December 23, 2011

Is disruptive innovation a threat to established sequencing companies?

In his book The Innovator's Dilemma, Clayton M. Christensen asks: Why do established companies fail when faced with disruptive technology? A commonly heard answer is that large companies grow complacent and that their managers just don't understand new technology. 

Christensen's answer is more nuanced than that. After all, large companies often have excellent management, yet struggle with disruptive innovation.
Disruptive innovation can be defined as technology that helps to create a new market that did not exist before. Because this market is new, it is still small, and therefore it does not make financial sense for large established companies to invest in it. For them, it is much more sensible to invest in markets that offer a return that is in proportion to their firm's size. For example, a €2bn company would not see the point of investing in a €200k market.

Because well-managed companies do not invest in non-existent or tiny markets, this leaves an opening that start-up companies can exploit. Start-ups, because they are small, are happy with a smaller market and the associated smaller profit. As the market grows, the start-ups grow with it. However, eventually the growing market will start to take over the established companies' market.

There seems to be a feeling amongst many people working in the field that the sequencing market is due for a disruptive innovation.
If the sequencing market develops in the way outlined in The Innovator's Dilemma, established providers of sequencing machines would continue to provide equipment to large research centres, whilst start-ups would move into new niches that are currently uninteresting for established providers. In the following posts, I'll invest more thought into whether this is a likely scenario.


  1. Hi Art,
    Didn't know you had a blog, trendy topic :). I think that big companies do not invest in disruptive technologies not just because the markets are small but because these technologies often disrupt the market. They actually remove value from the established players. Along the lines of google making money with ads and giving away online tools that keep people in their garden. Microsoft has a hard time competing because their business model depends on their income from the tools they sell.

  2. While it’s impossible to say for sure what will happen in the future, I’d say the major players are trying to innovate (or at least buy innovation) at the expense of their current markets. NGS is starting to eat microarray’s lunch, but the dominant microarray platform company (Illumina) bought into NGS technology with their purchase of Solexa. (Affymetrix decided to… try a different path.) ABI (now Life Technologies) saw the writing on the wall for their (very) dominant CE sequencers, so they bought SOLiD from Agencourt. Both have recognized the maturation of the NGS market and are taking steps to move “down the chain” away from sequencing centers towards individual researchers. Illumina is doing this through their new MiSeq platform and Life with the purchase of Ion Torrent. Both also have their investment fingers in next-next-gen technology pies (Oxford Nanopore for Illumina and Genia for Life). So, while some new disruptive technology could come out of the woodwork to surprise the large companies, they are certainly working hard to try to be the ones to disrupt their own technologies.

  3. I share Shawn's thoughts on this one. All the original players in the NGS market appear to be invested in one of the 'disruptive' technologies. Even 454 are working alongside DNA Electronics and IBM.

  4. @ Pedro: Great that you found my blog. The reason that you didn't know about it is probably that a month ago it didn't even exist. I'm looking forward to your next post on

    As for your comment, I completely agree. I can only imagine how difficult it must be for Microsoft to try to think of ways to compete with free Google tools without pissing off their colleagues working on products like MS Office.

    @ Gavin and Shawn: Thank you for your insightful comments. The possibility of established players buying into innovative start-ups is something I completely ignored in my blog entry. This is actually one of the main strategies that Christensen recommends in The Innovator's Dilemma to established companies in order to deal with disruptive innovations. It seems that the big sequencing players are heeding his advice.

    Happy New Year,


  5. As Shawn mentioned too - all our current big players are actually the result of established companies purchasing disruptive innovation companies :) Happy New Year Art.