Up through the mid-1970s, most consumer electronics products were built with these devices called vacuum tubes. They're about the size of a child's fist.
A TV had about 20 vacuum tubes inside of it. And as a consequence, the TVs of the time had to sit on, stand on the floor. They're about this tall. Cost about $4,000 in today's money. So only families that had big homes and big bank accounts could own TVs. The transistor was disruptive relative to the vacuum tube, because when it emerged it couldn't handle the high power that was required to be used in one of these big floor-standing TVs. Or the radios of the time sat on the, the, uh, credenza in the dining room.
Every one of the vacuum tube companies, and these are the giants of the electronics industry, RCA, the Radio Corporation of America, Zenith, Westinghouse, Motorola, Philco, they all took a license to the technology, and they carried the license into their own laboratories and framed it as a technological problem. In other words, the transistor just can't handle the power required to be used in the market.
As a group they spent over $2 billion in today's money trying to make the transistor good enough that it could be used in big TVs and big radios. Now, while they were working on that product, out here in a, in a larger circle of competition the first application of the transistor was a germanium transistor hearing aid.
And this was an application, in our language, that competed against non-consumption, meaning it wasn't possible with the old technology. Then, in 1955, Sony introduced the world's first pocket radio. And these were -- people of my generation, you ought to talk to them about these radios -- just horrible products. But they cost $2, fit right in your pocket. I-I grew up in Salt Lake City. My brother and I pooled our savings and bought one.
We had to face west to the Great Salt Lake to get reception. But we were delighted to have a crummy product. Because Sony targeted teenagers, and our other option was no radio at all. A booming new market emerged with customers who were delighted with a limited product. Then, in 1959, Sony introduced its first portable television, again, a very limited product.
But they made it so affordable and simple that now a larger population of people whose apartments had been too small or bank accounts too small to have the big RCA TV, now they could have one of these little ones. And because it was infinitely better than nothing, they were delighted with this product. And so out in the next circle, booming new markets emerged with solid state electronics. And the ones in the inner circle, the American electronics companies, felt no pain, because these were all new customers.
But by the late 1960s, solid state electronics had gotten good enough that you could start to build big machines with it. And within just a few years all the customers got sucked out of the vacuum tube circle into this larger solid state circle. And every one of the vacuum tube companies vaporized. It's a very punishing story, isn't it? Because it's not that RCA lacked vision. They saw the technology coming long before Sony did.
It's not that they lacked commitment. They easily spent 30 times more money trying to make the technology work than Sony ever spent. But what's punishing is that by trying to deploy the technology into the very core market that they served, they forced it to compete as a sustaining innovation head-on with the established approach. And through the 1950s and '60s, that constituted a very onerous technological hurdle for RCA to overcome.
Whereas by coming out to the next circle and competing against non-consumption, all Sony had to do was make a product that was better than nothing, and the customers were delighted. And then they had a-a viable business that they could use to fund the ongoing improvement of that product.
Clayton Christensen © 2010 All Rights Reserved.