This document discusses disruptive innovation and provides examples to clarify the concept. It begins by defining innovation versus invention, and explaining that disruptive innovation occurs when a smaller company targets overlooked customer segments with a lower-cost product. The document then analyzes whether Uber qualifies as a disruptive innovation and concludes it does not, as it launched in major markets and did not initially appeal to non-consumers. Finally, the document provides examples of companies that were truly disruptive, such as Netflix targeting underserved customers through mail delivery before moving mainstream with streaming.
3. INNOVATION OR INVENTION
• Pure invention happens at a lab, but innovation
happens in our minds.
• It differentiates an entrepreneur from a scientist.
• Innovation happens when you question the status
quo and are driven by the hunger to do things
differently and creatively.
5. HOW IS THE TERM “DISRUPTIVE INNOVATION”
FREQUENTLY USED?
• Quite often, the term disruptive innovation is
used to describe any situation in which an
industry is shaken up and previously successful
incumbents stumble. BUT…………………………that is
too broad a usage.
6. VERY SPECIFICALLY, DISRUPTIVE INNOVATION IS:
• Disruption describes a process whereby a smaller company with fewer resources
is able to successfully challenge an established incumbent businesses.
• As incumbents focus on improving their products and services for their most
demanding (and usually most profitable) customers, they exceed the needs of
some segments and ignore the needs of others.
• Entrants that prove disruptive begin by successfully targeting those overlooked
segments, by delivering a more suitable functionality at a lower price.
7. • Incumbents, who are busy chasing higher profitability in more demanding
segments, tend not to respond vigorously.
• Entrants, then, gradually move upmarket, by delivering superior performance,
while preserving the advantages that drove their early success.
• When mainstream customers also start adopting the entrants’ offerings in
volume, disruption has occurred.
10. ABOUT UBER…………..
• Uber, as a company, was founded in 2009.
• The Company has enjoyed fantastic growth as it operates in
hundreds of cities in 60 countries and is still expanding.
• It has enjoyed tremendous financial success and other
market makers are trying to emulate its “market-making”
business model.
• Uber is clearly transforming the taxi business in United
States. But is it disrupting the taxi business???
11. According to the theory, the answer is “No”.
Uber’s financial and strategic achievements do
qualify the company as genuinely disruptive.
12. WHY UBER IS NOT A DISRUPTIVE INNOVATOR?
a) Disruptive Innovations originate in low-end or new-market footholds
b) Innovations don’t catch on with mainstream customers until quality catches upto
their standards.
13. A) DISRUPTIVE INNOVATIONS ORIGINATE IN LOW-
END OR NEW-MARKET FOOTHOLDS
• Uber was launched in San Francisco (a well-served taxi market) and Uber’s
customers were generally people already in the habit of hiring rides.
• Uber, did not primarily target non-consumers, i.e. people who found the already
existing taxi service expensive or inconvenient.
14. • Disrupters are the ones who start by appealing to
low-end or unserved customers and then migrate to
the mainstream market while Uber has done
exactly the opposite, i.e. by building a position in
main-stream market first and subsequently
appealing to historically overlooked segments.
15. B) INNOVATIONS DON’T CATCH ON WITH MAINSTREAM
CUSTOMERS UNTIL QUALITY CATCHES UPTO THEIR
STANDARDS.
• Disruption theory differentiates disruptive innovations from what are called
“sustaining innovations”. (Sustaining innovations make good products better in
the eyes of an incumbent’s existing customers).
• Disruptive innovations, on the other hand, are initially considered inferior by most
of an incumbent’s customers.
• Most of the elements of Uber’s strategy seems to be sustaining innovations.
Uber’s service has rarely been described as inferior to existing taxis. In fact, many
would say, it is better.
17. 1. DISRUPTION IS A PROCESS
• Disrupters tend to focus on getting the business
model, rather than merely the product, just right.
• When they succeed, their movement from the
low end of the market to the mainstream
customers erodes first the incumbents’ market
share and then their profitability.
18. 2. SOME DISRUPTIVE INNOVATIONS SUCCEED,
SOME DON’T
A common mistake is to focus on the results
achieved, i.e. to claim that a company is disruptive
by virtue of its success. Not every disruptive path
leads to a triumph, and not every triumphant
newcomer follows a disruptive path.
19. 3. THE MANTRA “DISRUPT OR BE DISRUPTED”
CAN MISGUIDE US
• Incumbent companies do need to respond to disruption if
its occurring, but they should not over-react by dis-
mantling a still profitable business.
• Instead, they should continue to strengthen relationships
with core-customers by investing in sustaining
innovations.
• Its to be taken care that corporate leaders should not try
to solve a problem before it is a problem.
20. ALSO, DISRUPTERS CAN BE OF TWO TYPES:
• A) Low-end disrupters
• B) New-market disruptions
21. LOW-END DISRUPTORS
• Low-end disruptors come in at the bottom of the market and take
hold within an existing value network before moving upmarket and
attacking that stratum. Low-end disrupters succeed because the
incumbents pay less attention to less-demanding and less profitable
customers. This opens the door to a disrupter focused on providing
those low-end customers with a “good enough product”.
22. NEW MARKET DISRUPTORS
• New market disruptions take hold in a completely new
value network and appeal to customers who have
previously gone without the product. Thus, disruptors
create a new market where none existed and turn non-
consumers into consumers.
24. NETFLIX
• Netflix was launched in 1997 and its initial service was not appealing to
Blockbusters’ customers, who rented movies on impulse.
• Netflix had an online interface and a large inventory of movies, but delivery
through the U.S. mail meant selections took several days to arrive; therefore, the
service of Netflix took several days to arrive.
• Therefore, initially the service of Netflix appealed to only a few customers.
• However, as new technologies allowed Netflix to shift to streaming video over the
internet, the Company did eventually become appealing to Blockbusters’ core
customers.
25. APPLE
• Apple’s iPhone: The product that Apple debuted in 2007 was a sustaining
innovation in the smartphone market.
• It targeted the same customers coveted by incumbents and its initial success is
likely explained by product superiority.
• The iPhone’s subsequent growth is better explained by disruption—not of other
smart phones but of the laptop as the primary access point to the internet.
26. NEW CHALLENGERS’ PERSONAL-COPIER
• In the early days of photo-copying technology, “Xerox” targeted large
corporations and charged high prices in order to provide the performance that
those customers required.
• Librarians, students and other small customers, priced out of the market, made do
with carbon paper or mimeograph machines.
• Then, in the late 1970s, new challengers introduced personal copiers, offering an
affordable solution to individuals and small organizations---and a new market
was created.
• From a relatively modest beginning, personal photocopier makers gradually built
a major position in the mainstream photocopier market that Xerox valued.
27. AN INTERESTING ANOMALY
• An intriguing anomaly was the identification of industries that have
resisted the forces of disruption, at least until recently.
• Higher education in the United States is one of these.
• Over the years---indeed, new kinds of institutions with different
initial charters have been created.
28. • Many of these new entrants strived to improve over time, compelled
by analogues of pursuit of profitability, a desire for growth, prestige
and capacity to do greater good.
• They made costly investments in research, dormitories, athletic
facilities, faculty and so on.
• Yet the relative standing of higher education institutions remains
largely unchanged: with few exceptions, the top 20 are still the top
20, and the next 50 are still in the second tier.
29. • Because both incumbents and newcomers are following the same
game plan, it is perhaps no surprise that incumbents are able to
maintain their positions.
• The question now is: Whether there is a novel technology or
business model that successfully appeals to today’s non-consumers
of higher education.
30. • The answer seems to be yes and the enabling innovation is “online
learning”, which is becoming broadly available.
• Innovators are making in-roads into the main-stream market at a
stunning pace. (MOOC-Massive Online Open Course).
