Entrepreneurs are well positioned to introduce disruptive innovation into the market. Use these three questions to identify the opportunities.
Harvard Business School professor Clayton Christensen is just one theorist who has described the power of business disruption. Essentially, a nimbler competitor introduces an innovation that creates a new market, which can ultimately replace an existing market. Here are three questions to ask, to identify where you could make a business disruption happen.
1. What are my competitors’ commitments?
Established businesses have invested in systems, staff and products that work well for the existing market. It’s not easy for them to walk away from these investments to try a new way of doing business or to offer a different product.
Examine the existing market and identify the “givens”. For example, does everyone bill for their time, rather than for the work performed? Are the products all produced and priced similarly? Do all these businesses compete for the same target customer?
Example: a commitment to the existing technology. Cathode ray tube (CRT) televisions and screens were a market mainstay for decades, from the 1930s. In contrast, the first LCD displays in the 1970s were primitive, monochrome and were used for watches and calculators. Colour LCD screens replaced CRT screens because, initially, consumers were willing to sacrifice picture quality for flat screens that could be wall-mounted and offered greater choice of size. LCD is also more energy efficient than CRT.
2. What does this mean they will not do or defend?
In order to protect and justify their existing model, businesses may have to sacrifice a particular customer set or avoid a risk that a new business may be willing to take on.
Looking at the big players in a market, could they add a cheaper or more expensive product to their range without undermining their existing offering? Where do they source materials or products and what claims can they make about their sources? How are they
staffed and what do these staff members do? Are they tied to
particular physical locations or infrastructure?
Example: an off-the-grid opportunity. In India, Manshuk Lal Raghavjibhai Prajapati realised that refrigerator manufacturers were reliant on electricity infrastructure. He invented the clay Mitti Cool refrigerator, which uses simple water evaporation for refrigeration. The product is an electricity-free, affordable option for rural areas.
3. What opportunities does this present?
Once you’ve identified the basic assumptions and investments that existing businesses have made, you’re in a position to try something new.
Is there a basic product or service in the market that targets customers who want something that’s just good enough, with no bells and whistles? How about something for the high-end customer who is willing to pay for more customisation? For B2B businesses or suppliers, could you develop a service or product where you get a fee for every new customer who buys it, rather than charging for your time? This links your reward to the client’s success – a great incentive to create a killer product!
Example: computers for the masses. Sydney-based start-up Ninja Blocks is producing small, cheap computers ($155 for the Ninja Block; $255 for the Ninja Block and five sensors). Optional plug-in-and-go sensors perform simple functions and report the findings online. Tasks include monitoring motion and temperature, turning switches on or off, or taking photos.
Famous examples of disruptive innovation
1. Vinyl records, replaced by tapes, replaced by CDs, replaced by downloadable digital music files.
2. Landline telephones, replaced by mobile phones.
3. Film photography, replaced by digital photography.
The views expressed in this article are those of the author and the interviewees, and not of Australia Post.
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