Essay: Innovations types

INTRODUCTION

Innovation is the change in thought process for doing something new and useful. Definition of innovation (www.businessdirectory.com); “It is the Process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination, and initiative in deriving greater or different value from resources, and encompasses all processes by which new ideas are generated and converted into useful products. In business, innovation results often from the application of a scientific or technical idea in decreasing the gap between the needs or expectations of the customers and the performance of a firm’s products”

Innovations are of mainly two types

1. Sustaining innovation:

it basically means improving the existing products on the basis of dimensions historically valued by the consumers.

2. Disruptive innovation:

disruptive innovations are those innovations that introduce a new value proposition. These innovations are radical in nature and have an adverse effect on the existing industry.

According to Clayton Christensen in his book ‘the innovators dilemma’; “Disruptive innovation is 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.”

Christensen continues “Because companies tend to innovate faster than their customers’ lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers”, which means that it is very important to take into consideration the lifestyles and the present needs of the society to develop a disruptive technology.

Christensen in his book further adds that a technology is only disruptive if it adds a new population of customers access to a product that earlier was only used by people who had either a lot of money or skills. In the initial stages the characteristics of disruptive technology can be low gross margins, small market etc.

For a technology to be disruptive it must fulfil the following criteria:

1. The first characteristic of disruptive technology is that it is more costly than the product it replaces for example the cellular phone, when launched was very costly as compared to the landline phone at that time.
2. The performance of the new entrant or the disrupting product is not as good as the product it is replacing which means the product that is being disrupted serves better than the new product. when the mobile phone was launched , the problems that it had to faced enormous problems like no connectivity and disturbances to name a few.
3. Most of the time when a disruptive technology is launched , the market research shows that there is a very small market for the product which means that customers are not willing to purchase the new device.
4. It always difficult to ascertain the segment into which the new product that disrupts the existing products fits. This indicates that the customers are really unsure of the usage of the disrupting product.
5. The initial market is very small.

As discussed earlier that for a technology to be disruptive it must meet the above criteria. Recently launched Apples Ipad is one such technology that does qualify to be a disruptive innovation. The Apples ipad is a revolutionary tablet computer, which is not only a computer but much more. It is disruptive on basically the lower end of the laptop market that’s the netbooks and the e-book reader such as the Amazons kindle.

Let us examine that how Apples Ipad fulfils christens conditions for being a disruptive technology.

Though the ipad is costlier than the amazons kindle but the apple has priced the ipad very aggressively at about $ 499 which makes it about at par with the netbooks. Critics of the device have already written off the device because it lags certain features considered essential for computing such as the flash player, u.s.b (universal serial bus) and memory card slot, which indicates that the device though is better in terms of many features it has but lags behind in true computing performances. The customers really are not sure of how to use the device which also means that in the present scenario the Apples ipad is a misfit in terms of the categories already present. The industry predictions for the ipad sales are relatively less than the netbooks. (Sheldon Laube, 3rd march 2010)

The following table compares apples ipad, net book industry and e-reader industry (specifically the Amazon kindle).

From the table we can easily conclude that though the ipad does lack some essential input and output devices and the flash players, but it has features such as multitouch display coupled with the aggressive pricing really make it disrupt the crowd.

Clayton Christensen mentions that for a technology to be disruptive it must have new capabilties/abilites and features which are attractive to the buyers and are not available in the existing products .and this is what is the ipads unique selling proposition. The feature like multitouch touch screen , easy to operate interface are among many factors that contribute to the ipads strength.

Apples ipad has created a vehicle for media transmission, it has created a platform which is conducive for the development of applications which over the long term would drive broad adoption of the device and in turn derive apples growth. To name a few the ipad has features where in one can watch replays as when one feels like , can watch player statistics while watching a match and can read magazines with embedded videos. Ipads another forte is the simplistic and superior browsing experience. Even though the ipad is a touch screen device, accessing emails and working on it is a very comfortable and an easy experience.

Thinking about ipad within the context of Smartphone’s and laptops misses the essential point .this device is a misfit with its cross category functionality, and its these misfit ways that coupled with competitive opening price makes it a potential disruption to multiple categories and help apple grow.

Ipad is a classic example of both the kinds of disruptive innovations that is the low disruptive innovation which offers the existing customers a low priced relatively straightforward product as well as the new product disruptive innovation which basically adds the non consumers to the market.

Apples ipad has launched this product at a very crucial time, thus it has been able to integrate all three consumer group and form its own market. Ipad targeted first of all the non consumers by inculcating the features and capabilities that was never done before. They then targeted the e-reader market whose consumers were undershot and wanted something that could have more features .lastly they set their target on the overshot consumers who earlier bought or wanted to buy netbooks and laptops and who were willing to sacrifice few features for the sake of lesser price. This concept is illustrated in the following diagram. Ipads 1 million units sale in just 28 days speak for the above.( Andrew James, 2010)

Both the ipad and the netbooks lie between two segments, that is the Smart phones and the laptops.This means that even about a month after the launch, the ipad has already started disrupting the existing market for the netbooks and e-readers.

Since the launch of the ipad on the 3rd of April Apple has already sold over a million units of the ipad, this huge volume of sales had led to a fall in the sales of competing goods specifically the netbooks.The following chart explains how the growth rate in the sales of the netbooks went down after the launch of ipad.

The table has been adapted from the research done by Morgan Stanley. The results of the research were astounding , last year the growth in the the net book industry was about a whooping 641% but in april this year when ipad was launched the growth rate fell to a meagre 5%.

Established firms response to the ipad and the tablet pc

When a new technology hits a market it gets difficult for existing company to maintain their position in the market. Companies then employ specific strategies to remain in business and grow.In case of the Apple’s ipad and the netbook industry, netbook industry started flourishing in 2009 and had huge sales numbers. But due to the launch of apple ipad their sales during past quarter has not really been that good. Hence it is very crucial time for the netbook industry to form a strategy and fight the way out of this disruption. The netbook industry should apply a mixture of the following two strategies:

1. Co-opting: under this strategy the netbook industry using its internal resources should provide a resistance to the Apples ipad by the way of acquiring technology similar to that of the ipad and inculcating it in their products, thus being a fast follower.
2. Growth driven: under this strategy the netbooks and the e-reader firms should through incremental innovation improve their products quality and features and come up with a new, improved and modified version of their existing products and target ipads present market.

Companies like Hewlett Packard and Acer are big companies that do not only exist in the netbook industry, but multiple field such as desktops , laptops , printing etc.These companies have the resources to come out of the disruption.

The strategies above should be implemented simultaneously by the netbook industry. They should continuously improve their productS to give their loyal customers a better experience and on the other hand develop a device capable of leaving the Apples ipad behind. The fast follower strategy is considered as the best strategy, hence these companies should try and catch up with the apple on the innovation front.

Conclusion:

This piece of work provides insights into the disruptive innovation and its types. An example of emerging technology that is disruptive, is the Apples ipad. Due its features, its platform and simplistic design it has sold about 1 million units. The ipad is a revolutionary product that has been manufactured after a decade of research and development and therefore has many features that no other device has, which gives it the competitive advantage.

The ipad is having a very adverse effect on the low end laptop market that is the netbooks.The netbooks started to flourish in 2009 and saw astounding growth rates but with the announcement launch of ipad the growth rate of sales of these netbooks has been falling constantly.

These netbooks companies should now follow a strategy of improving their current products along with innovating and producing a device that could match apple ipad’s standards. These companies have sufficient internal resources to do that.