New Markets and Disruptive Technologies

Here is a good piece from Harvard Business School about disruptive technologies and new markets. It discusses why Tetradyne succeeded and HP failed in developing a disruptive technology. The conclusion is a little counterintuitive:

If revenue targets are too large, a division may be forced to choose target markets that will not value the disruptive technology. Trying to please customers in established markets, where performance expectations are high, can drive companies to include features that make a product too expensive to satisfy customers in emerging markets.

Because disruptive innovations often see failure before success, flexibility is critical to survival. Companies can retain flexibility by initially focusing on low-cost applications whose requirements satisfy the lowest common denominator. This way, breakthroughs in manufacturing and design can still be leveraged in the event that the product architecture is redesigned for higher-margin products.