Published by MBA Skool Team, Last Updated: March 03, 2016
6 people are having a discussion on the topic (Rahul, Vasu, Mayank, Sonika, Poornima, Archit)
Category: Education, Technology
Group Discussion Starts
Vasu: The topic given to us today is “Is disruptive innovation sustainable?” Let me begin by explaining the topic and we shall discuss it further. Disruptive innovation by theoretical definition means that innovations that serve a new market by creating new unique value proposition to the customer. To put it in simple terms Disruptive innovations generate a wholly new market that never existed before.
Mayank: We can take photocopying machine as an example of it. The introduction of photocopying machine by Xerox initially created and served a high end customers and people were reluctant about it, when time progressed new low cost machine flooded the market creating a whole new market.
Rahul: Always an innovative product could be everlasting if it is totally new and low cost. And due to its ability to change the entire market, many companies are investing in disruptive innovation.
Poornima: Sometimes customer may not want to switch simply because it is of low cost or some weird new product. There has to be value proposition and the product should be in a way solve the existing problem of the customer. People often don’t want to change their behavior pattern and mostly people resist change because of the lack of trust to the new product, low trust, misunderstanding about the product and they might be connected to the old product more that they are highly reluctant for a change.
Archit: Mostly if it is a high ticket item, customer feels more risky about the unproven technology. It is the responsibility of the markets to make the customers aware about the product so that the customer knows how their need even their latent need gets fulfilled by the product.
Sonika: If we take the example of any disruptive innovation, there would always be small group of people adopting it initially who are generally referred as Opinion Leaders. Later as the time progresses, then the number of new customers for the product would be growing exponentially. But the sustainability of the product becomes questionable if a few users only try it and the market is never expanding at all.
Vasu: This pattern is usually observed because once the initial niche segment tries and if the product works out to be good, then the product markets itself, the word of mouth that circulates creates a buzz in the market.
Mayank: When people find a new product being used by his friends, they quickly adopt to even knowing about it because there is a social stigma carried by people with not adopting to new technologies.
Sonika: There are various factors which decide if the product is really being able to change the market quickly and sustain it. Customers consider cost, switching costs and trial ability and to some extent the influence of Opinion Leaders also matters.
Rahul: Many a times we see that a disruptive innovation completely replaces the existing market which itself once replaced some other market. This is the basic feature of a disruptive innovation which makes it unsustainable. That is there would always be a new product to replace the old product and at some point down the line this new product would also be replaced by another new innovation eradicating its market.
Archit: One example would be the fax machine which created a wholly new market itself. Due to the penetration of internet and computers, the fax machine is being replaced by internet fax which does not require a fax machine.
Poornima: The inability of the product to be sustainable is not entirely dependent on the product, but by the replacing ability by new product. Hence for a disruptive innovation to be sustainable there must be unique value proposition and offer high benefits to cost ratio.
Sonika: Even the timing of the disruptive innovation matters. A new product that is released soon after a disruptive innovation could not extract the best out of the market. For example apple releasing two iPhones, that are technologically distinct, simultaneously can’t extract the best out of the market. Releasing the better one after much larger period can be profitable for the company.
Mayank: I think the usage of the disruptive innovation at the right time, in suitable place and for correct set of segments could be sustainable. Or else its like the magic trick loosing the element of surprise after knowing the secret behind the trick, we don’t get enough pay and enough attention. Same thing happens to disruptive innovation if it ends up before the need for it is required.
Vasu: Along with it, the selection of the markets needs to be in such a way that the markets are conducive for such a type of innovation. For example, Tesla releasing their cars in India can’t make the best as the back end infrastructure for developing such a car is not present and the consumers show no interest in such a car for the push to try a new product is lesser in Indian markets. With the high infrastructural constraints in India makes it difficult to use a car like Tesla.
Disruptive innovation is something like a sort of fire; the best use of it in a controlled manner could be useful and makes our lives easy. But if its not controlled it could burn the whole house and be disastrous. The segment in which the disruptive innovation is taken place should be selected in such a manner that the products in it have reached a maturity phase of its cycle. This selective targeting could reduce the losses incurred due to the cannibalization of existing products, which are technologically inferior. The markets are to be selected where the back end infrastructure for the innovative products (such as Research & Development, talent pool and availability of raw materials) is well established and the consumer behavior is much favorable for a new product
Facts related to the discussion
• Disruptive innovation by theoretical definition means that innovations that serve a new market by creating new unique value proposition to the customer.
• Disruptive Innovation is done in an old product category for reviving the decline phase of the segment.
• Factors such as market dynamics, development of infrastructure etc. play major role in extracting best out of the innovation.
• Over the last 10 years, 40 different billion-dollar startups were found
• A gigabyte of storage in 1993 was $9000. In 2015, it is 40 cents
• Content on the internet has tripled from 2010 to 2013
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