Disruptive Innovation Model

The first major manifestation of digital technology was mainframe computers, they cost millions of dollars, and in order to use them, it required hours of training. Since then, we took a big leap from mainframes to desktops, to laptops, to smartphones, and now we have democratized technology where a majority of folks in the world have technology access. 

The disruptive innovation model transforms products that are historically very expensive, complicated and makes them affordable and accessible. It helps in thinking about innovation-driven growth by keeping customers in mind, and highlighting how the progression of original innovation and disruptive innovation works. These customers range from Performance customers (who can be satisfied with the minimal viable products) to Demanding Performance Customers (who like to have the best of the experience). Disruptive innovation model helps us in answering questions like: 

Why are some companies being so successful for so long?

Because they differentiate, they choose, they make tradeoffs, they focus, they provide something which is unique in value and that’s the way they gain sustainable competitive advantage. Taking Microsoft’s example, they were able to manage quality, culture, sophistication and are still leading the market. 

How does a small young company beat an industry giant on its own turf? 

Big companies focus on sustaining innovation to attract higher paying customers, in this process focus is lost on regular customers. While they are overserving high paying customers, new entrepreneurial companies take advantage of this opportunity by providing low-cost product option to other not so focused customers. These disruptors improve the product to appeal to more customers; by the time incumbent notices it and takes corrective action they are already on the back seat. 

Knowing the cost of technology is going down and technology is going up, it gives disruptors more options to load the product with features and functionalities. Disruptive innovation creates new markets and reshapes an existing one. One of the examples we have witnessed is Netflix, it started with initial video streaming services, it penetrated in the market early and positioned themselves in such a way by leveraging the network effect.  As per Clayton Christensen, when something first comes out it’s not really the best, it evolves over a period. Eventually, it improves because of fixing internal challenges and external competition. This results in the collapse of companies, in some cases industries. Examples:  VOIP: changed the telecom and Digital photo: changed films.

Cheers!
Rahul S.