Question

Consider a startup that has developed an innovative solution based on new technology that it is the basis for a new venture that it has launched. Suppose the startup is quickly acquired by an industry incumbent not long after launching the venture. What type of innovation does the new venture most likely have under Clayton Christensen's theory of disruptive innovation? Explain.

Answer 1

Disruptive Innovation

Disruptive innovation refers a unique conception created by a start up venture by using limited resources to compete the industry incumbent.

How the opportunity of a disruptive innovation creates

It is found that in the market where an established brand captures substantial number of customers by providing adequate products or services usually try to improve their performances in order to increase their acceptability and profitability in the market as a result a few negative things get happened.

1) Do not pay the attention to the less demanding customers

2) Do not take the initiative to transform the non consumers to consumers

Therefore, a vacuum is built up where the established firm does not meet up the requirement of the low budget customers and overshoot their demands. Secondly, these companies have put all their initiatives into the likeminded environment and don’t want to move out from that recognised market where they usually do the business.

Here comes the scope of disruptive innovation where a new start up business can grow. The nature of the business is to tap this neglected area where the less demanding customers exist and to build up a market in such a area where the main stream consumers do not exist.

Although it is a proven fact that the concept of disruption may not become successful overnight. It takes time for getting success as the consumers who are not well aware to the utility of the service takes time to get gelled with the product or service and when they get the actual benefit of the service the disruptive starts to grow.

Industry incumbent sometimes realizes the potentiality of disruptive innovations

Those firms that have risk taking capabilities may incorporate new ways into their business by giving importance to the disruptive technology and try to tap the new segment of customers. It is required to sustain in the market and hold the market share that may be dropped due to the challenge given by the altered form of business called disruptive innovations.

The innovative model used by the start up firm can be called the application of “Block chain” technology which is famous for keeping the records in a manner of decentralised ledger distribution process between two parties. The way it functions is to change the position of transactions from centralised server based system to a distinct cryptographic network which is proactive to verify the record of transactions and by implementing this process there is no need of manual counting or verification. It removes the function of custodians and clearing houses.

This innovative disruption later acquired by Banks as well as incumbent brokerage firms in order to practise the block chain for trade confirmations.