Executive Summary
“A disruptive innovation is a technologically simple innovation in the form of a product, service, or business model that takes root in a tier of the market that is unattractive to the leaders in an industry.” – Clayton M. Christensen
A disruptive innovation is a process of development of new products or services to substitute existing technologies and attain a competitive advantage in the market (Christensen, The innovator 's Dilemma, 1997) . Disruptive innovation transforms an existing market by introducing simple, convenient, accessible, and affordable technology where complication and high cost is the status quo.
In today’s turbulent environment having disruptive innovation is essential, both for growing a business and protecting existing markets. However, leading disruptive innovation necessitates new mind-sets and behaviours, for the organisations that develop them (Kaplan, Leading disruptive innovation, 2012). In organisational context, disruptive innovation induces a wide range of change in organisational status quo and needs to be managed by new strategies.
Disruptive innovations bring a very different value proposition to the market than previously available one. Usually disruptive innovations underperform established products in mainstream market (Christensen, The innovator 's Dilemma, 1997). In order to deal with disruptive changes organisations as a whole should foresee the impacts of the changes, lack of such anticipation and
Strategic Innovation takes the road less traveled – it challenges an organization to look beyond its established business boundaries and mental models and to participate in an open-minded, creative exploration of the realm of possibilities. “All men can see the tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.” – Sun Tzu Some organizations may feel that seeking breakthroughs is too grandiose a goal, and that they would be content with “simply growing the business”. Experience shows, however, that focusing on the short-term typically yields only short-term results – while teams aspiring to seek significant breakthroughs will both identify “big ideas” and also generate closer-in, incremental ideas.
A wise man once said, “The only permanent thing in the world is change,” an adage that rings especially true for organizations in this fast-changing era of technology and communication. Daft very deftly puts the inescapable need for change in three simple words, “Innovate or Perish” in his book “Understanding the Theory & Design of Organizations” [2].
The second objective is to find disruptive innovations that threaten the product roadmap and which, ideally, can be incorporated into corporate strategy to yield a competitive advantage [3].
Disruptive technology is a new way of doing something that initially does not meet the needs of existing customers. This type of technology tends to open new markets and destroy old ones. While, a sustaining technology produces an improved product that customers are eager to buy. This technology provides better, faster and cheaper products on established markets.
Innovation theory define when new or existing, large or small companies, individuals or groups identify, create and market new or existing products or services to consumers ultimately disrupting an existing business or create value. Some ideas are born out of a need that ultimately satisfies consumers and some are the next steps that dominate the market. Pfizer’ innovative strategies provide new products such as Lipitor, Viagra, and Celebrex.
The places that innovative ideas come from can vary. The innovation process involves creativity of the mind. The ideas that surround innovation come from employees, customers, competitors and even your suppliers. Anything that deals with innovation is challenging. The purpose of this report is to identify the sources of innovation, how it affects industries and to evaluate disruptive innovation.
Being innovative does not only mean inventing. Innovation can mean changing the business model and adapting to changes in the environment to deliver better products or services. Successful innovation should be an in-built part of a business’s strategy to create a culture of innovation and lead the
If you are searching for a definition for innovation you can find a number of different ones. Basically they all include the idea of creating something new. Referring this idea to business, the definition of Westland seems to be appropriate. It says an ‘innovation is a product or service with a bundle of features that is – as a whole – new in the market, or that is commercialised in some new way it opens up new users and consumer groups for it’ (Westland 2008, p. 6). According to that, innovations can occur for products, services, processes and business models (Stamm 2008). Beside these categories, there are three different levels of innovations, depending on the degree of novelty involved: incremental innovations are minor changes. When implementing these changes, something is done in a better way than it has been already done before, so there’s nothing significantly new. Substantial innovations are mid-level in significance both to customers and to the company (Tucker 2008). Radical innovations, also known as breakthrough innovations, transform the way you think and have a big impact on the company and the customers in a whole (Tucker 2008; Bessant & Tidd 2008).
In this essay I will describe and explain the causes and consequences of disruptive innovation. Firstly I will write about what dualism is, why it is important and how to achieve it. I will continue with describing difficulties, which may occur on a company’s path towards it, namely overshooting and inability to recognize the start of a new industry cycle. Further on, I will go deeper in the reasons, why incumbents fail to recognize the new entrants on the market, specifically “attack from below” and other discontinuous patterns of change. In the end I will describe some of the responses taken by established companies to disruptive technologies.
Disruptive technology brings about many opportunities for both innovation and productivity outputs, however it can also be a risk. It includes developments that create substantial change across the economy for most people and businesses, the impact of which causes significant costs to adjust to due to capital being made obsolete and workers becoming underutilised. Clayton Christensen is considered to be the world’s top expert on the concepts of disruption innovation and technology and according to him the ‘introduction of digital disruption offers a better alternative to the present approach for solving customer problems’. Digital disruption is redefining the norm, changing both markets and competitors around the world. Whilst it can be a positive change for
For instance, Wal-Mart is a good example of a company that has used a disruptive business model (Hess, 2012). Wal-Mart came into the market and introduced cheaper products while opening thousands of stores across the globe. Their concept of buying less at a lesser fee seemed to have attracted a lot of customers and this translated to the right revenues for the company within the first year of operation. Wal-Mart is arguably the biggest store globally and the largest employer with an employment capacity of over two million people globally. A disruptive model ensures that a company leaves an old way of shaping their products and learns new methods of
What Christensen means is that using the words “disruptive innovation” in a non-jargon way is very difficult, as even Uber, the company most pointed to by many as the epitome of a disruptive company cannot even be defined as disruptive. Perhaps he is implying that the misuse of certain words can be equated to jargon, such as when people in everyday conversation refer to Uber as a “disruptive” company. Because of this, Christensen believes that the mantra that commands: “Disrupt or be disrupted” can be very misleading. He advises corporate leaders of incumbent companies to not overreact to this mantra by trying to solve the problem before it is one. Christensen implies that overuse of this phrase requires incumbent businesses to be extra vigilant
Tidd et al (2000) states, “the innovation is a business process of revolving opportunity into new ideas and of putting these into widely used practice. In term of the nature, there are five major types of innovations: novelty, competence shifting, complexity, robust design and continuous improvement. While in term of the extent of change, innovations can be divided into incremental, radical and
Tidd and Bessant (2009) argued that “Unless an organization is able to move into further innovation, it risks being left behind as others take the lead in changing their offerings, their operational processes or the underlying models that drive their business”.
The case study of “Disruptive Innovation” is a studying that concentrated and described an innovation as the affordable price products for people in the entire world to use. This research indicated about certain disruptive innovations such as the laptops, the routers, smartphones or desktop photocopier that are the substitutions for other companies’ commodities. Furthermore, Porter five forces strategy is a structure to examine the level of competition in today’s market and to make an improvement for the business strategy. Likewise, these forces are including: the threat of new entrants, when suppliers have power, when customers have power, the threats of substitutes and intensity of competitive rivalry. Therefore, this report was assigned to analyze Porter’s five forces strategy for applying toward the case of disruptive innovations and demonstrating on how it affects or relates to most of the companies worldwide.