Companies behave differently depending on the following:
1) Resources: what a firm has, what are their assets, what can they buy / sell
2) Processes: how a firm does it work, their patterns to transform inputs into outputs of greater value
Companies face problems that have to be solved repeatedly to be successful. If they have never faced a particular problem before, then they may not have optimized process to solve it.
For example, the military may use their existing defence processes for staving off an alien attack. How the military will behave is predictable to some extent based on their existing processes.
3) Values: what a firm wants to do, and the criteria by which it allocates resources
The military may value survival and defence. By comparison, scientists may value new knowledge and exploration instead. They may prioritize developing a different set of processes for dealing with aliens, such as communication.
Consider if company values would prioritize disruptive opportunities. This might include reviewing:
Signals of change can come from observing what jobs customers are trying to get done with a product. We can classify customer groups by whether they have high product requirements, low requirements, or have unsatisfied requirements.
1) Non-consuming customers
They desire product characteristics on dimensions that are not being met by the market. These customers may be acquired through new market innovations. For example, the original cell phone was like a landline phone but satisfied a new and different dimension of portability.
2) Overshot customers
This is when existing products in the marketplace are too good for the customers requirements. The product has features and dimensions that the customer does not particularly value. Low end disruptive innovations can be on price or convenience.
3) Undershot customers
The current products are not good enough for the customers requirements. These customers are approached through improving products with upmarket sustaining innovations along existing performance metrics.
The factors below can protect a new entrant against an incumbent firm.
1) The new market may look small and inconsequential to a large incumbent, and they will not be motivated to pursue or dominate. However, to a smaller company, the market may be relatively large and enticing.
2) The type of customer in the new market may be different than the incumbents existing customers. The incumbent may not be motivated serve them, or the customer may be comparatively undesirable, such as low margin or different requirements and maintenance.
3) The disruptor may use a different business model than the incumbent. The incumbent will not want to sell a product that cannibalizes or destroys existing revenue streams.
The ideal situation is to enter a market, grow without interference, develop unique skills from servicing the new market, and then be able to fight incumbents with an asymmetric skills set.
Entrants enter a market and are protected due to asymmetric motivations. The incumbent is not interested in fighting for the reasons previously described.
As the disruptive company pushes upward, the incumbents flee the low end of market rather than fight over it. The incumbent is not overly concerned as it views the low end as its worst customers. The strategy may be rationalized as focusing on core premium customers.
As the incumbents continue to flee upmarket, the disruptor improves and develops asymmetric skills. Eventually the the disruptor moves further upmarket and is able to out-compete the incumbents. The incumbent may take action too late to respond.
By comparison, in sustaining innovations, incumbents are very interested in the market, and will compete more to force the disruptor out of the market from the beginning.
Disruptive innovations may fail under the following conditions:
Disruptor is unable to develop unique skills or business model