Does The Innovation Have Potential To Be Disruptive

Three sets of questions that will determine whether an innovation has the potential to be disruptive

i) new-market disruptive

- Is there a large population of people who historically have not had the money, equipment or skill to do this job for themselves, and as result have gone without it altogether or have needed to pay someone with more expertise to do it for them?

- Will the product/service be more convenient, more effective, more reliable, simpler and lower-priced than the current available product/service?

- Will organisations providing the product/service be able to stay connected with a given job as improvements are made?

- Can a purpose brand be developed so that the customers know what to buy?

ii) potential for low-end market disruption

- Are the customers at the low end of the market happy to purchase the product with adequate but lower performance than what competitors offer, ie trade-off some performance attributes (like slower speed, less reliable, more basic, etc), in exchange for a lower price?

- Can you create a business model that enables you to earn attractive profits at discount prices required to win the business of these currently over-service customers at the low end?

iii) degree of disruption

- Is there a similar impact of the innovative disruption on all the significant players in the industry?

Remember: if one or more significant player in the industry will not be disrupted by the innovation, then the entrant is unlikely to win.

There are 4 elements to developing new market disruption

"...i) the target customers are trying to get a job done, but because they lack the money or skill, a simple, inexpensive solution has been beyond reach

ii) these customers will compare the disruptive product to having nothing at all. As a result, they are delighted to buy it, even though it may not be as good as other products available at high prices to current users with deeper expertise in the original value network. The performance hurdle required to delight such new market customers is quite modest.

iii) the technology that enables the disruption might be sophisticated, but disrupters deploy it to make the purchase and use of the product simple, convenient, and foolproof. It is this 'foolproofedness' that creates new growth by allowing people with less money and training to begin consuming

iv) the disruptive innovation creates a whole new value network. The new consumer typically purchases the product through new channels and uses the product in new venues..."

Clayton Christensen et al, 2003

In other words,

"...What kind of customer will provide the most solid foundation future growth? You want customers who have long wanted your product but were not able to get one until you arrived on the scene. You want to be able to easily delight these customers, and you want them to need you. You want customers you can have all to yourself, protected from advances of competitors. And you want your customers to be so attractive to those you work with everyone in your value network is motivated to co-operate in pursuing the opportunity..."

Clayton Christensen et al, 2003

Furthermore, in the organisation's resource allocation process

"...Managers need to frame the disruption as a threat in order to secure resource commitments, and then switch the framing of the team charged with building the business to be one of a search for growth opportunities. Carefully managing this process in order to focus on those ideal customers can give new growth ventures a solid foundation for future growth..."

Clayton Christensen et al, 2003

In addition, the current competition views the entrants in the emerging market as irrelevant to their own well-being. Initially the new growth market has minimal impact on the mainstream market. In fact, the traditional players will prosper for a while because of the disruption as they will concentrate on the more profitable segments of the market. This allows the disruptive strategy to get a foothold and eventually topple the traditional players (including the distribution channels). Sometimes traditional players will try to compete head-on with the disruptor; again, most will fail.

This can be explained by the mindset of seeing a disruptive innovation as a threat rather than an opportunity. This is sometimes called 'threat rigidity', which means having less flexibility and becoming more 'command and control' orientated, ie refocusing everything on countering the threat in order to survive by protecting their current customers and business. To deal constructively with this scenario, the mindset needs to change so the situation is seen as an opportunity. An ideal strategy is to set up an autonomous business unit. For example, soon after the newspapers went online, some players took the online business out of the organisation and set it up as an autonomous organisation to handle the Internet.

This is a good example of an 'asymmetry of perception' with a new entrant seeing the situation as an opportunity while the established players see it as a threat. Furthermore, the disruptive innovation should be treated separately from a sustaining innovation opportunity.

Remember: in the resource allocation process, for disruptive innovations it is better to handle budget considerations based on the innovations fitting with a pattern (see above points i to iv), not numbers, ie

"...Fit constitutes a much more available predictor of success than do numbers in the uncertain environment of new market disruptions. If a project fits the pattern, executives can approve it with confidence that the initial conditions are conducive to successful growth..."

Clayton Christensen et al, 2003

Some examples of sustaining and disruptive innovations included

- high speed photocopier business (in the 1970s and 80's IBM and Kodak attempted to defeat Xerox. These companies were far bigger yet they failed to defeat Xerox in a sustaining technology competition. On the other hand, Xerox was beaten more recently with a disruptive innovation that included tabletop copiers)

- computers (corporate giants, such as RCA, General Electric and AT&T, who threw massive resources into the battle, failed to stop IBM in the development of sustaining-technology of mainframe computers. In the end, it was the disruptive personal computer makers, not the major corporations, which successfully competed with IBM. The centralised large computer changed to personalised computing (desktop to laptop), then to interconnected or cloud model and mobile phones)

- phones (landlines to mobile phones, etc, eg in Africa, there were around 10 m. fixed landlines in 2000 & in 2014 there are 700 m. mobiles; in early 2014, more mobile phones than world population (around 7 b. ); smart phones around 1.75 b. users. Smart phones are phones and have encouraging the use of apps over text, mobile Internet & are as powerful as best computer in 1987).

- power (use of solar power, with leasing option to reduce initial capital investment, is putting increasing pressure on the traditional power generator utilities. Solar is cheaper and customers are signing up for decades under the leasing option. Furthermore, total power usage is declining which is putting additional pressure on traditional suppliers to increase prices to cover their costs and this is making solar more attractive. The only drawback to solar's progress has been is the need to develop cheaper electricity storage that will allow solar generators to store the energy they generate and provide for use as required. Recent technological advances in batteries which store solar power is creating the possibility of home owners being able to divert their own solar power reserves to neighbours; energy is heading towards an interconnected system.. This could make it unnecessary to be connected to mainstream electricity networks.)

Further developments include water is being replaced with carbon dioxide to generating steam from solar energy.  Also, using utility solar (concentrated solar power - CSP) which uses the sun's heat rather than its light. CSP concentrates heat from the field of heliostat mirrors that are slightly curved to initially create the concentration and are controlled by actuators that track the sun.

"...The sun's heat is reflected upwards at a receiver, a 4.5 metre square hole at the top of the Tower that contains pipes.  When water runs through the red hot pipes it turns to steam which drives a turbine..."
Robbie McNaughton as quoted by Mark Abernethy, 2016

Some of the challenges are around the heat not melting everything, plus storage (so that it can handle peak loads and provide power when the sun is not shining) and efficiency (salt has a natural limit of 590 degrees which is well below temperatures to create optimum thermal efficiency). To help with storage, the heat is stored in molten salt, ie it is heated by the solar receiver and when the sun goes down, heat from the stored salt is used to drive the turbines.
Efforts are now being focused on using carbon dioxide, ie heat carbon dioxide to 720 degrees so that able to run carbon dioxide turbine at greater than 50% thermal efficiency (water and salt run at just around 40%).

"...storing the heat is done through a steel tank at the base of the tower in which special ceramic balls are heated by the initial solar process, a secret heat-transfer liquid is run down the tank into a heat-exchanger, from which a turbine can be driven when there's no sun..."
Robbie McNaughton as quoted by Mark Abernethy, 2016

To be commercially viable techniques, they need to produce at least 500 MW

Some examples of disruptive innovations creating new customers/new markets for products/services that were more convenient and/or low priced, etc were

- smart phones are replacing personal computers that replaced the main frames

- Sony's first battery powered transistor public radio that replaced the immobile plug-in wireless

- Canon's desktop photocopiers that replaced the large photocopiers that needed a technician to operate

- Japanese auto makers (Toyota, Honda, etc ) followed by the Koreans' (Hyundai, Kia, etc) entry into the North American market at the low-end of the market via fuel economy and low purchase price

- the minimills in the US steel industry

- discount retailing (Wal-Mart and Kmart) competing against the department stores

- plastic makers (Dow, Dupont and General Electric, etc) continue to displace steel

- VOIP (Skype, etc) considerably cheaper than the traditional land lines and mobile phones despite poorer quality and the need for computer linkage.

- pre-paid phones (Virgin and others) created a new market for low income customers (including young people) who were ignored by traditional phone firms as these people were not creditworthy enough to have accounts.

- digitalisation including downloading of the music from the Internet and communications (Apple's iPod)

- drones and autonomous cars delivering products

- 3-D printing upending manufacturing

- predictive algorithms causing upheaval in insurance and banking

There were some interesting disruptive flow-ons the innovations developed in the space program (1960s). It resulted in the development of modern computers, ICT industry, AI, robotics and encouraged miniaturisation, ie equipment had to be small enough to fit into the space capsules. After the landing of the man on the moon, many technicians left NASA and went into other industries to use their expertise there.



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