Fantastic book with excellent explanation of markets development. Though the explanation may not predict what will happen exactly, it give a frame of reference and starting point for thinking about any specific industry.
A useful book summary gives a short overview of primary concepts in the book.
Disruptive and Sustaining innovation
Sustaining innovation enhances value of the best customers of currently dominant businesses, and is usually quickly pursued by the incumbents. Disruptive innovation targets customer groups that are not “interesting” to industry incumbents.
- Customers not consuming any product or consuming only in inconvenient settings (non consumers)
- Consuming customers who are underserved
- Consuming customers who are overserved
Asymmetry in motivation/skills
Disruption capitalizes on asymmetries of motivation and skills. Disruptive markets start among customers that appear to the incumbent to be either undesirable or nonexistent. The initial absolute size of a disruptive opportunity is generally too small to justify any substantial amount of investment or even management attention. Asymmetric motivation shields companies from competitive response, because their potential challengers are just not interested in fighting.
Strategy formulation: deliberate and emergent. Deliberate – traditional process of studying markets and company’s strengths. Emergent – retain flexibility based on market feedback.
- Disruption is a process, not an event.
- Disruption is a relative phenomenon. What is disruptive to one company may be sustaining to another company.
- Different or radical technology is not the same as being disruptive.
- Disruptive innovations are not limited to high-tech markets.
One mistake innovators must avoid is to force a disruptive innovation directly into a large, mainstream market. The biggest, most lucrative customers will not initially be interested in purchasing the product because of its limitations. Low-end disruptors are more likely to find success when they stealthily take advantage of the asymmetries of motivation by targeting customers whom existing players are happy to avoid.
Recommendations for Managers
- They must not feel threatened when someone counters their insights by referring to “unassailable” data. Truly unassailable data only exists about the past.
- Theory and data must go together. Theory can help guide data collection, provide confirmation that circumstances are changing or indicators that suggest who has the upper hand in a competitive battle.
- Everything is relative. The same innovation has very different implications for different companies. Every company is motivated to tackle some opportunities and ignore others.
- There is a difference between announcements and actions. Just because the company says it plans to do something does not necessarily mean it will. So signals must be interpreted carefully.
- Choices matter up to a point. Firms do not have unlimited degrees of freedom.
Strategies for new firms:
- better product to take incumbent’s best customers
- low-end products to target price-sensitive customers (possibly not interested for incumbent)
- disruptive product to target non-customers (later improve the product and possibly move up-market)
- Chinese company created a very small microwave, which required little energy. Later, moved up-market.
- Bangladesh – company recruited “mobile phone operators” to sell phone calls on the per-call basis to people who could not afford a phone themselves; with large volume, the market became very profitable.