Disruptive Innovation, a concept pioneered by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.
In his book, "The Innovator's Dilemma," Christensen showed that time and again almost all the organizations that have "died" or been displaced from their industries could see the disruption coming, but did nothing until it was too late.
Most good companies are on a path of sustaining innovations by catering to their most profitable customers. This leaves them open for disruptive technologies. This is because the established companies are designed to maximize profits through sustaining innovations.
When Disruptive Innovations emerge, established companies are unable to react quickly enough. They almost always go up-market rather than to defend these new or low-end markets, and ultimately the disruptive innovation improves, steals more market share, and replaces them.
Companies tend to innovate faster than their customers' needs evolve. Thus, they produce offerings too sophisticated, too expensive, and too complicated for many customers.
This presentation delves into the core elements of Disruptive Innovation, breaking down the model into digestible components. It highlights how incumbents often fail to respond effectively to disruptive threats, despite having the necessary capabilities. The PPT provides a nuanced understanding of why established companies are unable to defend against low-end market entrants, ultimately leading to their displacement.
The primer also outlines the limitations of the Disruptive Innovation model, emphasizing the need for a separate strategy process and a deep understanding of customer needs. It includes real-world examples of disrupted markets, offering valuable insights for executives aiming to navigate and leverage disruptive forces in their industries.
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Source: Best Practices in Innovation, Disruptive Innovation, Clayton Christensen PowerPoint Slides: Disruptive Innovation Primer PowerPoint (PPT) Presentation Slide Deck, LearnPPT Consulting
This PPT slide outlines 2 critical elements of disruptive innovation: the trajectory of improvement by incumbents and the pace at which sustaining innovation exceeds customer needs.
The first element emphasizes that in every market, established companies follow a distinct trajectory of innovation. This trajectory is marked by year-over-year improvements that are typically incremental. For instance, auto manufacturers enhance their products by improving aspects like engine horsepower or torque. Good management practices focus on creating superior products aimed at higher profit margins, targeting customers who are not yet satisfied with existing offerings.
The second element highlights a crucial insight: the speed of sustaining innovation often surpasses the ability of customers to fully utilize new features or improvements. This disconnect can lead to a situation where products designed for mainstream customers exceed the actual needs of those customers. The example given from the 1983 computer industry illustrates this point well. Early personal computer users, primarily typists, struggled to keep pace with the rapid advancements in processing power, such as the introduction of the Intel 286 chip.
These elements suggest that while innovation is essential, there is a risk of overshooting customer expectations and needs. Companies must be mindful of this gap to ensure that their innovations align with what customers can realistically adopt and benefit from. Understanding these dynamics is vital for any organization looking to navigate the complexities of market demands and technological advancements effectively.
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Disruption Frameworks
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Innovation Management Business Framework PowerPoint Diagrams Organizational Design Consulting Frameworks Consulting Training Strategy Frameworks Customer Experience Ideation Costing Problem Solving Consulting Proposals Project Scope Proposal Template Value Chain Analysis Robotic Process Automation Fourth Industrial Revolution Artificial Intelligence Data & Analytics Data Monetization Team Management Agile Maturity Model Disruption Business Model Design Business Model Innovation
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