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, which came out

with its 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 six 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, Compaq VP, technology, Vik Muiznieks 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 tried 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 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 larger 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.

DATAQUEST