So what I'm trying to explain with this new technology, the transistor technology, and the fact that radio companies that were very embedded or committed to the vacuum tube approach, which worked very well for them, is that they ignored the transistor technology. Not because they were ignorant, which we said in our previous module, but because they were focused on making radios better for their most profitable customers. But they were making sustaining innovations. They were focused on families, and the piece of furniture type of radio that had become ingrained, or just a very integral part of the society that involved, or that enjoyed listening to music or other performances of dramatic or other entertainment based medium at home, or even just the news. And so their efforts would probably be called sustaining. They weren't bad improvements to the product, they just weren't what we would call disruptive. So the companies that made radios are brands like RCA, that really no longer exist today. And the brands that developed the hearing aid were companies like Sony out of Japan that still exist today, but are having their own struggles in 2015, but in the 1950s were really just getting started. These are companies that had 0% of the radio market, and so for them hearing aids was a whole new sector that they had all to themselves. And again hearing aid customers really were not being served at all by radio producers or vacuum tube based companies. So the next product that is produced better sound quality than hearing aides that emerged from the transistor technology were what we call today transistor radios or pocket radios. And now we're getting into the 1950's and 60's. These were the first portable, or smaller sized radios. It went from large, even table top sized furniture like radios, to hand held or even portable or mobile radios. These were radios that could be powered by a battery, that again, was small enough to be carried. The quality may not have been nearly as good as a desktop, or even a full fledged furniture type radio. But they brought in some very interesting new consumers, or non consumers of the radio technology that existed at the time. Think about that for a minute. Who was excluded from enjoying the benefits of radio and the related entertainment, and other information sharing that was allowed through that technology? If you think about it for a minute, there were a lot of people, but I'm going to identify just a couple. What about people who live in areas where they have very small living space? Think of a place like Japan. If you're from Japan or familiar with Japan, and that's just one country, I could mention a lot of other countries. There isn't always the space to fit an additional piece of furniture in a living space that's very small such as what you would find in Japan in the 1950s or 1960s. Think about another category that I think is really important if you want to understand disruption and be successful in the marketplace. Think about teenagers, adolescents, those who are younger. In the 1950s or 60s, if they wanted to listen to music that they enjoyed, they probably, or in the early 1950s, they probably had to do so in public if you will, in the living room, family room with their family. And they probably had to listen to music that their parents enjoyed. It's not a coincidence that rock and roll music, its rise coincides with the rise of mobile sound and audio technology such as the pocket or transistor radio. Young people could go into the privacy of their own room and enjoy music that they thought was entertaining or enjoyable. So, transistor radio was better quality sound reproduction than a hearing aid, but it still wasn't good enough to be used in something as important as the rapidly emerging television set. But as time went on, TVs became smaller and smaller in terms of the footprint, they became less of a very large piece of furniture. And they also began to invade smaller spaces in countries where people live in smaller apartments. And they became small enough that is was possible for someone to have one in multiple rooms in a living space. And so we have here, or Dr. Christensen on this slide has portable TV's written. Portable doesn't necessarily mean handheld that you take out to the beach, it means movable within a house. It's not a wide, large, piece of furniture. And so Sony is a major disruptor in this case, because they really adopted transistor technology, and were able to come out with some products that were not good enough to be used at first in some of the existing product segments. But were very quickly adopted by non-consumers, consumers who were underserved by traditional segments of the market. And by the time, let's say this is the 1970s or 1980s, that this transistor technology fully emerged, and became good enough for what we would expect in a high quality TV or radio. Companies like RCA, were really, it was too late for them. And that's why the company no longer exists, it was disrupted, not because the manager or executives were dumb or unintelligent, but simply because they were embedded in a process of pursuing the most profitable customers, and not focusing on non-consumers, or very unprofitable costumers such as teenagers. And so that is really the story of how companies are disrupted. One thing that I want to bring up as a final point from this case, is that not only is it the case that companies like RCA, which were traditional manufacturers of radio and TVs, not only were they disrupted, but entire distribution chains, or supply chains are created. As radios and TVs and other devices were developed that were smaller, more portable, they became easier and more simple to use, which also brought in non-consumers by the way. But the way that they were purchased also changed. They began to be sold in the increasingly popular self service store, where there isn't necessarily a salesperson there to explain to you and spend a lot of time with you understanding the product. It became something that you could buy in a different type of store like a department store, or a specialty retail store focusing on electronics or even a general retail store like a Walmart. And so the entire chain was disrupted, and TV and radio stores, as I mentioned, have a much smaller percentage of the market, are much less important in most parts of the world today in distributing those types of devices. And so if you want to understand disruption, think about of all the interests that are at play in making a big change. Not only did RCA not want to change, but you had to convince if you were an entrepreneur starting up a new company, hey this is a better way to deliver, to make radios. You gotta convince everybody that it's in their interest. And you usually can't, which is a sign that there's some disruption at play. And the product that's being developed is not a sustaining innovation or technology. Why is that important? Because you as an entrepreneur or manager, really would like to be able to distinguish disruption from sustaining innovation. Because if it's a sustaining innovation, it's most likely that an established, incumbent company is going to succeed, and a startup is not going to have long term success and take over the market. Now that's not to say you shouldn't start a company around a sustaining innovation, it simply means that if you do so, you should do it with both eyes wide open, and be ready to sell your company at the appropriate time before it's too late, and your competitors develop a better version of that sustaining innovation. If you believe it's truly disruptive, you should expect incumbents to be suspicious and even critical, and perhaps ignore it, and you should expect a startup to have much more success at taking the product to market, and even growing into a major player. So that's the end of this case. We'll look at one more to try to understand the forces of disruption in the next part of this module.
