Schwab's Disruptive Technology

As of the end of the case (1995-96) the Internet primarily represented a disruptive technology (as defined by Christensen) to Schwab.

Schwab clearly excelled at using disruptive technology (such as the Internet) to expand its customer base and constantly being an early entrant was part of the evolution technology strategy of Schwab even at the cost of commission revenues. Schwab’s adoption of the Internet was no different, and David Pottruck said it best “Schwab is a technology company that happens to be in the brokerage business.”

Schwab’s organizational structure allowed for identifying and building new ventures all while maintaining its mature customer base. Additionally, Schwab’s mature customer base, were well-educated, sophisticated,

Schwab would be much less likely to “bleed out” by keeping this evolutionary technology strategy and not fall into the traps of the evolutionary development approach.

The risk of Schwab adopting the disruptive technology of the Internet could be disastrous. The evolutionary development approach that Schwab uses to test and validate could rely too heavily on existing user feedback. The existing customer is the last group to ask about disruptive technologies, as they care more about sustaining technologies. This process could be too filled with bureaucracy, arrogance and poor planning. For this reason a recommendation should be made to house the Internet product in a separate independent entity. The independent entity will be able to test and validate at a much quicker rate and will not affect the main Schwab business when missteps are made. The down-market lower profit margins of the Internet product would keep the independent entity hungry for additional innovations when small gains are made, this is critical during this initial growing phase. Once the Internet product is established it would be wise to not integrate this entity back into Schwab. Brining the Internet product back into the mainstream organization could cause arguments about which product gets which resources especially if the Internet product cannibalizes the established