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Disruptive Technology & Innovation In Biotech – Case Study



Introduction


This case study will examine and introduce the definition of both Disruptive Technology and Disruptive Innovation. When a clear distinction between the two has been established, the paper will seek to understand what beneficiary effects the two can have on each other, and how they further can act as an enabler for one another. It will seek to do so by looking at the industry of biotechnology. It will take a basis in the company Illumina who is an industry leader in the sector of Genome Sequencing. Moreover, this will provide an insight into how disruptive innovation and technologies can enable growth in their current operations as well as disrupting other industries.


Disruptive Innovation has been praised by business leaders across markets, small as well as large corporations. However, the concept is in danger of becoming irrelevant due to a broad misinterpretation. It has is often described as being any situation in which an industry is shaken up, and previously successful incumbents become irrelevant or completely obsolete. (Raynor , Christensen, & McDonald, 2015)


Nevertheless, if going back to one of the center pillars in disruptive innovation, the book “The Innovators Dilemma,” the theory is much more specific. The author, Clayton Christensen, is perceived as one of the most influential business thinkers on earth, for his academic contribution to the business world on disruptive innovation. His theory describes disruptive innovation as a process where a service or product enters a market from the bottom – Usually being more accessible in terms of price. From there, it moves upmarket by improving product and margins, where if it is successful, it will replace the established incumbents. (Christensen , 1997) It is possible for entrants to take over the market because the incumbents often are focusing on its most profitable customer segment, which they further were over-performing in.



The approach between the Incumbent and the Entrant can be split into two types of innovation and strategic timeframes. The Incumbent is pursuing sustaining innovation that aims to satisfy costumers’ current needs, which is a short-term strategy. The Entrant is pursuing disruptive innovation that evolves to satisfy costumers’ future needs, which is a long-term strategy.


Nonetheless, the theory of Christensen is not the only recognized theory of disruptive innovation. There are further two theories which describe how to create disruptive innovation; the second is Incumbents disrupting incumbents by moving from one market to another market and the third is Incumbent, using its resources to disrupt the market.


Disruptive Technology


Disruptive Technology are in today’s terminology, referred to as a new technology that has the ability to disrupt or fully replace an existing technology.


Technology is further referred to as; Machinery and equipment, which are developed from the application of scientific knowledge. To some extent, this implies that technology is tangible, like a computer screen or a mobile phone. However, it is essential to recognize that this interpretation of disruptive technologies is too narrow. Considering the history of pioneering inventions, the Printing Press and the Steam Engine can be considered disruptive technologies. (McKinsey Global Institute, 2013)


According to one of the leading consulting firms in the world, McKinsey, Disruptive Technology is enabling advances that will transform life, business, and the global economy. Both intangible and intangible output. (McKinsey Global Institute, 2013)


Popular disruptive technologies in today’s world, known by the majority of the global community is, for example, AI, IoT, Cloud Technology, 3D Printing, and even Renewable Energy. It must further be emphasized that a disruptive technology can replace and disrupt other than a one-to-one technology. It is able to disrupt and replace processes, services, and markets as well.



Disruptive Technologies can bring great advances for business, individuals, and in general, most of the ecosystems of the world. However, in today’s digital age, there are constantly new breakthroughs that are praised as being revolutionary. Moreover, this can make it difficult to navigate the different disruptive technologies and their actual output.


As illustrated in the hype vs. the effect research from McKinsey, some of the technologies hype doesn’t match their potential economic impact. This makes it difficult for companies to navigate which of the disruptive technologies they should or shouldn’t invest in.


Industry Implementation of Disruptive Technology & Innovation


The establishment of the fundamentals of both disruptive innovation and technology has been made. However, even that there has been made a clear distinction between the two, it does not mean that they can’t co-exist or enable each other. Both can, in fact, have a beneficiary effect on each other, and further act as an enabler for one another.


The succeeding sections will focus on how this is possible within the industry of biotechnology. It will take a basis in the company, Illumina, who is an industry leader in the sector of Genome Sequencing. Nonetheless, before examining the company’s use of disruptive technologies and innovation, it is important to understand its core business offering.


Illumina manufactures, develops, and markets integrated systems for Genome Sequencing.

Illumina is one of the pioneers within this industry and accounts for more than 70 percent of the market share. (Abbosh, 2019) When it entered the market in 1998, there were few players in the industry due to the high costs and a lack of technological advancement. Their time in the industry, they have played a central role in reducing the cost of sequencing from $100 million to just $1.000. In fact, their contribution over the past decade has enabled the rate of improvement in sequencing speed to exceeded Moore’s law. (McKinsey Global Institute, 2013)


The reduction in cost alone has disrupted the process of biological research. Earlier, the sector relied on hypothesis-driven and trial-error testing, which with the current pace of technological development, can be completely replaced. Furthermore, it reduces the error and provides a much more detailed and individual results. (McKinsey Global Institute, 2013)


What is Genome Sequencing?


Genome Sequencing is, in itself, considered a disruptive technology and a very promising megatrend. It is estimated to have a global economic impact on between $700 billion-$1.6 trillion per year by 2025. (McKinsey Global Institute, 2013)


Genome Sequencing is a process of determining the complete DNA sequence of an organism’s genome at a single time. This is usually extremely difficult due to the length of even just a single DNA strings, which further makes it very expensive to analyze.



Genome sequencing, further reveals information about one’s own DNA sequences and the probable DNA sequences of one’s close genetic relatives, which will enable one to determine the DNA of one’s offspring. This process can be implemented on every organism which is built by cells. (Metzl, 2019) Moreover, this further enables one to analyze and understand tremendous amounts of data, which makes it possible to understand each organism in a much more detailed way. Being able to reach a much more detailed understanding makes it possible to repair, change, or remove specific cells that can improve different variables.

As the Genome Sequencing technologies emerge and get better as time goes, the technology will get rapidly more accessible. The price has already gone down to a level in which it reaches a larger group of the population and industries.


The Agricultural industry is a great example of how the emergence of Genome Sequencing can create a forceful impact on industries. Looking at crops, there is a tremendous potential to maximize the potential of every seed in every harvest. Genome Sequencing has created the path for a gene-editing tool named CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats). (Niiler, 2018) This tool enables scientists and farmers to boost everyday foods; Makes a more resilient variety of Bananas that can fight a deadly fungus attacking the global commercial supply; Makes a variety that produces more grain in corn under drought conditions; and even improve mushrooms appearance and shelf life by making them resilient to brown spots. These are just a few examples of how CRISPR can impact everyday lives. (Niiler, 2018) It is further important to emphasize that this tool shows the potential to tackle some of the world’s most urgent problems such as; Food waste, Water shortages, and Hunger in Developing countries. (Metzl, 2019)


Nevertheless, even that there is research which shows amazing results, the Genome Sequencing profession has been under a negative scope from the public, due to a large insecurity of the possible negative effects that have yet to be discovered, if there is any. It has led to a highly regulated industry in the majority of the developed countries, which usually will have the funds to carry out the research. Because of the highly regulated environment, the industry is in the category of compressive disruption.


Compressive disruption is a pervasive and insidious kind of disruption that is playing a prominent role in investigating and shaping wise pivots. – It usually takes a long time to disrupt due to highly regulated markets, which proves to be an entry barrier for entrants. (Abbosh, 2019)


However, this poses a great opportunity for developing countries that are not subject to high volumes of regulations, and with the price of the technology dropping to a level that makes it much more accessible, it is a realistic goal for developing countries to pursuit. (Metzl, 2019)


Connection between technology and Innovation


Already at this part of the examination, it can be stated that a disruptive technology enables disruptive innovation at a geopolitical level. In the case that the developing countries are the Entrant and the developed countries are the incumbents that, in this case, are subject to high regulation. In the deepest form of disruptive innovation, the developing countries are the unserved consumers.


It further gets interesting when looking into the effects disruptive technologies can have on other disruptive technologies. Staying in the disruptive technology of Genome Sequencing, there are really exciting enablers that have the potential to make it even better and by that make Genome Sequencing as a disruptive technology into a disruptive innovation in other industries and sectors. E.g. Other disruptive technologies like AI and Cloud Computing have the ability to enhance the quality, usability, and drive the cost down to achieve a much broader reach in the use of the technology.


AI, if implemented in a correct way, can help the scientists to bring together the results of the massive amount of data retrieved from each Genome Sequencing analysis and therefore make it easier to understand how different techniques can impact different outputs. (McKinsey Global Institute, 2013)


Cloud Computing makes it possible to store and utilize tremendous amounts of data which is generated from the process of Genome Sequencing, which has not been accessible before. (McKinsey Global Institute, 2013)

By these arguments, it can be stated that disruptive technologies have a unique opportunity to create disruptive innovation in the process of another disruptive technology.


Illumia's approach


The leader of the Genome Sequencing industry, Illumina, main business is the development and manufacturing of the industry-leading devices that can do the complex analysis of the data. However, even that Illumina’s products are the best in the market, and the competition hasn’t been able to follow up yet, the products of disruptive technologies are easy to replicate. Because the ease of replicating is there, Illumina has been forced to create a whole supporting ecosystem around its products, in order to stay on top.


These supporting entities include; a massive data library and some of the best industry scientists and consultants that work as a supporting network for the clients who purchase the devices. This enables Illumina to create strong partnerships with the clients, which brings additional revenue. Furthermore, it creates the opportunity to tailor different products to the clients, which is a great opportunity to optimize and create new products. This makes it difficult for new entrants to gain market traction due to the high level of collaboration between Illumina and its clients.


Moreover, for Illumina to establish a strong threshold in the market, they direct extra focus on specific trends that shows more potential than others. With the existing technology, they are trying to disrupt the livestock industry, more specifically, the Cow Livestock. Illumina has made extensive partnerships with farmers across the world, in order to improve management of the livestock in areas of nutrition and health management, genetic change is a major component of increasing productivity and efficiency, as well as improving health welfare traits within a herd. (Daetwyler, 2019) When farmers then achieve genetic gain, it works in cumulative patterns, which means that it, over time, will act like compound interest.


Farmers who implement the disruptive technology of Genome Sequencing get a much better understanding of each cow in the heard. This understanding allows the farmers to breed the heard much more efficient and targeted. Farmers can now confidently select and use individuals for breeding much earlier than before implementing the technology. It shortens the dairy bull generation interval from 5-6 years to 2 years. (Daetwyler, 2019) This is because the genes reveal what genes the offspring will have and, therefore, if the offspring is a male or female. Because the farmers now can predict the likelihood of their herds’ offspring, they know which individuals to invest in and which not to. This saves the farmers a lot of money and resources that they would have had to invest even with a large uncertainty beforehand.


Because disruptive technology eliminates a large amount of risk, the farmers will more confidently invest in scaling its business. The elimination of the risk is further great for small farmers who do not have large budgets as the large commercial farms that are dominating the industry. It creates a space for the small farmers to deliver the same quality as the large commercial farms at the same risk exposure for the buyers. (Aspinall & Hamermesh, 2007)


Nevertheless, because the small farmers get a much higher certainty to deliver on their daily operations of the heard, it opens up for resources that can be used to create disruptive innovation.

Illumina will be at the forefront of this research of farming livestock, which further gives them a unique opportunity to lead the movement of solving one of the future food shortages crises.


Illumina is further assisting many other programs, just like the livestock example. This strategy allows them to be at the forefront of disruption in multiple sectors and industries, which has relevance to the company. It gives the company a unique opportunity to feel where the market is going, and with their many collaborations, they will be able to respond quickly to market changes and further create the changes themselves.


As an endnote for Illumina and the Genome Sequencing industry, the paper will shortly touch on a few other markets which have benefitted from the emergence of Genome Sequencing technologies. E.g. The fitness industry now allows you to send in a sample of DNA to determine which workout and diet a person will benefit from the most. Furthermore, companies like MyHeritage and Ancestry allows people to send in DNA in order to uncover one’s ethnic origins and find new relatives.(Aspinall & Hamermesh, 2007)


Even that Illumina is not directly involved in some of these examples, the company will still be able to benefit from them if outsiders use their extensive data library or buys the devices.


Key Points

  1. There is a distinguished difference between disruptive technologies and disruptive innovation.

  2. There is proof that disruptive technologies enable disruptive innovation on a geopolitical level. In the context of the developing countries being both the unserved consumer as well as the Entrant, whereas the developed countries being the incumbent, which are not able to serve the full market potential due to high regulations that act as an inhibitor for disruptive innovation.

  3. Disruptive technologies have a unique ability to create disruptive innovation in the process of another disruptive technology.

  4. As demonstrated by Illumina, disruptive technology is not enough by itself to create success and/or disruption in a market.

  5. Illumina is a strong case in how to utilize disruptive technologies to create disruptive innovation and create growth in their own market. Their work further creates a massive foundation for disruptive innovation in other markets which Illumina never would have thought of perusing, but still are able to benefit from because of their high-quality devices and large data library.


References


Abbosh, O. N. (2019). Pivot to the Future. New York: Accenture Public Affairs.


Aspinall, M., & Hamermesh, R. (2007). Realizing the Promise of Personalized Medicine. Havard Business Review. Retrieved from https://hbr.org/2007/10/realizing-the-promise-of-personalized-medicine


Christensen , C. (1997). The Innovators Dilemma. Boston, Massachusetts: Havard Business Review.


Daetwyler, H. (2019). Large-Scale Bull Genome Sequencing Enables Rapid Livestock Improvement. Retrieved from emea.illumina.com: https://emea.illumina.com/science/customer-stories/icommunity-customer-interviews-case-studies/daetwyler-latrobe-interview-hiseq-1000bulls.html


McKinsey Global Institute. (2013). Disruptive technologies: Advances that will transform life, business, and the global economy. McKinsey & Company. Retrieved from https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/Disruptive%20technologies/MGI_Disruptive_technologies_Full_report_May2013.ashx


Metzl, J. (2019). Hacking Darwin. Naperville: Sourcebook, Inc.


Niiler, E. (2018). Why Gene Editing Is the Next Food Revolution. National Geographic. Retrieved from https://www.nationalgeographic.com/environment/future-of-food/food-technology-gene-editing/


Raynor , M., Christensen, C., & McDonald, R. (2015). What Is Disruptive Innovation? Havard Business Review. Retrieved from https://hbr.org/2015/12/what-is-disruptive-innovation

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