I don’t know….it wasn’t me. Maybe it was Chicken Little Chris Brown. It certainly supports his ILLUMIGEDDON theory. Yea, let’s say it was him.
Well, I decided to go to Harvard to find out. A Harvard Business School professor Clay Christensen, The Wrong Kind of Innovation, coined the term “disruptive innovation”. In fact it’s helpful to understand Christensen’s theory of the three types of innovation:
1. The first are “disruptive / empowering” innovations. These transform complicated, costly products that previously had been available only to a few people, into simpler, cheaper products available to many. Disruptive innovations entail a discontinuous shift from “how things worked” in the past to how they work today and in the future. The Ford Model T was an empowering innovation, as was the Sony transistor radio. Empowering innovations create jobs for people who build, distribute, sell and service these products.
2. The second type are “sustaining” innovations. These replace old products with new. The Toyota Prius hybrid is marvelous–yet every time a customer buys a Prius, a Camry is not sold. Sustaining innovations replace yesterday’s products with today’s products. They keep our economy vibrant–and, in dollars, they account for the most innovation. But they have a zero-sum effect on jobs and capital.
3. The third type are “efficiency” innovations. These reduce the cost of making and distributing existing products and services–like Toyota’s just-in-time manufacturing in car making and Geico in online insurance underwriting. Efficiency innovations almost always reduce the net number of jobs in an industry, allow the same amount of work (or more) to get done using fewer people.
I learned that industries typically transition through these types of innovations. Let me explain… The early IBM mainframe computers were so expensive that only big companies could own them. Then came the PCs, a disruptive / empowering innovation that allowed many more people to own computers and realize Bill Gates’ vision that one day every home and every office station will have a PC. Then companies like Hewlett-Packard hired and deployed thousands of workers to make better computers — sustaining innovations. Finally, the industry began to outsource its operations, becoming much more capital efficient. This reduced net employment within the industry, but freed capital that had been used in the supply chain — efficiency innovations.
Let’s examine our beloved lighting industry. I contend that the only disruptive innovation was the incandescent light bulb thanks to Thomas Alva Edison, from New Jersey by the way. It was disruptive because it was an innovation that helped create a new market, accessible to many and disrupting the then existing kerosene lighting market. New entrants joined GE, like Westinghouse, Sylvania, Philips, and others to build a dynamic industry, thanks to disruptive innovation. Afterwards, what has happened in the lighting industry, its long history, it can be argued, is continuous sustaining innovation. Along came the evolution to fluorescents, HID, halogen, PL, CFL, electronic ballast, dimming, controls, etc……. creating better value to existing products allowing the incumbent firms within to compete against each other’s sustaining improvements. Efficiency innovations make products cheaper and businesses more efficient and has occurred throughout our mature industry in the manufacturing process, the marketing and sales activities, the distribution channels, logistics, e-commerce, etc. Note: efficiency innovations pay off rather quickly. Disruptive innovations need resources and could take many years to pay off.
In analyzing all of this, I find it particularly relevant that it is very difficult for a new market entrant to gain traction with an incremental / sustaining innovation, since the market incumbents can easily incorporate the new technologies while maintaining their other advantages like brand loyalty, cost efficiency, supply chain access, distribution network, customer contact and so on.
Now I ask you: is LED disruptive innovation or what?
As long as lighting is just lighting, I don’t think it is. I ask again, is the phone still only a phone? We have lived through the many lighting product evolutions before and the same players still dominate. LED is just another incremental product improvement……sustaining innovation, right? It may be a revolutionary improvement since it has the potential to replace every lighting system commercially available. But, it’s still affecting the lighting business only, right? Maybe not……
Let’s agree that LED / OLED / ETC technologies are continuous sustaining innovations improving quality of light, energy efficiency, and long-life but Smart Lighting will not only allow consumers to manipulate the timing, intensity, and quality of light but will internally interact and track and react and adapt to the users’ living and working patterns. It’s not just about illumination only. Well then, my good friend and adversary Chris Brown is right…..Smart Lighting is disruptive, very disruptive innovation: it has its own apps, IoT / IoE / PoE applications, embedded devices, sophisticated control capabilities, energy monitoring, interactive communications, mobile wireless communications, Wi-Fi, Li-Fi, automatic dimming, network technologies, plug-and-play interaction, facial recognition, integrated security, connected lamps, programmed to research the space, the ability to transmit sensitive information, wireless protocol implementations, web services, mobile applications, backend infrastructure and stuff we haven’t heard of yet.. One more thing: lighting may wind up being the core connector to everything (IoE). Be careful, new entrants can thrive in such an environment.
So what am I saying? Simply, we are not in the lighting business any longer. We are in the Smart Lighting business. The LED technology and what is to follow is still sustaining innovation but let me repeat, Smart Lighting is not just about illumination any more. That’s why it may be disruptive innovation, the first since the Edison light bulb. Let’s hope so, as it will usher in an era of prosperity and innovation the world has never seen.