Over the years we have consistently seen that the leading brands fail to be on the top of their industries when technologies or markets change. Why is it that the strong brands fail to adapt to technological or market changes that customers of the future will demand? The fundamental reason is that strong brands succumb to one of the most popular, and valuable, management dogmas; they stay close to their customers. Customers wield extraordinary power in directing a company’s brand strategies. But we all know that what happens when a challenger brand enters the market with a disruptive innovation that changes an industry’s competitive landscape?
So what is disruptive innovation?
“Disruptive innovation, a term of art coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.”
Unfortunately, disruption theory is in danger of becoming a victim of its own success. Many top executives/consultants I have interacted describe “disruptive innovation” as any situation in which an industry is shaken up and strong incumbents’ brands lose. But that’s too broad a definition.
So let’s try to define the idea of “Disruption” a process whereby a new entrant with fugal resources is able to successfully challenge the established market leader. So what happens is that the incumbents’ strategy focuses on improving their products and services for their most profitable customers; they exceed the needs of some segments and ignore the needs of others. Challenger or entrant brands that prove disruptive attack and attract those overlooked segments, gaining a foothold by delivering more-suitable functionality at a competitive price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.
So who qualify to be a disruptor brands
Disruptive innovations are made possible because they get started in two types of markets that incumbents overlook. Low-end footholds – to start with disrupter brand focused on providing low-end customers with a “good enough” product. And new-market footholds, disrupters converted non-consumers into consumers.
In the Indian context, disruptive innovation follows the basic principle, but it starts out as a cheaper alternative of a strategy and targets a market segment (the lower end) ignored by existing leading brands.
One of the earliest instances of disruptive innovation in India was T-Series & Nirma detergent powder. Where T-Series aimed to bring music to every music lover at an affordable price on the other hand Nirma aim was to replace the ‘washing soap bars’ and offer a product at an affordable cost. Similarly, Chik shampoo came to the market in 1999 with shampoo sachets costing just 50 paisa each.
Maruti in 1983 was one of the biggest disruptive innovations and have wiped out the incumbents like Ambassador and Premier Padmini from the market place. Similarly in the 80’s the Super Cassettes’ ‘T-Series’ had completely changed the way the Indian music industry functioned. However, it is the mobile phone and ecommerce retail segment that has given us the most recent disruptive innovation. Indian manufacturers such as Micromax and Karbonn realised the potential of cost-effective mobile phones and introduced the affordable smart phones. Nokia did not perceive the disruptive threat and the Indian manufacturers evolved into successful brands. Brands like flipkart, Snapdeal, amazon etc are giving the traditional offline stores a run for their money.
In the case of new-market footholds, disrupters create a market where none existed. Put simply, they find a way to turn non-consumers into consumers. In Blue Ocean Strategy, Kim and Mauborgne delineate as ‘the three tiers of non-customers’ who can be transformed into customers.
First Tier: ‘Soon to be’ noncustomers who are on the edge of your market. They minimally use current market offerings to get by as they search for something better. Upon finding better alternative they will jump ship.
Second Tier: ‘Refusing’ noncustomers who consciously choose against your market because they find the offerings unacceptable or beyond their means.
Third Tier: ‘Unexplored’ noncustomers who are in markets distant from yours. They are the ones who have not been targeted or thought as potential customers by any existing incumbents.
The success of the Indian Premier League (IPL) is a case in point of how a successful blue ocean brand has been created by shorter format (20-20), orthodox batting and bowling techniques, raising the pace of the game and emphasis on athleticism, increasing the entertainment quotient with bollywood and cheer leaders. It overall created a unique entertainment experience and attracted even a non-cricket fan to watch and follow IPL – “khushiyon ka tyohaar”.
Further, Indian retail industry is devising strategies which could potentially disrupt competitor business. The disruption strategy adopted by online retail has resulted in successful sales of 5.3 billion USD. Although the numbers amounted to only about 0.5% of the overall retail trade, their innovative marketing and aggressive expansion strategies invited growing interest from investors, both in India and outside.
The disruptive strategies driven by online retail companies like flipkart, amazon, snapdeal etc had traditional retailers struggling to retain their leadership positions. The ‘online v/s. offline’ debate has given rise to an era of disruptive innovation (Really?), where retailers, both online and offline, are pulling out all stops to remain ahead in the competition. Is Snapdeal, flipkart a Disruptive Innovation? According to the theory, the answer is NO. E-retailers financial and strategic achievements do not qualify the company as genuinely disruptive—although these companies are almost always described that way.
India has a long way to go in creating ideas, products, and services to disrupt the international markets. So when Infosys co-founder NR Narayana Murthy says that no invention, technology or idea from India had set the world on fire in the last 60 years, he is referring to India’s lag in disruptive innovation.
Has ‘Disruptive Innovation’ Run Its Course? Not Yet… the bottom line is that everything that is traditional will get disrupted and all disruptive innovations will become traditional tomorrow.
Gaurav Sood is a Brand Communication professional, Consultant & Educator with a 2 decade practice of creating strong brands.