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Transcript of Disruptive Technologies
& the Death of
Innovations that improve a product or service in ways that the market does not expect
Change service delivery
Force change in design
Innovations that do not change existing markets
Innovation has features that exceed what consumers need
It becomes disruptive when at higher levels of use, it begins to change how users apply the technology
Base market - innovation addresses the needs of dissatisfied customers
Once value is created - charge more for the product or service
Shrink competitors market share & gradually forces either change or exit from the market space
Radio & TV
Made digital recordings easy to transfer
Directly upload to youtube
Integrated camcorders and cameras
Easy to use
Entrepeneurs created it in an office above Gump's Department Store in San Francisco ... sales started in 2007
Sold 2 million devices
2009 - $490 million
What happened between 2007 and 2011???
Integrate more features
Good enough ...
Cisco didn't care
400 million in revenue in a 40 billion dollar firm
Smaller profit margin than other products
$300 million tax write-off in the third and fourth quarter
An Entrepeneur's View
Folks who started the business made huge profits
Investors realized a return on the investment
Innovation quickly diffused
What do you think?
How Disruptive Innovations Kill Competitors
Distribution & Cost
One other condition
: A History
After grabbing market share - seek to improve profit margin by adding features
Concentrate on core products
Bring a different value proposition to the market. Initially, they often underperform established markets.
Improves the performance of established products for mainstream customers in major markets.
Precursors to Innovation
A core business that is in control
A game plan ... targeted innovation portfolio
Disrupt competitors, not customers
What does this mean?
1. Largest markets do not equal growth opportunities.
2. Sustaining innovation improves product past what people need.
3. Disruptive innovations often win by being inferior but closer to customer needs.
4. Low Cost strategy only works when you are fighting against a high cost competitor -> prices will fall ...
5. A good disruptive strategy creates an incentive for leaders to exit a contested area & focus on higher margin businesses.
6. Good companies survive by setting up separate business with an unfettered charter to kill the mother company.
Listening to customers is NOT the key to innovation
Testing for Disruptive Ideas
Test 1: New Market Disruption
Test 3: Sustaining Innovation
Test 2: Low End Disruption
Is there a large enough population that utilizes an inconvenient product? Service?
Is the innovative disruptive to all the incumbent firms in the industry?
Will low-end customers buy a product with "good enough performance?
What's Next? More Innovation ...