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