Question

Every so often a management idea escapes from the pages of the Harvard Business Review and becomes part of the zeitgeist. In the 1990s it was “re-engineering”. Today it is “disruptive innovation”. TechCrunch, a technology-news website, holds an annual “festival of disruption”. CNBC, a cable-news channel, produces an annual “disruptor list” of the most disruptive companies. Mentioning “disruptive innovation” adds a veneer of sophistication to bread-and-butter speeches about education or health care. But just what is disruptive innovation?

The theory of disruptive innovation was invented by Clayton Christensen, of Harvard Business School, in his book “The Innovator’s Dilemma”. Mr Christensen used the term to describe innovations that create new markets by discovering new categories of customers. They do this partly by harnessing new technologies but also by developing new business models and exploiting old technologies in new ways. He contrasted disruptive innovation with sustaining innovation, which simply improves existing products. Personal computers, for example, were disruptive innovations because they created a new mass market for computers; previously, expensive mainframe computers had been sold only to big companies and research universities.

The “innovator’s dilemma” is the difficult choice an established company faces when it has to choose between holding onto an existing market by doing the same thing a bit better, or capturing new markets by embracing new technologies and adopting new business models. IBM dealt with this dilemma by launching a new business unit to make PCs, while continuing to make mainframe computers. Netflix took a more radical move, switching away from its old business model (sending out rental DVDs by post) to a new one (streaming on-demand video to its customers). Disruptive innovations usually find their first customers at the bottom of the market: as unproved, often unpolished, products, they cannot command a high price. Incumbents are often complacent, slow to recognize the threat that their inferior competitors pose. But as successive refinements improve them to the point that they start to steal customers, they may end up reshaping entire industries: classified ads (Craigslist), long distance calls (Skype), record stores (iTunes), research libraries (Google), local stores (eBay), taxis (Uber) and newspapers (Twitter).

Partly because of disruptive innovation, the average job tenure for the CEO of a Fortune 500 company has halved from ten years in 2000 to less than five years today. There is good reason to think that the pace of change will increase, as computer power increases and more things are attached to the internet, expanding its disruptive influence into new realms. Google promises to reinvent cars as autonomous vehicles; Amazon promises to reinvent shopping (again) using drones; 3D printing could disrupt manufacturing. But perhaps the most surprising disruptive innovations will come from bottom-of-the-pyramid entrepreneurs who are inventing new ways of delivering education and health-care for a fraction of the cost of current market leaders.

QUESTIONS

If every new product has a first-mover advantage, then why do products fail?

Do you view 3D printing as sustaining or disruptive technology? Choose one of the products listed and determine what the company could have done to prevent the product from failing.

Can you name another technology product that failed? Why did it fail? What could the company have done differently for it to succeed?

Answer 1

1) Every new product which goes to the market will have first mower advantage in the market. They are generally awarded with huge profit margins and monopoly status. But, there is a clause here, not every new product will be awarded. Because, not all products are successful in the market. Few reasons why products are not successful or they fail because -

1. If the product has defects, or not up to the standards
2. If the price of the product is too high, but the quality of the product is not as per the price
3. If any incident like product blasting, or over heating of the product happens
4. If the product goes to repair frequently

If the product satisfies all or any few of the above reasons, then the product fails in the market

2) 3D priniting is a disruptive technology. Because, no one has even expected the where all 3D technology is being used now. Presently, 3D printing is being used in sectors like - Aerospace industry, Automative industry, Medical, Construction, Manufacturing, and there are not more to come. 3D printing is definitely disruptive which is helping to create new markets.

3) Drones come under disruptive technology. With Drones, there is a lot of innovation coming up. Drones are used to deliver medical supplies to the remote locations and disaster places. It helps to monitor the placement of the enemy in military, it can even navigate and provide information about the places where human's have no access, like deep within the earth's crust , etc. The use of drones has been increasing, every year. Hence, it is ultimately a disruptive technology.

4) The product chosen is - Taxis. If a company is dealing with taxis, then in order to keep them successful, company has to do the following -

1. If the taxis are offered at low prices
2. Discounts and offers can be given to attract more people
3. Taxis should be made available at all the time, even during odd hours, when people needed them the most

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