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.
Excellent book – an explanation of what has changed and what has not changed in marketing. While the book describes case studies using social media (the shiniest of all shiny objects 😉 ), the author puts new marketing tools in perspective, explaining that medium is not the message and each business needs to understand where its limited marketing dollars should be spent more effectively.
Marketing strategy rightly remains the foundation of marketing.
Another fundamental (and rarely understood) point is the need for internal alignment and minimal level of marketing resources to be effective. No matter how brilliant the idea and dedicated the marketing team, positive impact on the business can not be realized if resources are insufficient and alignment is absent.
The author outlines several points of alignment needed; it is probably first time when I saw all of them emphasized, what makes complete sense.
As we have been discussing marketing and sales for a long time, and marketing and IT conversations in a few last years, product development relation to marketing was somewhat understood, but the idea that executive support AND all of other alignments are needed for marketing to succeed is often missed. Every marketer probably has more examples of when particular alignment was not working than examples when everything worked perfectly 🙂
Particularly interesting points:
- Companies are focusing on broader customer life-cycle, including customer’s experience after the initial sale. In some organizations the CMO is replaced by CCO (Chief Customer Officer)
- Think which marketing programs you can cut out. A few strategic programs done well are more valuable than many initiatives adding to the noise…
- In the five stages of the purchase process (Awareness > Consideration > Purchase > Preference > Loyalty) – the purchase is the middle step, rather than a final one
Moving forward with a marketing program without taking the time to outline a solid strategy is like going mountain climbing without understanding which mountain it is you are going to scale
- It is impossible to build a successful strategy without understanding the vision and goals of the overall organization.
- Is the corporate focus on growth in terms of revenue or new customers?
- Is the business looking at maintaining or growing its business in existing markets, or expanding into new markets?
- Is the focus on customer acquisition or on improving margins?
- Organizations that rise above the noise solicit customer input, good or bad, and they act on it to improve their performance and drive their marketing.
- Sun Microsystems: original customers were the same as the producers of the product – the engineers. When the product became popular on Wall Street, the target audience was generally the same “but they dressed better.” When Sun moved to business and commercial space, the audience became different – different goals and objectives and different experience level. “We had to ask customers what they wanted, because they were no longer us.”
- Customers will be more open with a third party consultant when discussing the company’s products and services.
- Many campaigns run effectively for three to four years before being replaced. Marketers have to understand that their fatigue with a marketing campaign doesn’t necessarily translate to consumers.
- Discounts: Bed, Bath and Beyond cut its margins by 20% with aggressive discounts. That may work for this company’s business model, but may not be beneficial for others.
- New Digital Divide: companies who use data effectively and companies who do not.
- Internal communication: a company provided a brand guidebook for employees when branding changed. A few years later, when this organization merged with another one, employees were asking for the new brand guidebook.
- Excellent new employee orientation experience stays with the employee for 7 years (maybe longer; it was the extent of the research).
- There is no ideal definition of employee engagement; what works in one organization, may not work in another.
- At one point marketers believed that web design and programming (to produce a good web site for the company) needed to be in-house. Now, the feeling is that web strategy is what is key, but the web design and programming can be outsourced.
You will meet people who believe that today’s marketing decisions should start and stop with data. The problem is that we can’t abdicate decision-making responsibility to the analysts. … Even with great insights, we still need people with the right judgement and business acumen to make decisions.