Principles of disruptive innovation

By Manish Shah
An innovation that is disruptive allows a whole new population of consumers’ access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.

—Clayton Christensen
Achieving one billion dollars in revenues is a lofty goal for any business. This goal is so elusive that less than one in 20,000 companies ever achieve it. Half the companies in this exclusive club used disruptive innovation to create exponential growth. Inno-sight, a consulting firm that specializes in disruptive strategy, recommends that we keep the following principles in mind when thinking about disruptive innovation.

Look at market in new ways
A decade from now, majority of today’s best performing companies will be average performers. History tells us that they will fail to allocate adequate resources to disruptive opportunities. In the late 1970s, Digital Equipment Corporation (DEC) did not invest in the up and coming PC industry. The PC revolution was disruptive to DEC’s mini-computer business and resulted in DEC’s demise. In order to take advantage of the disruptive opportunities, we need to look at the world through a different lens.

Look for the “job” that cannot be adequately or affordably done
Consumers don’t really buy products; they hire them to get “jobs” done in their life. For example, Procter & Gamble’s Crest WhiteStrips enabled consumers to whiten their teeth inexpensively and comfortably at home. Before the advent of WhiteStrips, the consumers were stuck with expensive and time consuming professional visits to get their teeth whitened. We should look for opportunities to solve a problem that customers cannot solve inexpensively or simply.

Come up with a solution that is “good enough”

When companies pursue perfection, they create complicated and expensive products. A disruptive solution trades performance for simplicity, affordability or convenience.  A $300 Netbook is a good example. Netbooks provide consumers with the connectivity and give them the ability to be productive at an affordable price.

Expect that initial approach will be wrong
The approach of disruptive innovators is to invest a little and learn a little and then adjust their strategy accordingly. There is no need to “bet the farm” on innovations that may not work out. Apple invested over $350 million in the Personal Digital Assistant (PDA). The PDA was a flop. It was an expensive way for Apple to learn that consumers did not want a replacement to their computers but just a complement.

Be patient for growth but impatient for profit
Focus on early profitability forces a company to connect with genuine customer needs and discover a viable strategy.  When Honda was strapped for cash, it had to concentrate on selling one motorcycle: its small, 50cc Supercub. Honda was wary about selling these low-priced, low-margin motorcycles through sporting goods stores.  However, this strategy paid off. By pursuing a product that was profitable from the outset, Honda was able to disrupt the marketplace. Eventually, Honda became a dominant player in the motorcycle industry.

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