The disruptive innovation model In the Innovator’s Dilemma, Christensen (1997) identified three important elements of disruption: The rate of improvement that customers can utilize or absorb The pace of technological improvement The distinction between sustaining and disruptive innovation The first element represents the fact that not all customers are actually able to utilize the performance companies make available for them due to certain factors. An example from the automobile industry is that the companies are keep providing new and more powerful engines, but traffic jams, speed limits and safety concerns prevents certain customers to utilize all the performance. The second issue is the pace of technological improvement. Generally,
Sustaining innovation mainly deals with rectifying defects and making the products faster and more powerful. The other form of innovation being disruptive offers lower performance products but contain key features which is valued by the market. It is noteworthy to mention, that disruptive innovation does indeed have more defects which includes less speed and power. Products that are disruptive appears as if its doing everything wrong, born from the need that exists in a niche market that is neglected by the current market offerings. The failure of not focusing on disruptive innovation is often overseen by managers and entrepreneurs, which eventually leads to the product becoming
B. How firms can respond to the emergence of potentially disruptive technologies and innovations. The term, disruptive innovation was coined by Clayton Christensen.16 In his book, The innovator’s dilemma, 17 he describes two types of innovations: sustaining and disruptive innovation. According to him, sustaining innovations are those that improve product performance in ways that the mainstream or high-end customers would normally value, while disruptive innovations have new features that generally target the low end, less profitable part of the market, or even create a market for new customers. Initially, they deliver worse product performance than the already established technologies based on what mainstream customers value, but usually catch
They outline four factors of Web 2.0 that must be considered by companies (particularly e-businesses) undertaking BMI; Social Networking, Interaction Orientation, Customisation and Personalisation, and User Added Value. This model is explained further in Figure 2. (Bower and Christensen, 2000) maintain that disruptive technologies cause disruptive innovation. They define Disruptive Technology as “technology that has the potential for revolutionizing an industry”. They also use as an example in order to explain this theory: When Sony released their first transistor radios, they sacrificed sound fidelity but created an entirely new market
A disruptive technology is defined as a disruptive innovation that disrupts an existing market by creating a new market. When looking at innovation, we can say that there are two types of technological innovation, namely incremental and radical innovations. These two variances are quite distinct in nature. Incremental innovation takes an existing product and creates barely or minor changes to the existing technology, it is safe to say that most innovations are incremental in nature and involves small improvements to the already existing technology. There is no dramatic change to the design, just improvements of the product, service or processes.
It also includes better products and services by remodeling of existing process and recombinative innovation (NESTA Report, July 2012). IV. China’s low cost disruptive innovation Disruptive innovation, a term of art coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors (Clayton Christensen). The characteristic of disruptive innovation at least for the initial phase includes lower gross margins, smaller target markets and simpler products and services. Chinese are known for their low cost advantage throughout the world and is acting as a disruptor for other firms as they have changed the whole landscape of BOP market by their offerings.
Disruption is effectively a more violent form of competitive innovation. What Christiansen called ‘new market disruption’ occurs when a new product meets a new customer need – or even better – creates customer desire – like Apple did with the iPod and iPhone. What real disruption does it forces consumers to ask the most primal questions about market places. Planning for digital disruption • Adopting digitally disruptive technologies and processes should be a calculated move after careful and detailed analysis of a company’s risk appetite and its capacity for continual change. • Digital disruption is about creating better brands, resulting in better dialogue with its customers and getting its brands to the market in a faster and more efficient way.
Process has to do with series of activities that are linked or connected. So the process of new product development has to do with the various step NPD team undergo to bring a new product/ service into the market. THE PROCESS OF NEW PRODUCT DEVELOPMENT According to Kotler et al. 2008: 254 stated in order to create successful new products, a company must understand its consumers markets and competitors and develop products that deliver superior value to consumers. The company must ensure that they plan about the new product and set a systematic new product development process for bringing new products in the markets.
Disruptions like these go after either low-end consumers by offering higher value or by lowering prices, or they go after an entirely new set of customers. In The Innovator’s Dilemma, a book by Clayton Christen, it is mentioned how innovations that are new unexpectedly bring established markets to an end. (Christensen, 1997). There is an important difference between ‘sustaining’ and ‘disruptive’ innovations as Sustaining Innovation is mostly exercised by companies that are established and it helps maintain their competitive degree in the market by altering and improving the overall performance of existing products. (Christensen and Overdorf,