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Understanding and applying Disruption
Theory (Christensen)Munir Mandviwalla
Fox School of BusinessTemple University
What do these have in common?
Porter “Five forces”SWOT
Financial analysis“Best practices”
Christensen
Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.4.
SustainingMove along a known path
such as improve an existing product.
Low-endExisting products are “too
good” and relatively expensive such as
Smartphones?
New-market Change the product to get new people by changing its nature or by making it more convenient (reduce expertise
or wealth requirement)
Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.6.
ResourcesWhat a firm has
ProcessesHow a firm does its
workValues
What a firm wants to do
Strengths
Weaknesses(blind spots)
Source: Singh, D. “Porter’s Value Chain”, August 5, 2009. Retrieved from Wikipedia on September 13, 2010. http://en.wikipedia.org/wiki/File:Porter_Value_Chain.png
What matters most to
customers?
Control
Integrate (modularize)
Integrate to improve what is “not good
enough” (e.g., speed, customization, convenience)
Outsource what is “more than good
enough”
Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.2.
UndershotUp-market sustaining
innovation.
NonconsumersNew-market disruptive
innovation
Overshot Low end-disruptive
innovationModular displacement
Market contextLow end, new market, new
context
Industry
Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.3.
New market
Existing market
Non-consumers / Not consuming
• Change• Simple• Increase access• Increase ability• Reduce financial
barrier• Reduce skill barrier• Easily• Effectively
• Signals• Growth rate• Specific segments
(college students!)• Product or service
delivery chain• RELATIVE low price
• How• Convenience• Customization• Lower price
• Leads to: New market disruptive innovation
Undershot
• Change• Incremental• More radical
• Signals• Consumer frustration• Negative reviews• Willingness to pay
higher prices• Prosperity of niche
integrators• Specialists struggle
• How – existing customers• Performance -
Reliability• Performance -
Functionality• Integration - need it
for radical• Compatibility• Interoperability• Legacy
• Leads to: Sustaining up-market (radical or incremental innovation)
Overshot•Change•Basis for competition•Make the product “less good”•Commoditize•Signals•Decreasing prices over time (refusal to pay for more)•Features not used•Complaints about ‘complicated’•How•Value chain•Convenience•Customization•Low prices•Ease of use (flexible and convenience, customizability, price)
•Leads to•Low-end disruptions (convenience/price)•Specialists displace integrated players (need modularity)•Standards based competition
Connecting Systems Thinking to Disruptive Innovation
What processes did it directly affect?
How did it affect the publishing industry?
What were the secondary effects on society?
The Kindle as a disruptive innovation…
Google Case Study Discussion
Describe the line of business Google is in. What is Google’s revenue model (how do
they make money)? Who are its customers? With this in mind, what is Google’s real product?
How would you describe Google’s strategy? Do they have one?
What Should Google Do?
Amazon Case Study Discussion
Why would a company use services from Amazon instead of maintaining their own infrastructure?
Is Amazon web services following a disruptive strategy or a different business model?
Apple Case Study Discussion
What are the key success factors behind Apple’s platform strategy with iTunes?
Develop an argument that a similar platform strategy can or cannot be used in other products such as cars, TV, or more traditional products like furniture and appliances (e.g., pick a side and argue it).
Compare the Google, Apple, and Amazon strategy. Which company do you think will be more successful? Why?
Google vs. Apple vs. Amazon