Disruptive Innovation

Question 1

Definition Sustaining Innovation (5)

Answer 1

• Incremental or radical innovation
• Improves value proposition for existing customers/markets
• No new markets or value propositions created
• Become part of existing product/service (upper bound of Christensen)

Question 2

Definition Disruptive Innovation (5)

Answer 2

• Innovative product or service that is less developed than the entire market
• Provide different set of qualities (e.g. simpler, cheaper, more customer friendly)
• Attract completely new or less demanding customer groups
• Helps create a new market and value proposition
• Innovation eventually disrupts existing market and value network

Question 3

Innovator’s Dilemma (2+4)

Answer 3

• GOOD management is actually the most powerful reason for failure or loss of market leadership
• Leadership is lost because of, not despite
• Listening to customers
• Investing aggresively in new tech providing incremental innovation
• Carefully studying market trends
• Systematically allocating investment capital

Question 4

When is technology disruptive? (5)

Answer 4

• No connection to extent of technological change (incremental vs. radical)
• Not disruptive if it can be used within scope of existing business model and supports it
• Introduces new business model that is better suited to satisfy demands of some customers (e.g. simpler, cheaper, easier to use)
• Established market disruption: demand exists and is now served differently (analog camera, landline phones)
• New market disruption: business model aims to satisfy new demands (smartphone, VoIP/Skype)

Question 5

Christensen’s model of disruptive innovation

• General (3)
• Detailed (5)

Answer 5

General:

• Disruptive businesses squeeze out established businesses
• Disruptive businesses focus on low-end of the market
• Disruptive businesses focus on new markets: competiton with non-consumption

Detailed:

• Incumbents in a market improve along trajectory of sustaining innovation
• Incumbents tend to compete by continuously seeking to offer customers better products than competitors, overshooting customer needs
• Disruptive innovations gain a foothold in fringes of a market and grow into mainstream segments served by incumbents
• Incumbents often fail to recognize/react to disruptive threats
• Incumbents often end up floundering as a result of disruptive innovation