Substrat: customer focus creates excellence & underinvestment in disruptive technologies
in practice, it is a company’s customers who effectively control what it can and cannot do
many companies move up-market, over-satisfying original customer demands -> creates vacuum at lower price points
successful companies have systems (e.g. require quantification of returns) for killing ideas that established customers don't want
established technology strong until disruptive technology intersects with mainstream customer demand (too late to react)
disruptive innovations: cheaper, simpler, more convenience, strong first-mover advantage
formula for success: take action before careful planning
requires:
organisational capability to change strategies and cost structures
product capability to quickly change features at low cost
new distribution channels
improvement trajectory that eventually intersects with market demand
primary development challenge is marketing: build or find a market for the product
embraced by least profitable customers (emerging/insignificant markets)
might be best to set up autonomous organization with appropriate cost structure
$40 million revenue company needs $8 million to grow 20 percent; $4 billion company needs $800 million
this is only effective with disruptive (and not sustaining) innovations
sustaining innovations: trajectory is known, weak first-mover advantage
formula for success: careful planning, followed by aggressive execution
customers lead their suppliers toward sustaining innovations and provide no leadership or mislead in times of disruptive technology change
how to recognise disruptive innovation:
graph trajectories of demanded performance improvement vs realised performance improvement from technology over time -> potential for disruptive innovation, if supply outpaces demand