Henry Chesbrough surfaces, after surviving his August move from Harvard to Berkeley! Here he weighs in on the enhancement/replacement innovation fear conversation:

Leslie's concept of enhancing innovations and replacement innovations is a useful one, and my former colleague Clay Christensen termed these different types of innovation "sustaining" and "disruptive."  Leslie is less concerned about the impact of these different types of innovation on their respective suppliers than Clay's original formulation was, and more interested in the impact upon us customers and users.  But I think they are talking about similar things.

In either case, another important lesson from the history of earlier technologies is that the most valuable use of a technology by a customer or user is often very hard to foresee.  In the case of the VCR that Leslie mentions, for example, the original use was envisioned to be one of "time shifting," whereby people would record programs at the time they were broadcast, and see them at whatever time they wished.  (This is eerily like the value proposition of today's TiVo technology, with the added bonus of fast forwarding through the commercials.)  As we came to learn, the "killer app" for VCRs was video rentals, a market that didn't really exist prior to the VCR, and wasn't on any VCR manufacturer's radar screen at the time.  This new application ushered in Blockbuster and other stores.  The movie catalog of studios soon became much more valuable, because there was a new distribution channel to market the library of old films.  Studios eventually mastered the art of launching a film into theaters, and when to launch it into video stores to get the most money out of the film.  Only now, more than 25 years later, is the "time shifting" application really becoming valuable through TiVo and others.

To take another example of the difficulty of accurately judging the best use of a technology from around the same time, when Intel first signed up IBM in 1978 as a customer of its 8088 microprocessor for what would become the IBM PC, Intel didn't even regard the design win as one of their top fifty applications for the 8088.  Yet the successor Pentium microprocessor today contributes 80% of Intel's revenues and 100% of its profits.

So the emotional responses to innovation of "fear" and "replacement" are based on a misconception: the idea that the likely impact of a technology is readily foreseen at the outset.  The reality is that extensive experimentation and trial and error may have to occur before the best use of a new technology can be discovered.  And the creator of the technology may not even know what this best use might be.  This suggests that managers ought to downplay the hype about the enormous potential of a new technology  until some compelling uses begin to emerge - both to keep investor expectations down, and to reduce the possible consumer fear factor associated with that new technology.