Disrupting To Grow

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.

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.

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.

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

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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