Wednesday, April 13, 2016

Planning Smart for Disruptive Technologies

Disruptive technologies by nature require thinking out of the box that create new market in design as small, simple and easy to use; as described by Clayton M. Christensen in the article ‘Introduction: Why Good Companies Fail to Thrive in Fast-Moving Industries’.

The most intriguing idea of disruptive technologies has been glorified by W.Chan Kim and Renee Mauborgne in the article ‘Blue Ocean Strategy’, this inspires leaders to create opportunities beyond traditional business market. Key point for blue ocean markets is to introduce a product or service which is low cost. Low cost because it allows disruptive technologies to flourish under the umbrella of ‘new to the market’ and this creates willingness among buyers to try the new product. Example of good-enough and low-cost solution is, Southwest Airlines who clearly came disruptive existing market model where other established airlines had to take notice and follow the trend.
Another idea is, that managers may start with a small customer base but the intention is to grow business in a new market and build strategy to incrementally improve overtime with test and trial. As W. Chan and Renee Mauborgne described in the article ‘Blue Ocean Strategy’, that inherently company strategies always take a military stance to approach next steps. But disruptive technologies take form by envisioning undiscovered land of opportunity.

At the same time Clayton M. gave us a great lesson of rationalizing monetary spend on disruptive technologies. It is important to know, that while creating disruptive technologies, we must take smart steps to control costs using these three steps explained by Clayton in ‘Introduction: Why Good Companies Fail to Thrive in Fast-Moving Industries’. First of all, disruptive technologies are simple to use and inexpensive. This allows for areas of improvement and quick launch of minimum viable product to the market. Second, try and attract to the needs of small group where the need is at an evolving stage. Third do not expect profitable customers to jump into this new market. In general principle of disruptive technologies, consumer segment who are thee early adopters of the product, do not expect heavy returns on investment or large profit margins. Taking example of Intel’s micro processing chip, the product was simple, small and initially had its limited use in technology. But the overwhelming increase in smaller devices over the years created huge demand for micro processing chips. Intel enjoyed big success and eventually captured almost entirely all of the market share in this realm.

To create a sustainable and long life for a company, disruptive technologies can be very useful tool. The model of five principles described by Clayton in ‘Introduction: Why Good Companies Fail to Thrive in Fast-Moving Industries’ allows companies to think beyond their existing business and to create opportunities not from existing market but with an introduction of new market needs. Five principle require strategy driven based on, 1) customer and investor say matters the most, 2) Do not wait on industry to become large before entering that market, 3) Untapped markets do not have comprehensive or any data available for market feasibility, 4) Do not entirely rely on the people with capable skills rather rely on processes of the company and lastly, 5) Do not over satisfy the existing customers i.e. technology improvements can create a gap of low cost solutions allowing competition to capture that market.

Key take away from this discussion is, that while sustainable markets allow companies to grow and compete with the competition but that is not a sustainable strategy. Eventually the competition catches up on your strategy and starts taking over your market share. But a smart move would be to invest time and energy in disruptive technologies where competition is not relevant and does not exist. Hence, disruptive technologies are simple, cheap, small and established based on emerging markets.

References:
1)      ‘Introduction: Why Good Companies Fail to Thrive in Fast-Moving Industries’ by Clayton M. Christensen.
2)      ‘Blue Ocean Strategy’ by W. Chan Kim and Renee Mauborgne.

3)      ‘Discovering New and Emerging Markets’ by Clayton M. Christensen.

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