Understanding and applying Disruption Theory (Christensen) Munir Mandviwalla Fox School of Business Temple University

What do these have in common?

Porter “Five forces” SWOT Financial analysis “Best practices” Porter “Five forces” SWOT Financial analysis “Best practices” Christensen

Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.4. Sustaining Move along a known path such as improve an existing product. Low-end Existing products are “too good” and relatively expensive such as Smartphones? New-market Change the product to get new people by changing its nature or by making it more convenient (reduce expertise or wealth requirement)

Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.6. Resources What a firm has Processes How a firm does its work Values What a firm wants to do Strengths Weaknesses (blind spots)

Source: Singh, D. “Porter’s Value Chain”, August 5, Retrieved from Wikipedia on September 13, What matters most to customers? Control Integrate (modularize) Integrate to improve what is “not good enough” (e.g., speed, customization, convenience) Outsource what is “more than good enough”

Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.2. Undershot Up-market sustaining innovation. Nonconsumers New-market disruptive innovation Overshot Low end-disruptive innovation Modular displacement Market context Low end, new market, new context Industry

Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.3. New market Existing market

Non-consumers / Not consuming Change Simple Increase access Increase ability Reduce financial barrier Reduce skill barrier Easily Effectively Signals Growth rate Specific segments (college students!) Product or service delivery chain RELATIVE low price How Convenience Customization Lower price Leads to: New market disruptive innovation Undershot Change Incremental More radical Signals Consumer frustration Negative reviews Willingness to pay higher prices Prosperity of niche integrators Specialists struggle How – existing customers Performance - Reliability Performance - Functionality Integration - need it for radical Compatibility Interoperability Legacy Leads to: Sustaining up-market (radical or incremental innovation) Overshot Change Basis for competition Make the product “less good” Commoditize Signals Decreasing prices over time (refusal to pay for more) Features not used Complaints about ‘complicated’ How Value chain Convenience Customization Low prices Ease of use (flexible and convenience, customizability, price) Leads to Low-end disruptions (convenience/price) Specialists displace integrated players (need modularity) Standards based competition

Connecting Systems Thinking to Disruptive Innovation What processes did it directly affect? How did it affect the publishing industry? What were the secondary effects on society? The Kindle as a disruptive innovation…

Google Case Study Discussion  Describe the line of business Google is in.  What is Google’s revenue model (how do they make money)? Who are its customers? With this in mind, what is Google’s real product?  How would you describe Google’s strategy? Do they have one?  What Should Google Do?

Amazon Case Study Discussion  Why would a company use services from Amazon instead of maintaining their own infrastructure?  Is Amazon web services following a disruptive strategy or a different business model?

Apple Case Study Discussion  What are the key success factors behind Apple’s platform strategy with iTunes?  Develop an argument that a similar platform strategy can or cannot be used in other products such as cars, TV, or more traditional products like furniture and appliances (e.g., pick a side and argue it).

 Compare the Google, Apple, and Amazon strategy. Which company do you think will be more successful? Why? Google vs. Apple vs. Amazon