It is quite clear from the case that by 1995-96, Schwab considered Internet as a disruptive technology and were aware that it posed a threat to their brokerage business. It is evident from the words of Randy Goldman, VP of Electronic Brokerage, that Schwab was fully aware of the disruptive nature of the Internet technology.
Schwab was founded (1971) with Information Technology as its core and proudly considers itself as “a technology company happening to be in the business of brokerage services”, as stated by its leadership. Innovation has been part of Schwab’s culture and in fact, its foray into discount brokerage was a disruptive innovation impacting full service brokers like Merrill Lynch. Historically, Schwab’s philosophy has been to be an early entrant, but not on technology’s bleeding edge. Similarly, in case of Web-based trading, Schwab strategically exercised a wait-and-see approach while its team was working on a seamless web technology to work with…show more content… Schwab did exactly like what Christensen has prescribed in his early 1995 paper, “house the disruptive technology in an independent entity”. An independent entity named Electronic Brokerage (“EB”) Enterprise was created immediately, reporting directly to Schwab’s co-CEO, David Pottruck.
Disruptive technologies come with a different package of attributes. Financial advisors were able to provide variety of sophisticated services to a wide range of clients facilitated by Internet access to a wide array of Schwab’s products and services. This opened up financial planning to non high net worth individuals. This was further aided by the fact that 70% of Schwab users owned computers and 50% of its users didn’t have prior investment experience. This led to the emergence of a new market as is typically created by disruptive
