How does a small, young company beat an industry giant
on its own turf?
Through what Harvard Business School professor Clayton
Christensen calls disruptive innovation.
It works like this.
Big players focus on sustaining innovation, upgrading
existing products and services to attract
higher-paying customers.
But soon they start to ignore all the regular customers who
just want simple, low-cost alternatives.
That's where the entrepreneurial company jumps in
with that basic offering.
The big guys stay focused on more profitable customers
and begin to overserve, adding bells and whistles no one
wants to pay for.
Meanwhile, the disruptor improves its product
to appeal to more people.
By the time the incumbent notices,
the disruptor has already started
to take over the market.
The classic example is the steel mini mills
which first produced low-quality rebar, then moved
to sheet steel, stealing business
from the large mills that had been dominant.
More recent disruptors include makers like Toyota and Hyundai,
which launched with economy models then added
luxury features and brands.
The only way for industry giants to fight back
is by launching their own disruptive innovations.
To succeed, they must treat the project
as a separate unit with a different business
model and growth expectations; ask
what job do customers need to get done;
segment customers by job, not by product, market size,
or demographics; and develop basic, low-cost ways
to get the job done.
That's how Procter Gamble came up
with Crest White Strips, a cheap, do-it-yourself
alternative to an expensive dental service.
Disruptive innovation creates new markets
and reshapes existing ones.
To achieve growth in a fast-changing world,
you want to be a disruptor.
Don't be disruptive.