How you can use disruptive innovation to crush your most powerful competitors

October 10, 2022

How you can use disruptive innovation to crush your most powerful competitors

If your business operates in the steel or auto sectors then you probably know or have heard about disruptive innovation because your industry has already been disrupted by disruptors such Nucor Corp  or Toyota, Hyundai, Kia, etc.   Does it mean that every traditional incumbent is at risk of being disrupted by some small, obscure, under resource company or a traditional incumbent? Not if you, the traditional incumbent is the disruptor like Dow Corning whose forward thinking, proactive, agile, and adaptive approach enabled it to escape disruption by becoming the disruptor and was thus was able to overcome the challenges posed by its relatively small low cost rivals and/or large supplier rivals in the standard silicones business. Dow Corning was known for its innovative high quality products supported by strong service offerings for which customers paid premium prices. However, in the late 1990s commoditization of the standard silicon business presented existential threats to the company’s core business which had slowed dramatically.  Confronted with declining performance resulting from customer defections to smaller local suppliers, economies derived from improved efficiency of global and local rivals to undercut their standard silicon products business, Dow Corning embraced and applied the theory of disruptive innovation along with technological leadership to develop high quality standard silicon products which were competitively priced and successfully  engineered a turnaround in the company’s fortune. The theory of disruptive innovation introduced circa 20 years ago by Harvard Business School’s  professor Clayton Christensen is a powerful tool for predicting when an industry is ripe for or susceptible to disruption and which entrants are likely to be successful disruptors.  It is a theory which attempts to explain innovation-driven growth and has been touted as a springboard for growth by both large and small entrepreneurial entities such as Dow Corning, Intel, etc.  Disruptive innovation is largely misunderstood and has been widely used to describe the process wherein successful incumbents have been made to stumble by relatively new entrants. Disruptive innovation is not necessarily about extracting gains from first-mover advantage. In the business sense, disruption is the process in which a resources deficient entity [generally a small company] successfully challenges its larger traditional incumbent(s). These disruptors succeed by initially seeking out and meeting the needs of the underserved/fringe/overlooked customers and the products  offered  initially  are deemed inferior by most of the incumbent’s customers. In other words the lower price is not sufficient to get mainstream buyers to switch. As the disruptors then offer the next iterations of products with rising quality enough to satisfy these mainstream customers of the traditional incumbents, these customers will be happy and content to buy the products at the lower prices.  This is fundamentally how disruptive innovation unfolds and how it forces prices lower so that more of the nation’s population can afford the products they need to enrich their lives. Which of the following companies is an innovative disruptor, Uber, Netflix or Tesla?