Christensen’s theory
Discuss about the Innovator’s Dilemma By Clayton Christensen.
The term disruptive innovation was introduced by Clayton Christensen in the year of 1997, in his book named ‘The Innovator’s Dilemma’. Christensen stated that the term is grossly misunderstood and it is generally applied to those businesses, which are actually not disruptive. Finally, in the year of 2105, Christensen with his co-authors broke down the concept of disruptive innovation (Johnson, Christensen and Kagermann 2008). The theory suggests the concept through which an innovation changes an existing industry. The changes are brought by introducing the affordability, convenience, simplicity and accessibility where complication exists. Initially, the concept of disruptive innovation is established in a market where the members of the industry may consider it as unattractive however, the idea of the disruptive innovation will gradually change or redefine the whole industry. A perfect example would be the personal computer. Before the introduction of personal computer, mainframe computers and minicomputers had been dominating the industry of computing. The mainframe computers and the minicomputers were available at a price around $200,000. The computers required engineers in order to operate it. The scenario was changed when Apple brought the disruptive innovation in the computing g industry. It started selling the personal products in the year of late 1970s and the year of early 1980s. Initially, the personal computer manufactured by Apple, was not able to be compete with the mainframe computers and the minicomputers (Johnson, Christensen and Kagermann 2008). The performance of the product of Apple was not as good as the mainframe and minicomputers. However, the customers of the Apple Company did not swift to the mainframe and minicomputers as they were very expensive to afford. Knowing that the minicomputers and mainframe computers would not be able to as good as the mainframe and minicomputers, they stick to the company, which moved the company to bring innovation in order to improve the customer experience. The gradual improvement of the innovation made the personal computer more efficient as well as more affordable which had completely eliminated the mainframe computers and the minicomputers from the computing industry. Christensen’s theory of disruptive innovation is not limited to the industry of technology but it can also be implemented to other sectors as well. According to Christensen, disruptive innovation not only makes the products better but also makes the products more acceptable along with affordable. This study mainly sheds light on how service industry brought revolutionary changes in itself by adopting innovation. Hence, the study gave examples of some well known companies like Amazon and Dominos as how they used innovation and brought change while setting examples for other companies.
Adoption of disruptive innovation
The concept of disruptive innovation which is generally considered in the business sector is completely different from the theory of Christensen. The term disruption is grossly perceived as the interruption of the process. Whereas, the definition of the term disruption denotes something new that enters in the industry and has the possibility of becoming successful.
Christensen elaborates the differences between the low-end disruption and the new-market disruption. As per the statement of Christensen, the term low-end disruption eludes to the businesses which enters at the bottom of the industry with an aim to serve average yet little better than what the existing companies serve to their customers. These low-end disruptive businesses lower the profit margin of the other existing companies and become a threat to the incumbents. The existing companies in turn focus on achieving more profit margins within the industry.
On the other hand, the new-market disruption eludes to the businesses which steps in the direct competition against the non-consumption within the lower margin industry in the market. Like the low-end disruptive businesses, new-market disruptive businesses also offer products which are average yet better than the products offered by the existing brands. The primary differences between the two kinds of disruption lie in the factor that new-market disruptive businesses prioritize the undeserved customers while the low-end disruptive businesses aim to the over served customer area.
Christensen’s theory described disruption as the process more than just a product or service. While writing in the Harvard Business Review, he stated that it depends on time that whether the new disruptive business model of the innovator will succeed or not. He then exemplified Netflix. When Netflix fist came in the market, its strategy was such that did not pose any threat to the Blockbuster at a first space. It started providing DVDS to its customer when it first launched in the market. However, it could not satisfy the customers as the requirement of the customers did not meet. The customers rather wanted get the newly released movies instantly. However, based on the demand of the customers, Netflix improved its version and was able to snatch away the customer hold of Blockbuster even before they could take adequate measure to keep a hold on their customers.
When a disruptive business enters in the industry, it must be aware of the current market trends and the customer requirement as well. It is not necessary that every disruptive business will be successful in achieving the target market. The companies need to choose their rivals and make plans accordingly in order to address the market trend. In order to bring the disruptive innovation in the business, the companies need to understand first what the term is actually meaning. As mentioned earlier, disruption is no more limited to technological business. Any business can make a way towards disruptive innovation.
Disruptive innovation and popular brands
Most of the companies these days are adopting disruptive innovation in their business in order to make themselves stand out. Changing their business models into disruptive model, the today’s organizations mainly aim towards reaching out to maximum customer area. Within a few years, disruption has become a common business word which implies change in terms innovation in business. Disruptive innovation changes the fundamentals of a business. A complete new approach towards business, disruptive business models have become the one of key component that business heads strongly expresses their interest to (Furr and Snow 2015). From technical to social and others, every business sector is on the verge of implementing disruption in their business.
Regardless of industry, organizations are continuously competing with each other in order to hold the market position as well as to increase it. It can be said that the competition is the major aspect that pushes an organization to adopt disruptive approach in their business models. The advancement of the technology opened up a complete new sphere in the business world. Disruptive business model strongly rejects the traditional concept of business model (Paap and Katz 2004). The principles which were being followed traditionally narrowed the scope of business whereas the disruption based business model broadened the scope of business by involving technology.
Disruption redefines the whole world of business as it is incorporates strategies based on technology. Over the past few years, business disruption has become topic of discussion within the business world. Earlier which was a mere concept, now has changed into a reality that companies experience on a daily basis (Lucas and Goh 2009). Globalization is considered to be the root cause of disruption. The concept of disruption does not only allow the businesses to grow in an ever increasing rate, but also decline the cost of business practice in a rapid manner. Due to disruption concept, every day the external environment of business is changing. In order to keep a match with the change, most of the companies change their internal business game by various means.
The term disruption refers to innovation which can be implemented in many ways. For example, revolutionary changes have been brought by Amazon Company when they introduced Amazon Prime in the market. Most popular blockbuster movies as well as videoes are streamed in the application called Amazon Prime (Forbes 2018). The Amazon Company offers both free as well as paid version of the application to its customers. On one hand, audiences can watch latest movies through the paid version. On the other, old yet blockbuster movies are streamed for the customers who want to watch once again those blockbuster movies. As it brought changes in the scenario of movies, it also has introduced innovative changes in the shopping industry (Osterwalder and Pigneur 2010). Moreover all kinds of leading brands are available over the online shopping website called Amazon. Through only a single application, the company is able to deliver their products to the locations which is of the customers’ choice. In order to do this changes in the shopping sphere, the company has introduced smart-connected gadgets in their business.
These innovations are called digitization through which Amazon not only possible fast delivery of the products to their customers but also specially designed their websites with modern technology through which the buyer are able to keep the track of their ordered products. completely rejecting the traditional rules of shopping industry, which made the shopping experience as well as the return of the products troublesome for the customers, the company Amazon brought an ease to the return policy of the products so that the customer without any hassle can return the purchased products (Reinventing Your Business Model 2018). Apart from these, the company also made the payment procedure of the products easy for the customers through implementing smart-connected gadgets, which provides the customers hassle free payment experiences. Smart-connected gadgets and the digitization are thus similar in the meaning. The main aim of adopting digitization or smart-connected gadgets is to reach out to more consumers by using the technology to a greater extent (Zott, Amit and Massa 2011). The company when made the way for adopting technology in business, it purpose is to go beyond the traditional model of business strategies. The implementation of the smart-connected gadgets in the business has been able to elevate the concept of innovation in business to more integrated status.
In order to give a clear understanding of digitization, the Amazon Company can be taken again as an example. Along with the industry of shopping, Amazon has brought considerable changes in terms of innovation in the service industry also. With their integrated smart service model, the company has been able to satisfy a greater number of customer bases all over the world. Through the website and the mobile based application, the company made it possible for the customers to give feedback directly about their products as well as about their services (Porter and Heppelmann 2014). The customer service combined with technological innovation assists the customers regarding the issues of product information, process of delivery and many more. Apart from these, their integrated customer service provides assistance to the customer if they have negative experience regarding the delivery of the products.
Another example can be given which is of the popular fast food chain, Dominos. The Pizza making company not only made the pizza delivery fast but has completely changed the scene of delivery of the pizza by introducing disruptive innovation in their business. The internet based website of the pizza making company enabled the customers to place their orders from anywhere, any time. As compared to other pizza making company, it delivers pizza by a minimum time to its customers (Zhu and Furr 2016). The technology of the smart-connected gadgets, which has been used by the company can take orders, supervise the procedure of making of the pizza and keep a track of the pizza delivery person. Meanwhile the technological innovation has the capability to monitor the customer services as well (Glimore 2016). The other technological adoption includes the company’s avaibility over the other food delivery applications thus it can be said that the adoption of the innovation aims to reach out to maximum number of customer base.
The other companies which have made use of innovation in their business, are Uber, Airbnb, Facebook, Coke and many more. All these above mentioned businesses have implemented disruptive innovation in their business in order to make themselves stand out. Changing their business models into disruptive model, the organizations mainly aim towards reaching out to maximum customer area. Within a few years, disruption has become a common business word which implies change in terms innovation in business. Disruptive innovation changes the fundamentals of a business (Gilmore 2016). A complete new approach towards business, disruptive business models have become the one of key components that business heads strongly expresses their interest to. From technical to social and others, every business sector is on the verge of implementing disruption in their business.
The companies before adopting disruptive innovation in their business must adhere to some aspects. The first aspect before entering in the market should be kept in mind that, the disruptive innovation can have adverse effect on business if not implemented properly. Often business individuals do not have a clear understanding of what disruption actually means. Disruption is often considered to be applicable for the businesses that deal with hardcore technology (Gans 2016). Therefore the companies which have possibilities to be successful by adopting disruptive innovation in their businesses often step back due to lack of clear understanding of the concept.
Implementation of the disruptive innovation needs an effective research. Before implementing disruptive innovation in business, a company must analyze what is the current requirement of the industry. Innovation must be done as per the need of the customers. The company must know the factors that the customers expect from the company so that they can make the business plan based on innovation (Hang, Garnsey and Ruan 2015). In order to understand the customer requirement the organizations must conduct a research on the industry, from which it belongs.
The companies along with the above mentioned aspects need to be aware of the strategies adopted by the rival companies in terms of disruption. It has been often observed that many companies without knowing the rivals position implemented same strategy regarding the disruptive innovation and could not become successful in fulfilling the requirements of the customers while the rival companies due to having an effective implementation of disruptive innovation was able to pool a significant amount of revenue in the market (King and Baatartogtokh 2015).
It is necessary for the companies to understand the differences between the low-end disruption and the new-market disruption. The term low-end disruption eludes to the businesses which enters at the bottom of the industry with an aim to serve average yet little better than what the existing companies serve to their customers. These low-end disruptive businesses lower the profit margin of the other existing companies and become a threat to the incumbents. The existing companies in turn focus on achieving more profit margins within the industry (Sampere, Bienenstock and Zuckerman 2016). At the same time, the new-market disruption eludes to the businesses which steps in the direct competition against the non-consumption in the lower margin industry in the market. New-market disruptive businesses also offer products like the low-end disruptive businesses which are average yet better than the products offered by the existing brands. The primary differences between the two kinds of disruption lie in the factor that new-market disruptive businesses prioritize the undeserved customers while the low-end disruptive businesses aim to the over served customer area.
The companies need to aware of the fact that disruption is the process more than just a product or service. It depends on time that whether the new disruptive business model of the innovator will succeed or not. When Netflix fist came in the market, its strategy was such that did not pose any threat to the Blockbuster at a first space. It started providing DVDS to its customer when it first launched in the market. However, it could not satisfy the customers as the requirement of the customers did not meet. The customers rather wanted get the newly released movies instantly (Yu and Hang 2010). However, based on the demand of the customers, Netflix improved its version and was able to snatch away the customer hold of Blockbuster even before they could take adequate measure to keep a hold on their customers.
It is not necessary that every disruptive business will be successful in achieving the target market. The companies need to choose their rivals and make plans accordingly in order to address the market trend (Lepore 2014). In order to bring the disruptive innovation in the business, the companies need to understand first what the term is actually meaning. As mentioned earlier, disruption is no more limited to technological business. Any business can make a way towards disruptive innovation.
Some recommendations are given in order to implement the disruptive innovation in business.
- In order to avoid the adverse effect of disruptive innovation in business, a company must be implanted it effectively.
- It needs experts to design the strategies as well as the business model based on the disruptive innovation so that it can successfully serve for the interest of business.
- The companies need to choose their rivals and make plans accordingly in order to address the market trend.
- In order to bring the disruptive innovation in the business, the companies need to understand first what the term is actually meaning. Disruption is no more limited to technological business. Any business can make a way towards adopting disruptive innovation.
- The companies need to aware of the fact that disruption is the process more than just a product or service.
- Disruptive innovation depends on time that whether the new disruptive business model of the innovator will succeed or not.
- It is necessary for the companies to understand the differences between the low-end disruption and the new-market disruption.
- The term low-end disruption refers to the businesses which enters at the bottom of the industry with an aim to serve average yet little better than what the existing companies serve to their customers.
- The new-market disruption eludes to the businesses which steps in the direct competition against the non-consumption in the lower margin industry in the market.
Conclusion
To conclude, it can be said that disruptive innovation or digitization in the business model is being rapidly adopted by most of the large companies all over the globe. The term disruptive innovation was introduced by Clayton Christensen in the year of 1997, in his book named ‘The Innovator’s Dilemma’. Christensen stated that term is grossly misunderstood and it is generally applied to those businesses, which are actually not disruptive. Finally, in the year of 2105, Christensen with his co-authors broke down the concept of disruptive innovation. The theory suggests the concept through which an innovation changes an existing industry. The changes are brought by introducing the affordability, convenience, simplicity and accessibility where complication exists. Initially, the concept of disruptive innovation is established in a market where the members of the industry may consider it as unattractive however, the idea of the disruptive innovation will gradually change or redefine the whole industry. The paper begins with discussing the disruptive innovation theories of Clayton Christensen. In the discussion, several aspects regarding Christensen’s theory have been discussed. Additionally, the study reflects on the current scenario of market adoption of the disruptive innovation while highlighting the factors that encourage the organizations to adopt this approach. In addition to that, several companies who have adopted disruptive business model in their business have been mentioned as examples of disruptive innovation in business. The paper further states the key factors that a company should consider before implanting the approach of disruptive innovation its business. Finally the study concludes by giving some recommendation so that a company can successfully implement it in order to generate more revenue.
References
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