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Disruptive Innovation & Why Start-ups Need to Rethink Business Models

Team YS
1st Dec 2010
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KCG Group

It was 1995 when Prof. Clayton Christensen first conceptualized the idea that a small business, with an unconventional thought process and a revolutionary business model, could challenge and upstage established market leaders in any sector. Be it Prahalad’s idea of the ‘Fortune’ to be made at the bottom of the pyramid, or Christensen’s notion of ‘designing or re-designing a product for a new set of customers’, popular business leaders of recent time have more often than not commenced advising start-ups and young businesses to look outside their markets for a more effective Market Entry Strategy.

What is most encouraging for early stage start-ups with a plan is that initially, most disruptive technologies do not even compare with the existing technology, except in the mind of the entrepreneur. More often than not, existing market leaders realize the true threat posed by disruptive technology only too late.This is often because historically, innovation has been about improvements in existing quality. Innovation in technology or otherwise for most firms has mainly focused on enhancing quality delivery on existing products, as opposed to disruptive innovation, which more often than not starts with a lower quality, albeit capturing a whole new, many-a-times mutually exclusive market. When straight backed innovation follows this kind of an approach, market dynamics change quickly to accommodate the new entrant innovation, rendering the existing technology obsolete, and making way for the new version.

Disruptive Innovations have often-times happened unintentionally, as opposed to recently, where firms are attempting this by design. Be it the case of mobile phones effectively displacing the traditional telephone, or the relatively new instances of the Tata Nano exploring new markets for the car industry, the Twenty20 cricket introducing newer patrons to cricket, beginning to loom as a threat to Test Cricket, disruptive innovation has had significant impacts on the way business is perceived and transacted.

However, with start-ups coming into vogue in the twenty-first century, the order of the day is now becoming disruptive innovation by design. The challenge before companies is now to clearly identify markets to unsettle, and devise clever strategies by which these can be clearly disrupted. A significant example is the falling market share of established players like Nokia in the mobile phone market in developing economies as opposed to low cost local players that are lower on the quality quotient.

KCG Group

With the quicker changing dynamics of consumerist marketplaces, the question of engineering the best disruptive innovation is looming large before entrepreneurs of today. In fact, calculated disruptive innovation definitely seems like a sure-shot password to success. What this demands from entrepreneurs, though, is an ability to think efficiently on one’s feet, in addition to a comprehensive understanding of the marketplace. A lot of start-ups could definitely benefit from revisiting their business models in a new light, thinking paradigm shifts, in an attempt to redesign and reshape markets. Cautious yet ambitious planning is vital to success in the competitive environs of the 21st century.It is also time for the big players to sit up and take notice of novice start-ups before it is too late. Only time will tell which will dominate - the tested arrogance of the leader, or the wily strategy of the beginner.

KCG Group


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