X-ray technology could not capture. The
leading X-ray equipment makers, including General Electric, Siemens and Philips, became leaders in the two
major radical sustaining technology revolutions in imaging: CT scanning and magnetic resonance imaging (MRI).
Because ultrasound was a new market disruption, none of the X-ray companies participated in ultrasound until
very recently, when they acquired major ultrasound equipment companies.
Portable Disrupted makers of large blood glucose testing machines in hospital laboratories, enabling patients with
diabetes blood diabetes to monitor their own glucose levels.
glucose meters
Sonosite This firm makes a hand-held ultrasound device that enables health-care professionals who historically needed the
assistance of highly trained technicians with expensive equipment, now to look inside the bodies of patients in
their care, and thereby to provide more accurate and timely diagnoses. The company floundered for a time
attempting to implement its product as a sustaining innovation. But as of the time this book was being written,
it seemed to have caught its disruptive stride in an impressive way.

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