Is IP Video a Disruptive Technology?

The security and surveillance industry is currentlyexperiencing a shift from analogue to digital

cameras which are connected over the internet.

It is sometimes argued that this transition is disruptiveIt is sometimes argued that this transition is disruptive.


And there are indeed many signs of such a pattern.



i id di i i h i i l ?But is IP video disruptive in the original sense?




In this presentation I will address whether it is or not.




In this presentation I will address whether it is or not.

In order to do so, we first of all need to get a clear ideaof what is meant by disruptive innovation.

Harvard Professor Clayton Christensen bli h d hi b k ’Thpublished his book ’The

innovator’s dilemma’ in 1997 and coined the1997 and coined the

term disruptivetechnology.gy

In this book, Christensen sought to explain whygreat firms fail under conditions of

technological change.

While there are many explanations of such failureWhile there are many explanations of such failure, Christensen brought an intriguingly different

perspective upon this issue.p p p

Previous work in this area had primarily looked at h h l i h ihow a new technology impacts the companies

existing R&D skills.

Christensen on the other hand argued that it was theChristensen on the other hand, argued that it was the impact on the market that determined whether

established firms would fail or not.

Therefore, Christensen claimed that oneTherefore, Christensen claimed that onemust look at whether innovations satisfya firm’s current customer base or nota firm s current customer base or not.

Sustaining innovations are those which mainstream customers demand.

Sustaining innovations are those which mainstream customers demand.

Th i ti hi h d tThose innovations which do not satisfy current customers are y

regarded as disruptive.

The disruptive innovation has:


Lower performance according to whatmainstream customers wantmainstream customers want.


Lower performance according to whatmainstream customers wantmainstream customers want.

Other performance attributes (smaller, simpler) which are not valued by currentsimpler), which are not valued by currentcustomers, that makes it prosper in a new

value network.

The main problem then for establishedfirms is that they find it irrational to investin a technology which their customers do

not demand.not demand.

Th ’t fi d fi i l l i iThey can’t find any financial logic in doing so and keep improving theirg p p g

existing products.

But once the disruptive technology has become ”good enough” it displaces thebecome good enough it displaces the

former one.

But once the disruptive technology has become ”good enough” it displaces thebecome good enough it displaces the

former one.

Those entrant firms which found a nicheThose entrant firms which found a nichewhere customers did indeed demand the t h l i iti ll k ttechnology initially now move up‐market

and start to dominate the industry.

The Disruptive innovation framework essentiallyThe Disruptive innovation framework essentiallyposits that companies go bankrupt by listening to

their customers and giving them what they demand.their customers and giving them what they demand.

A pretty provocative and interesting conclusion.

Christensen based his argument upon evidence from the rigid disk drive industry, where each shift fromthe rigid disk drive industry, where each shift from one generation of disk drives to a new one caused

major problems for incumbent firms.

Christensen based his argument upon evidence from the rigid disk drive industry, where each shift fromthe rigid disk drive industry, where each shift from one generation of disk drives to a new one caused

major problems for incumbent firms.

Each new generation of disk drives was smaller andEach new generation of disk drives was smaller and offered a lower performance in terms of storagecapacity. Those firms that dominated the previous

generation therefore struggled to develop the new one, as their customers did not demand it.

It looked something like this:

Technology supply and demand in the HDD industry10000

1000

MB)

100

Capacity (

10Hard Disk C

1

10

1975 1980 1985 1990

H

1975 1980 1985 1990Year (Source: Christensen, 1997)

In each transition to a new generation firms wereIn each transition to a new generation, firms weremislead by focusing on the what their existing

customers demanded.

No let’s go back to the case of IP video.

At first sight it appears to be truly disruptive.

It had a lower performance along many of the traditional dimensions such as:


Image qualityFrame rate

Price



Price

h ff d b hAt the same time, it offered new attributes such as:



Price

h ff d b hAt the same time, it offered new attributes such as:

Images can be viewed from anywhere you only needImages can be viewed from anywhere, you only needan internet connection

Easier to scale up these systemsp ySoftware can make the cameras more intelligent

Over time, IP video has improved significantly alongthose dimensions which underperformed – image quality is better today with HD and Megapixel

d th i d li icameras and the prices are declining.

Sound like a schoolbook example of a disruptivetechnology, right?

But remember, Christensen stated that theseproperties made a technology problematic because an

incumbent firm’s existing customers did not i t h l itiappreciate such a value proposition.

But in the case of IP video, this is not necessarily the case.

IP video has not initially prospered in low‐endsegments or new markets as Christensen stated.

IP video has not initially prospered in low‐endsegments or new markets as Christensen stated.It has rather emerged in many different, existing

segments such as retail, transportation, schools and i illcity surveillance.



These segments are hardly new, or low‐end in any senseor low‐end in any sense.



These segments are hardly new, or low‐end in any senseor low‐end in any sense.

Rather, they are segments which benefited in particular from the scalability and other new p yattributes that IP brought to the market.

Wouldn’t Pelco’s customers in for instance the city surveillance or retail segments benefit from

d ti IP?adopting IP?



I think they do and that they have adopted IP toI think they do and that they have adopted IP to quite a large extent.



I think they do and that they have adopted IP toI think they do and that they have adopted IP to quite a large extent.

But those cameras have not primarily come from Pelco or other analogue firms. Entrants like Axis,

ACTI, Mobotix and Indigo Vision have been leadingthis shift, so far.

The transition to IP is therefore not a classicalexample of a disruptive technology.

One of the problems for analogue firms has ratherOne of the problems for analogue firms has ratherbeen that they are not used to delivering this kind of

value proposition to their customers.p p



Their sales channel has been related to securitypeople and with the shift to IP, surveillance is

becoming an IT issue.



Their sales channel has been related to securitypeople and with the shift to IP, surveillance is

becoming an IT issue.

Those firms find it difficult to target security peoplewith an IT offer and their sales model has been builtwith an IT offer and their sales model has been builtaround relations with security people throughout

the value chain.the value chain.

And it is sometimes more difficult to changerelations than to change technologies.

Summing up, the transition to IP may at first glanceSumming up, the transition to IP may at first glanceappear to be a schoolbook example of disruptive

innovation.


innovation.But a closer look makes it clear that it is actually not

disruptive in the traditional sense.


innovation.But a closer look makes it clear that it is actually not

disruptive in the traditional sense.IP h t i il d i k t lIP has not primarily emerged in new markets or low‐end segments, rather, it has prospered in existingmarket segments albeit in a new way that makes itmarket segments, albeit in a new way that makes it

problematic to handle for established firms.

SSources

Christensen, C.M. (1997) The Innovator’s Dilemma, Harvard Business School Press,

Cambridge, Massachusetts.

Christian Sandström is a PhD student at Chalmersstudent at Chalmers

University of Technology in Gothenburg, Sweden. HeGothenburg, Sweden. He writes and speaks about disruptive innovation and technological change.

www.christiansandstrom.org

More about IP video and disruptive innovation:

www.christiansandstrom.org

http://www.christiansandstrom.org



Is IP Video a Disruptive Technology?

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