Disruption! You probably know that it is the trendiest term in the business world today and came to light when the ground-breaking book, “The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail”, was published in 1997.
It is one of the most influential business books of all time written by one of the best-known Harvard professor and businessman, Clayton M. Christensen who coined the powerful concept of “disruptive innovation”, particularly referring to how small companies with less resources have been able to enter different markets and revolutionise the pre-established system.
What may have driven the success of these companies? As per Christensen’s writing, these companies have not just addressed customers’ current needs but also anticipated their future possible needs. He also highlighted that even if the existing dominant companies do everything "right", they may still lose their market leadership to the rise of new, unexpected competitors taking over the reins.
Irrespective of the success and size of a company, it is imperative to catch up with the new waves of innovation. Otherwise, the existing products will eventually be thrown out of the market space unless managers understand the right time and technique to discard the traditional business practices.
Netflix- once a media rental business is now a king of streaming market space. Once an overpriced computer manufacturer, Apple has surely disrupted the industry with innovative watches and mobile phones.
Leading global electric car manufacturer – Tesla is one of the hottest growth stocks these days with market cap thrice that of General Motors, soaring 220% over last six months. It is disrupting the market with innovative idea of literally sending the vehicles into the space.
Some of the key ASX listed players that have established a great name in the market with innovative technologies include:
- SEEK (ASX: SEK) - Operator of online employment classifieds and education and training;
- REA Group (ASX: REA) - Leading global digital business, specialising in property;
- XERO (ASX: XRO) - Online accounting software provider for small businesses;
- Telstra (ASX: TLS) - Australia’s largest mobile network;
- Ramsay Health Care (ASX: RHC) – Popular Global hospital group;
- com (ASX: CAR) – Engaged in online automotive industry.
"The Innovator's Dilemma" offered readers an insight into both successes and failures of leading companies as a guide and a few rules to effectively capitalise on the phenomenon of disruptive innovation.
A key thing to note is that many of these disrupting businesses are trying to create and offer a valuable product or service to their customers, which adds meaning to their mission. On the flipside, not every successfully business or product needs to be disruptive. It may not always be the need of the industry.
Nevertheless, it can be hard to see a disruptor in its early stages as any company/ breakthrough innovations take time to make a real impact in any industry. Often, such breakthroughs take years to materialise as these innovations are undertaken bottom of the market, adhering the similar requirements as high-end solutions in a relatively inexpensive and simple way. In due time, the low cost and advantages being offered by these new products are acknowledged by the consumers. Consequently, they move above the market ladder and are considered more appealing than their sophisticated counterparts.
It is true that the pace of innovation is incredibly fast and new things are being discovered on a daily basis on the back of extensive research and development.
Examples of the widely known true disruptive technologies include online news sites, photography, e-commerce, steel mini mills, video streaming, and GPS systems. Others include Artificial Intelligence; Internet of Things (IOT); Space Colonization with the prediction being that the human population in space could exceed one trillion people in the 22nd Century; medical innovations such as genomic directed clinical trials, gene editing using CRISPR, cell-free fetal DNA testing, new vaccines etc; high-speed transport; robotics; renewable energy amongst others.
In their own times, the introduction of automobiles, personal computers, smartphones, advent of electricity service, and television were also perceived as disruptive technologies.
3D Printing and Online education can be considered as some of the potential disruptions.
Clayton Christensen touched everybody lives not only through his business theories, principles and thinking, but he also shared with his students and acquaintances a set of guidelines that had helped him find meaning in his own life. Christensen mentioned that his thinking comes from his deep religious faith, however, he believed that his strategies could be used by anyone to sail through life.
Christensen’s business book , The Innovator’s Dilemma, is also one amongst Steve Jobs’ list of favourite books mentioned in his biography and one that profoundly influenced him. It is believed that Jobs solved the Innovator’s Dilemma when he returned to Apple after his exile. He shifted the company’s priorities away from profit making, back to building great products that propelled Apple, which was three months away from bankruptcy, to being one of the most valuable and influential companies in the world today.
Since his death, Former Intel CEO Andy Grove, Amazon CEO Jeff Bezos, and Netflix CEO Reed Hastings have all spoken about the life-changing influence that Clay’s work had upon all of them and their approach towards life and business.
According to Harvard Business Review, an approximate estimation of the measure of impact that Clay’s theories had on creation of entirely new industries, revealed that his guidelines had led to making of hundreds of companies, billions of dollars in revenue and creation of millions of jobs.
Former editor of Harvard Business Review, Karen Dillon recently published an article reflecting upon the powerful impact that Christensen had on her leading her to go on a months-long soul search and subsequent restructuring of her whole life.
As per Karen, Christensen was never fascinated in earning the rewards of the success he received.
On the other hand, he wanted to continue helping people to solve their problems from the success of Clinicas del Azúcar in Mexico (a startup focused on reframing how diabetics in Mexico received healthcare) to Southern New Hampshire University (which revamped online education to help thousands of late-in-life learners earn the credentials that they needed to create and live a better life) to any of the big venture-backed technology companies that have dominated the headlines in recent years.
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.