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Massive and often unexplored business opportunities lie at the lowest end of the market, especially in nations like India and China.
This, according to professor Clayton Christensen, can be exploited through Disruptive Innovation (DI), whereby businesses can produce cheaper alternatives and target products for consumers at the lowest end.
Speaking at a one-day Indiatimes seminar on ‘Create New Growth Through Disruptive Innovation’, Christensen gave the example of a Chinese firm that started selling microwave ovens at $37 or a-third of the price of existing microwaves. The impact: Outstanding sales of 160 million microwave ovens in just two years.
Historically, firms like Toyota, started at the lowest end of the car market with basic models and threatened GM and Ford. More recently, Korean car makers did the same with Toyota. They used the concept of DI, which involves producing ostensibly inferior products which meet the basic needs of consumers.
Through DI, firms start capturing markets at the lower end and then move up the value chain, putting greater pressure on market leaders.
Low cost airlines are another example of DI, which is valid not just for manufacturing but also for service industries. For example, IBM and Accenture, were disrupted by low-end Indian BPO firms. The effect was that the leaders also started getting into the low-end segment.
“It is the business model that is disruptive and not the technology, as disruptive entrants bring inferior technology. DI cannot be wished away. It is a recurring market dynamic,” says Christensen.
But as every threat is at once an opportunity, companies can gain by using DI to target India and China’s massive low-end market to their advantage. The co-Platinum sponsor of the event was Signature.
The Indian Institute of Planning & Management was the academic partner, Citibank, the credit card partner, Canon, the documentation partner, Erehwon Innovation COnsulting the knowledge partner, HDFC the associate sponsor, Times Now, television partner, CSC, technology partner and agencyfaqs! the marketing partner.
The event was supported by CXOtoday.com and BMA and conceived and managed by indiatimes mindscape.
Tags: academic partner, associate sponsor, car makers, car market, chinese firm, clayton christensen, disruptive innovation, documentation partner, inferior products, inferior technology, knowledge partner, korean car, microwave ovens, platinum sponsor, target products, unexplored business opportunities, value chain |
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