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Disrupting To Grow

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DQI Bureau
New Update

The law of gravity states that what

goes up comes down. Any organisation would vouch for the fact that more than reaching the

top, maintaining its numero uno status is far more difficult. This is especially true in

the case of IT companies, where, change in technology is the only thing that is constant.

Companies which constantly innovate, which introduce disruptive technologies have better

chance of ensuring a high growth, given the risk involved in the adoption of the

technology. A classic case is that of Netscape, who came out with their 'navigator'

browser. The launch of this browser completely changed the phase of Internet computing.

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Disruptive technologies are

technologies that begin from the "low-end " or in a "niche" as a low

quality, low-margin product and gradually possess the capability of replacing the existing

technology. The companies that are the pioneers in 'disruptive' technologies are able to

achieve a success rate 6 times higher, and revenues 20 times greater than the companies

trying to enter established markets. The ability to grow faster, once the technology is

put in place is tremendous. In a forum held in New Delhi, Vik Muiznieks VP, technology

from Compaq, one of the leaders in the PC market in India said "a great deal of the

defining work on 'disruptive' technologies comes from the work of Clayton Christensen, a

management consultant and the author of The Innovator's Dilemma". Disruptive

technologies bring a different value proposition previously unavailable in the market. In

the near term, they generally under perform the established products in the mainstream

markets.

The characteristics and benefits

These technologies tend to be

cheaper, simpler, more reliable and convenient than the established products. These

attributes may not be applicable in the established markets but could become their

strongest selling points in emerging markets. They have a low initial purchase price than

the products in the mainstream market, but their maintenance cost is relatively high. They

often involve no new technology-rather they consist of components built around the

existing technology, put together, that provides the customer newer attributes.

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Reasons for resisting innovation

The firms least successful in

confronting 'disruptive' technologies primarily viewed them as technological challenges.

They try to improve the 'disruptive' technologies enough to satisfy the needs of the known

markets and did not attempt to market the technologies until they felt they were good

enough to be valued in the mainstream markets. The firms most successful in

commercialising these technologies built or found markets where product competition

occurred along dimensions that favoured the disruptive attributes of the initial products.

After creating a commercial base, they move 'upmarket' and eventually enter the mainstream

market. The initial low returns and the unfamiliarity of its implication could be one of

the reasons that resist organisations from adopting this technology.

Digital, one of the well known IT

companies in India earlier was predominantly using mainframes. It failed to recognise the

potential of the PC in the initial stages because of which their growth stagnated. The

case of 'disruptive' technologies could be mentioned in this scenario, since the company

overlooked the potential of the emerging (in this case, the PCs) technology.

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Another classic case is that of the

Network Computer versus the PC. The concept of the 'network' holding centre stage never

really materialised because of the intense penetration of the PCs. This summarises the

fact that 'disruptive' technologies may not always be successful for the companies

implementing them. The company should be willing to take the necessary risks and treat it

more as a learning process rather than increasing their profit share.

Even the case of Microsoft can be

taken in this context. Microsoft did not see the potential of the Internet in the initial

stages. It did not foresee the growth of Internet in such a large scale and just managed

to act in time to maintain their position in the market.

Emergence of new business models

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The higher the growth of a company,

the more the company is vulnerable to rigidity and inflexibility of strategy.

The small and medium sized firms

enjoy a distinct advantage in the emerging markets for disruptive technologies, since the

major firms do not look much into their technologies. But, entrants starting their

business may do so at their own risk, since low returns are expected for a long time. This

could herald a change in the business methods practised by organisations in the future, as

a result of which they are not behind the future technologies which could take over from

the existing ones. In the quest of increasing the market share, organisations often

overlook new technologies. The result could be the disintegration of the company due to

lack of focus and maintaining a flexible approach in their business.

Is the Indian market ready?

The returns expected out of this

technology is relatively low and it continues for an extended period before reaping the

desired returns. Failure is inherent in searching for new market applications. The

implications of these technologies are totally unfamiliar at the time of implementation.

The organisation must plan for learning, rather than implementation and action being taken

before the plans are completed. The mainframe versus the PC was one of the classic

examples of 'disruptive' technology. When the PC was first launched into the market, the

mainframe makers scoffed at the possibility of the PC taking the centre stage in the

future.

In the due course of time, the PC

makers had the last laugh, dominating the market almost completely. Minicomputer and

desktop PC makers surprised the mainframe makers. There is no concrete evidence regarding

the implementation of 'disruptive' technology in India, since even the normal

infrastructure is not in place and the risks involved are very high. In the future,

organisations that can adapt themselves to new and unconventional technologies will be the

ones that could be in the best position to maintain their leading edge status.

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