What can make the process of innovation more predictable? It does not entail learning to predict what individuals might do. Rather, it comes from understanding the forces that act upon the individuals involved in building businesses—forces that powerfully influence what managers choose and cannot choose to do.
It is the middle managers who must decide which of the ideas that come bubbling in or up to them they will support and carry to upper management for approval,
A dearth of good ideas is rarely the core problem in a company that struggles to launch exciting new-growth businesses. The problem is in the shaping process.
The question that now needs answering is: What are the circumstances in which focusing on or near the core will yield sustained profit and growth, and what are the circumstances in which broader, Fosteresque creative destruction is the approach that will succeed?
Disruption works because it is much easier to beat competitors when they are motivated to flee rather than fight.
Sustaining innovation essentially entails making a better mousetrap.
A sustaining-technology strategy is not a viable way to build new-growth businesses, however. If you create and attempt to sell a better product into an established market to capture established competitors’ best customers, the competitors will be motivated to fight rather than to flee.9 This advice holds even when the entrant is a huge corporation with ostensibly deeper pockets than the incumbent.
Dell’s order fulfillment systems. For Dell, the Internet was a sustaining technology. It made Dell’s core business processes work better, and it helped Dell make more money in the way it was structured to make money. But the identical strategy of selling directly to customers over the Internet was very disruptive relative to Compaq’s business model, because that company’s cost structure and business processes were targeted at in-store retail distribution.
For the sake of simplicity, The Innovator’s Dilemma presented the disruptive innovation diagram in only two dimensions. In reality, there are two different types of disruptions, which can best be visualized by adding a third axis to the disruption diagram, as shown in figure 2-3. The vertical and horizontal axes are as before: the performance of the product on the vertical axis, with time plotted on the horizontal dimension. The third axis represents new customers and new contexts for consumption.
Because new-market disruptions compete against nonconsumption, the incumbent leaders feel no pain and little threat until the disruption is in its final stages. In fact, when the disruptors begin pulling customers out of the low end of the original value network, it actually feels good to the leading firms, because as they move up-market in their own world, for a time they are replacing the low-margin revenues that disruptors steal, with higher-margin revenues from sustaining innovations.15
Southwest Airlines is actually a hybrid disruptor, for example. It initially targeted customers who weren’t flying—people who previously had used cars and buses. But Southwest pulled customers out of the low end of the major airlines’ value network as well.
Is there a large population of people who historically have not had the money, equipment, or skill to do this thing for themselves, and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them? To use the product or service, do customers need to go to an inconvenient, centralized location?
Note: new market disruption screen
Are there customers at the low end of the market who would be happy to purchase a product with less (but good enough) performance if they could get it at a lower price? Can we create a business model that enables us to earn attractive profits at the discount prices required to win the business of these overserved customers at the low end?
Note: low end disruption screen
Once an innovation passes the new-market or low-end test, there is still a third critical question, or litmus test, to answer affirmatively: Is the innovation disruptive to all of the significant incumbent firms in the industry? If it appears to be sustaining to one or more significant players in the industry, then the odds will be stacked in that firm’s favor, and the entrant is unlikely to win.
Note: final disruptive screen
Companies that target their products at the circumstances in which customers find themselves, rather than at the customers themselves, are those that can launch predictably successful products. Put another way, the critical unit of analysis is the circumstance and not the customer.
Note: Old school Christensen: Circumstance-centric design often > User-centric design.