The Disruptive Potential of Game Technologies

Technology innovation has often been characterized as either radical or incremental. Incremental innovation refers to changes that "build on and reinforce the applicability of existing technology" (1). These changes strengthen the value of existing technology and the products that use them by making the products more reliable, simpler to use, lower in cost, or accessible to a larger customer base. Most established companies are involved in researching, creating and marketing incremental innovations to their products. Radical innovation, in contrast, refers to changes that "destroy the value of an existing knowledge base" (2). These changes negate the value of existing technology by providing an alternative that is significantly different and to which older technologies cannot be adapted. In his 1992 Harvard University dissertion, Clayton Christensen introduced a variation to radical and incremental innovation (3). He explored sustaining and disruptive innovations. Sustaining innovations are similar to Dewar and Dutton's definition of incremental innovation, above; they improve upon established products and technologies by adding to them. However, disruptive innovations are different from radical innovations. They have the value-destroying characteristics of radical innovation, but they work much more slowly and methodically through an industry. At their introduction, disruptive innovations actually provide a worse solution than the existing technologies. Their power lies in their ability to meet the needs of a small portion of the market that is unaddressed or undervalued by the current leading products and technologies. A disruptive technology often provides a capability that is valuable to a niche of customers who are seen as insignificant by the industry leaders. This lack of significance usually comes from their small size or from the small profit margins they generate (4). As a result, disruptive innovations do not destroy the value of established technology quickly. Instead, they erode its value gradually by systematically stealing away customers from the bottom of the value chain. As these disruptive innovations improve their services to customers, they move up the value chain and become a real threat to existing market leaders. Small volume and low margin customers are the least valued by large market leaders. For this reason, their needs are not the focus of major companies in a field, leaving them to do the best they can with the products available. These customers represent an attractive opportunity to new companies that strive to directly address their needs and accept the lower profits that they generate. In some cases, the solutions that are created for these customers have within them the seeds for tremendous improvements to the products and services that are valuable across the industry. When this occurs, the upstart company has the opportunity to build a low-margin business into an industry-dominating position. These innovators can displace industry stalwarts to become the new leaders based on technology that was originally "not good enough" for the main body of customers. Christensen and other authors provide examples of this happening in computer disk drives, hydraulic machinery, steel processing, and aluminum production (4,5). Figure 1 illustrates how this happens. Customers have a wide range of needs for a family of products. These needs vary from the level of performance required at the low end of the market to the level required by the most demanding customers at the high end. Initially, there are no products that meet these higher needs. However, if the demand remains unmet, entrepreneurs will create products that begin to address them. If successful, these new innovations grow in complexity and capability in an attempt to capture customers that are higher up on the value chain. [FIGURE 1 OMITTED] The line in Figure 1 labeled "Progress due to sustaining technologies" illustrates the creation of the first industry leaders in a field. …