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Path to Disruption and the Innovator's Dilemma
Toyota disrupted the US car market through a strategy of entering low-margin market niches ignored by incumbents, innovating to make those niches profitable, and then moving upmarket to compete directly with incumbents. Specifically, Toyota entered the US market in 1968 with subcompact cars, then reengineered its manufacturing process using lean techniques to lower costs and increase margins. This allowed Toyota to offer lower-cost, higher-feature cars than incumbents and capture market share across segments. Toyota's example demonstrates how disruptive innovation can involve targeting overlooked niches before competing head-on with existing companies.
Path to Disruption and the Innovator's Dilemma
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- 2. Me 2 Startup Mentor 16 years working indigital Growth Hacker Fintech Enthusiast Love Cars @niroism
- 3. 3 What is theBest Selling Car in the US? GM Ford Dodge ? Some other car
- 4. Toyota Camry The BestSelling Car in the US is… Jan 2016 US car sales
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- 6. 6 Toyota’s entry intothe US Market Toyota Corolla 1968 (Sub-compact) Typical 1968 Muscle Car
- 7. 7 Traditional Business Thinkingof US Car Manufacturers Focus on the best customers Focus on the highest margin products
- 8. 8 Continued allocating Resourcesto build new features for these segments (Sustaining Innovation) £
- 9. 9 Toyota knew thatselling cheaper cars meant tighter margins for them $$$ Manufacturing cost $$$$ Car retail price
- 10. 10 So they re-engineeredthe car manufacturing process – Toyota production system Just-In-Time Systems Lean Manufacturing Kaizen teams (Continuous improvement)
- 11. 11 This lead tocheaper manufacturing costs and better margins for Toyota $$ Manufacturing cost $$$$ Car retail price
- 12. 12 And once theycaptured a significant stronghold over the lower end of the market, Toyota moved upmarket
- 13. 13 The incumbents couldnot compete with Toyota’s Lower cost, High Feature cars as their margins would not allow it Toyota Car Sales Incumbent Car Sales Disruptive Innovation
- 14. 14 Path to Disruption Enter lowmargin niche ignored by market incumbents Innovate to make the niche market segment profitable Move upmarket and compete with market incumbents Become new market incumbent Beat incumbents on price and service Disruptive Innovation – Clay Christensen
- 15. 15 Disruptive innovation can hurtif you are not the one doing the disrupting - Clay Christensen
- 16. 16 Path to Disruption Enter lowmargin niche ignored by market incumbents Innovate to make the niche market segment profitable Move upmarket and compete with market incumbents Become new market incumbent Beat incumbents on price and service
- 17. 17 Enter low marginniche ignored by market incumbents International Payments P2P Lending Personal Finance Management Cloud Accounting Banking Disintermediation
- 18. 18 Path to Disruption Enter lowmargin niche ignored by market incumbents Innovate to make the niche market segment profitable Move upmarket and compete with market incumbents Become new market incumbent Beat incumbents on price and service
- 19. 19 Innovate to makethe niche market segment profitable Onboarding - Automate form completion Usage of Companies House API to autopopulate form
- 20. 20 Innovate to makethe niche market segment profitable Snap ID for real time KYC Onboarding – Real time KYC
- 21. 21 Innovate to makethe niche market segment profitable Video call with live photo and ID capture for KYC Onboarding – Real time KYC
- 22. 22 Innovate to makethe niche market segment profitable Solution for thin credit file applications
- 23. 23 Path to Disruption Enter lowmargin niche ignored by market incumbents Innovate to make the niche market segment profitable Move upmarket and compete with market incumbents Become new market incumbent Beat incumbents on price and service
- 24. 24 Move upmarket andcompete with market incumbents Banking re-intermediation - Marketplace bank?!?
- 25. 25 What should Banksdo? The Innovator’s Dilemma Sustaining Innovation Disruptive Innovation • Do new better things • Focus on niche segments and unproven markets • Do what we always did but better • Focus on high margin products
- 26. 26 What should Banksdo? The Solution – Do both SustainingInnovation DisruptiveInnovation Collaborate with startups Enter adjacent or completely new marketsFast follower Kaizen teams
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