Topic 1: Disruption Flashcards
How has technology changed business?
Technology has allowed companies to compete between countries. 5B internet users. It has never been so cheap or easy to move information around the world.
Competes
A business factor which give a competitive edge
Qualifiers
Basic qualifications or necessities needed to start a business in the market
Christensen’s Classic Disruption
Have to actively defend against disruption by investing in innovation. You may eat your own sales but worry about that when you get there. Eventually new entrants get better and your core customers shift away.
Case: Netflix vs Blockbuster
This is an example of classics disruption because Netflix went for the under reserved clients (those who liked weird movies). They then improved their offering and eventually replaced Blockbuster. Blockbuster was too scared of going into mail movies because they didn’t want to cannibalize sales.
Forms of disruption
Classic, platform, architectural
Classic Disruption
Big player focuses on main customers, new player comes in at the bottom of the market and works their way up.
How to combat classic disruption
Only way is for companies to launch their own disruptive innovations and invest in innovation. This could damage sales of the main product but better get 50cent rather than nothing. Innovation branch must be treated as a separate business unit not influenced by current sales or customers. Can also involve investment into new ventures.
Platform Disruption
When a company creates value to a customer through their ability to connect. Not really creating a direct product to compete, it is more in the connections that creates the competitor.
Rules of Digital Business Strategy
1: Network effect grows at an increasing rate
2: platforms win not by being better, but by being broader and more convenient
3: Platforms have incentive to envelop more platforms in order to grow and become broader.
4: when entering a new sector, platforms can usually subsidize and offer very low rates at first, funded through their other more profitable businesses
Platform Envelopment
When one platform takes over another to become broader. Usually done when the user bases are similar. To prevent being enveloped, convince users that your platform is better
Platforms: Winner takes all
happens when multi-homing costs are high, big network effect. Eventually only one platform can win
Architectural Disruption
When changes in technology require a rethink in business strategy. Often comes in four forms: incremental, architectural, radical, modular
Incremental innovation
Small changes to existing technology. Low cost and slightly improved performance. Common with established firms
Architectural Innovation
Changes in how components of your product fit together, leads to change in structure and strategy. Destroys the architectural knowledge of established firms. Difficult to recognize and hard to correct.
Radical Innovation
Major change, often a brand new technology and involves major performance improvement. Major threat to established firms.
Modular Innovation
Changes the functional concept within components but not how they fit together
Dominant Design
Wins the allegiance of the marketplace, competitors must adhere if they want to command a significant following. Dominant design acts as a constraint that limit innovation.
Case: GE
GE had a new analytics software with three ways to distribute: selling the boxes with the hardware, selling hardware and software separately, creating a new business division which consulted for companies and only made money if companies realized benefits
Innovative Strategy: Established firms
Incremental innovation is good for efficiency improvement, makes it harder for new entrants. Radical innovation is both a friend an enemy, keep an eye out. Leaders should be aware of the need to innovate. With architectural innovation, have to acknowledge that old knowledge is useless.
Innovative Strategy: Startup
Take full advantage of being new, no need to stick to old norms/knowledge. Try to push for architectural or radical innovation, not a lot of resources for incremental. Avoid direct competition. Try to be a first mover and establish dominant design.
Six Sigma
Focused on controlled processes. Limited variance in production.
Digital innovation principles (two)
1: use digital technology to make things cheap and rapid. Do digital experiments.
2: Enlarge the group of people who can participate in your innovation: customers, users, the crowd.
Shape of innovation
Innovation must be cheap and cheap if you get it wrong. Innovation feeds of variation. Accidents can lead to innovation.
