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July 24 - July 24, 2022
marketing under an explicit assumption that no one—not us, not our customers—can know whether, how, or in what quantities a disruptive product can or will be used before they have experience using it.
In each of the several industries explored, technologists were able to provide rates of performance improvement that have exceeded the rates of performance improvement that the market has needed or was able to absorb.
when this performance oversupply occurs, it creates an opportunity for a disruptive
technology to emerge and subsequently to invade established ...
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computer makers had a choice of drives to buy: The 5.25-and 3.5-inch drives both provided perfectly adequate capacity.
What was the result? The desktop personal computer makers began switching to 3.5-inch drives in droves.
Why did the 3.5-inch drive so decisively conquer the desktop PC market? A standard economic guess might be that the 3.5-inch format represented a more cost-effective architecture:
This was not the case here, however. Indeed, computer makers had to pay, on average, 20 percent more per megabyte to use 3.5-inch drives, and yet they still flocked to the product.
Once the demand for capacity was satiated, other attributes, whose performance had not yet satisfied market demands, came to be more highly valued and to constitute the dimensions along which drive makers sought to differentiate their products.
the smallness of the drive began to matter more than other features.
For a time, when the availability of small drives did not satisfy market demands, desktop computer makers continued to pay a hefty premium for 3.5-inch drives.
Generally, once the performance level demanded of a particular attribute has been achieved, customers indicate their satiation by being less willing to pay a premium price for continued improvement in that attribute.
the criteria used by customers to choose one product over another changes to attributes for which market demands are not yet satisfied.
Enter disruptive technology. Challenge though is identifying the customer segment where leading functional metric is satiated by your product and leverages another functionality that's not met to gain the market
A product becomes a commodity within a specific market segment when the repeated changes in the basis of competition, as described above, completely play themselves out, that is, when market needs on each attribute or dimension of performance have been fully satisfied by more than one available product.
differentiation loses its meaning when the features and functionality have exceeded what the market demands.
Huge! Differentiation in the market should always be with respect to market needs!!! In fact, differentiation should only ever be framed in terms of market needs, not technical functionality alone.
the product evolution model, called the buying hierarchy
which describes as typical the following four phases: functionality, reliability, convenience, and price.
a market may cycle through several different functionality dimensions.)
Once two or more products credibly satisfy the market’s demand for functionality,
tend to choose a product and vendor based ...
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As long as market demand for reliability exceeds what vendors ...
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the most reliable vendors of the most reliable products ear...
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when two or more vendors improve to the point that they more than satisfy the reliability demanded by the market, the basis o...
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the most convenient to use and those vendors that are most conv...
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Finally, when multiple vendors offer a package of convenient products and services that fully satisfies market demand, the basis of competition shifts to price.
Another useful conception of industry evolution, formulated by Geoffrey Moore in his book Crossing the Chasm, 3 has a similar underlying logic, but articulates the stages in terms of the user rather than the product.
early adopters in an industry—customers who base their choice solely on the product’s functionality.
after the demand for functionality in the mainstream market has been met, and vendors begin to address the need for reliability among what he terms early majority customers.
when product and vendor reliability issues have been resolved, and the basis of innovation and competition shifts to convenience, thus pulling in the late majority customers.
a key characteristic of a disruptive technology is that it heralds a change in the basis of competition.
Two additional important characteristics of disruptive technologies
the attributes that make disruptive products worthless in mainstream markets typically become their strongest selling points in emerging markets;
disruptive products tend to be simpler, cheaper, and more reliable and convenient t...
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understand these characteristics to effectively chart their own strategies for designing, building, an...
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managers can bet on these two regularities.
it is often the very attributes that render disruptive technologies useless in mainstream markets that constitute their value in new markets.
sought to find or create a new market that would value or accept those attributes.
created a market for small drives in portable computers, where smallness was valued;
Nucor found a market that didn’t mind the surface blemishes on its thin-slab-cast sheet steel.
“Where is the market that would actually value a smaller, lower-capacity drive?”
“Where is the market that actually wants a mobile excavator that can only dig narrow trenches?”
“Where is the market for low-priced sheet steel with poor surface appearance?”
They applied to a disruptive innovation a way of thinking appropriate to a sustaining technology.
A mistake
the firms that were most successful in commercializing a disruptive technology were those framing their primary development challenge as a marketing one: to build or find a market where product competition occurred along dimensions that favored the disruptive attributes of the product.
It is critical that managers confronting disruptive technology observe this principle.
find markets that embrace the attributes of disruptive technologies as they initially stand.
the disruptive technology often succeeds both because it satisfies the market’s need for functionality, in terms of the buying hierarchy, and because it is simpler, cheaper, and more reliable and convenient than mainstream products.
design a product that was truly simple and cheap,
targeting simplicity and reliability.
Its developers made it so convenient to use, and continue to make it simpler and more convenient, by watching how customers use the product, not by listening to what they or the “experts” say they need.
