MBA Boot Camp: Disruptive Innovation (8.5)
Concepts & Vocabulary
Sustaining Innovation: Improving an existing product for your best customers (e.g., making a TV screen slightly sharper, or adding a 5th blade to a razor).
Disruptive Innovation: A cheaper, simpler, often lower-quality product that targets the bottom of the market, which established companies ignore—until it improves and destroys them.
Core Lesson: The Innovator's Dilemma
Harvard professor Clayton Christensen asked a brilliant question: Why do great, well-managed companies fail?
His answer: Because they do exactly what they are taught to do in business school. They listen to their most profitable customers and invest in Sustaining Innovations.
Meanwhile, a startup introduces a Disruptive Innovation. Initially, it's a joke.
Example: When Netflix first started streaming, the quality was terrible and the movie selection was awful. Blockbuster ignored them because Blockbuster's best customers wanted high-def DVDs on a Friday night. Blockbuster was acting rationally!
But the disruptor improves rapidly. Within a few years, streaming quality matched DVDs, and the convenience was unbeatable. Blockbuster was destroyed from the bottom up.
The MBA Marketing Insight: As a marketer, you must keep an eye on the "cheap, low-quality" alternatives in your industry. If you only market to your wealthiest, most demanding customers, you leave the basement door wide open for a disruptor to enter.
