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Disruptive Innovations Start in Low-End or Emerging Markets

The document discusses low-end disruptive innovation, which occurs when a new entrant enters the low end of an established market with a lower-cost product. This allows the new company to gain market share by serving overserved customers at the low end. Incumbents often retreat to the higher end where margins are greater. Low-end disruption differs in providing "good enough" quality rather than the best, targeting the low end of the market, and causing incumbents to willingly abandon the low end rather than competing directly. The document also provides questions to determine if an innovation is sustaining existing products or disruptive in targeting new markets or customer needs ignored by incumbents.

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Michael Yohannes
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54 views

Disruptive Innovations Start in Low-End or Emerging Markets

The document discusses low-end disruptive innovation, which occurs when a new entrant enters the low end of an established market with a lower-cost product. This allows the new company to gain market share by serving overserved customers at the low end. Incumbents often retreat to the higher end where margins are greater. Low-end disruption differs in providing "good enough" quality rather than the best, targeting the low end of the market, and causing incumbents to willingly abandon the low end rather than competing directly. The document also provides questions to determine if an innovation is sustaining existing products or disruptive in targeting new markets or customer needs ignored by incumbents.

Uploaded by

Michael Yohannes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Disruptive innovations start in low-end or emerging


markets.
Examples of disruptive innovation include low-end and new-market
disruption, which are distinguished by their interactions with the current
market. Although low-end disruption joins the existing market at the
bottom to deliver a "good enough" product to an overserved consumer, new-
market disruption happens when a creative product generates a new market
segment.
If you work for an established company or are a new entry, knowing how
disruption operates may help you drive it or avoid it. Let's take a deeper look
at low-end disruption, one sort of disruptive innovation.

WHAT IS LOW-END DISRUPTIVE innovation?


When a business enters an established market at the bottom and seizes a
section using a low-cost business strategy, it is said to be engaging in low-
end disruption. The incumbent corporation often retreats upwards, where
profit margins are stronger, as the entry-level competitor captures the
lowest market sector.
According to Christensen in Disruptive Strategy, "almost usually, when low-
end disruptions happen, it creates a scenario where the market leaders
really are incentivized to run rather than fight you. When your rivals don't
want to compete with you, they just walk away, low-end disruption is a
crucial instrument for developing new growth enterprises.
characteristics of Low-End Disruption
Low-end disruption differs from other innovation categories in three ways:
1. It doesn't provide the greatest quality, but rather "good enough" by
market standards. As this product is unlikely to appeal to customers at the
top of the market, existing enterprises may not regard it as a threat.
2. It goes for customers at the low end of the market. These are folks that are
overserved by the present product offers; they don't require all the extra
features that come at a high cost.
Determine Whether the Innovation Is Sustaining or Disruptive

Innovation often belongs to one of two categories: disruptive or sustainable.


As we've seen, Christensen and Bower use the term "sustaining" to refer to
their method of gradually upgrading already-existing products.

By contrast, disruptive inventions cater for clients who seek a low-end


product, rather than one with sophisticated or more expensive features.
They could also target a market that doesn't at all purchase the popular,
market-dominating goods.

Take into account the following questions to assess if an invention is likely


to be disruptive or sustaining:

• Is it predicated on providing a better or altered version of a product that is


already available on the market? If so, it's likely to be enduring.

• Does it have a clear market appeal depending on the product it is based


on? If so, it usually won't cause any disruptions.

• Does it target a market that current suppliers are ignoring? If so, it could
be upsetting.

• What do your company's technical specialists think of your product? It


could be worthwhile to pursue it as a disruptive innovation if they are
enthused about its possibilities in the future.

• What do your organization's management think of it? It can be a


positive indicator if it makes them feel uneasy. Be in mind that
disruptive technology may also be disruptive inside!

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