Strategy: Disruptive innovation
Key person: Clayton Christensen
This business strategy mainly focuses upon describing the impact of new technologies on a firm's existence. Clayton Christensen first coined the phrase "disruptive technologies" in 1997, in his book "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail". A disruptive innovation is a successfully exploited product, service, or business model that significantly transforms the demands and needs of a mainstream market and disrupts its former key players,' says an article in Malaysia's Business Times (April 10). Digital and photocopying technologies are examples of disruptive innovations.
There are two types of Disruptive Innovations.
1. Creates a new market by targeting non-consumers.
2. Competing in the low end of an established market.
Even though Technology is still a key source of disruptive innovation, other important elements are concept of consumer value and business models which includes vertical integration, business processes
An example for the technology driven disruption is GM’s OnStar vehicle sensing and tracking system that uses a combined GPS / GSM technology bundle to pin-point vehicle location for roadside assistance. Aravind Eye Hospitals which pioneered the low cost cataract operations is a good business model disruption.
Some disadvantages of the disruptive innovations are, since the market is new and the company is addressing to the low end customers, achieving big profits may take long time. Understanding the needs of the customers, designing the innovative products and informing them about the brand may not be an easier task and it will also take huge investments.
Source: 12 manage
Showing posts with label business strategy. Show all posts
Showing posts with label business strategy. Show all posts
Tuesday, 3 July 2007
Monday, 2 July 2007
Blue ocean strategy
Blue Ocean Strategy is a way to make the competition irrelevant by creating a leap in value for both the company and its customers. Blue Ocean denotes all the industries that is not in existence today—the unknown market space, untainted by competition. Blue Ocean Strategy,
• Creates uncontested market space
• Make the competition irrelevant
• Focus on non-customers
• Create and capture new demand
• Break the value-cost tradeoff (Seek greater value to customers and low cost simultaneously)
• Align the whole system of a firm’s activities in pursuit of differentiation and low cost
• Ample opportunity for rapid growth in terms of profitability.
Blue ocean strategy applies across all types of industries from Consumer Product Goods to B2B, financial services, entertainment, IT, and even defense. New wealth is created by expanding the demand of the economy. The focus is making the right strategic moves and large R&D budgets are not the key to creating new market space. “Strategic move” is the set of managerial actions and decisions involved in making a major market-creating business offering and that have delivered products and services that opened and captured new market space, with a significant profitable growth. A good example in the auto industry is , GM created the blue ocean of emotional, stylized cars in 1920s, the Japanese created the blue ocean of small, gas efficient autos in the 1970s and the Chrysler created the blue ocean of minivans in the 1980s.
Among Indian brands, Tata motors is a notable brand in creating blue ocean strategy. Their plan to offer the Rs 1 lakh car is creating a new demand. To attract the Indian customers who are price, value conscious and those who intend to buy two wheelers. They are extending this strategy by recent new launches, Magic and winger. The main idea is create new segments in commercial passenger vehicles and extend its coverage of the entire spectrum of customer needs in mass transportation from the rural interiors to cities as well as the top-end luxury mass transportation segment.
Source: Chan Kim and Renee Mauborgne
• Creates uncontested market space
• Make the competition irrelevant
• Focus on non-customers
• Create and capture new demand
• Break the value-cost tradeoff (Seek greater value to customers and low cost simultaneously)
• Align the whole system of a firm’s activities in pursuit of differentiation and low cost
• Ample opportunity for rapid growth in terms of profitability.
Blue ocean strategy applies across all types of industries from Consumer Product Goods to B2B, financial services, entertainment, IT, and even defense. New wealth is created by expanding the demand of the economy. The focus is making the right strategic moves and large R&D budgets are not the key to creating new market space. “Strategic move” is the set of managerial actions and decisions involved in making a major market-creating business offering and that have delivered products and services that opened and captured new market space, with a significant profitable growth. A good example in the auto industry is , GM created the blue ocean of emotional, stylized cars in 1920s, the Japanese created the blue ocean of small, gas efficient autos in the 1970s and the Chrysler created the blue ocean of minivans in the 1980s.
Among Indian brands, Tata motors is a notable brand in creating blue ocean strategy. Their plan to offer the Rs 1 lakh car is creating a new demand. To attract the Indian customers who are price, value conscious and those who intend to buy two wheelers. They are extending this strategy by recent new launches, Magic and winger. The main idea is create new segments in commercial passenger vehicles and extend its coverage of the entire spectrum of customer needs in mass transportation from the rural interiors to cities as well as the top-end luxury mass transportation segment.
Source: Chan Kim and Renee Mauborgne
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