Friday, May 31, 2013

Competitive Strategy Against a Disruptive Technology

Disruptive technologies and product from Napster, Amazon, and the Apple Store devastated Tower Records and Musicland; tiny, underpowered personal computers grew to replace minicomputers and mainframes; digital photography made film practically obsolete.

Present leading companies have to respond by developing  a disruption of their  own before it's too late to reap the rewards of participation in new, high-growth markets, as Procter & Gamble did with Swiffer, Dow Corning with Xiameter, and Apple with the iPod, iTunes, the iPad, and the iPhone.

Disruption is not a a single event but a process that plays out over time, sometimes quickly and completely, but other times slowly and incompletely. There are many companies and businesses that survived disruptive technologies and making profits even today after many years of the appearance of successful disruptive technology. Therefore managers must not only disrupt themselves but also consider the fate of their legacy operations, for which decades or more of profitability may lie ahead.

Maxwell Wessell and Clayton Christensen proposed  a systematic way to help managers  fashion a more complete strategic response.

Disruptive innovations are like missiles launched at your business. You need to determine whether a missile will hit you dead-on, graze you, or pass you altogether. For that,  you need to:
• Identify the strengths of your disrupter's business model;
• Identify your own relative advantages;
• Evaluate the conditions that would help or hinder the disrupter from co-opting your current advantages in the future.

They introduced the concept of the extendable core--the aspect of its business model that allows the disrupter to maintain its performance advantage as it creeps upmarket in search of more and more customers. Then managers have to figure out what jobs people want still want their company to do for them--and what jobs the disrupter could do better with its extendable core. This  give a clearer picture of the  relative advantage of a company against a disrupter.  Then the barriers a disrupter would need to overcome to undermine the existing companies in the future are to be identified. This approach will enable a manager  to see which parts of the current business are most vulnerable to disruption and which parts  can be defended for signicant period of time.

Related Articles

Surviving Disruption
Wessel, Maxwell1 and Christensen, Clayton
Harvard Business Review; Dec2012, Vol. 90 Issue 12, p56-64, 9p

Stop Reinventing Disruption
by Maxwell Wessel,   March 7, 2013

Leveraging Disruptive Theory to Develop Up-Market Strategy

Maxwell Wessel is with the Forum for Growth and Innovation at Harvard Business School

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