The Innovators Solution talks about creating new growth in business & prying open the black box

of innovation and studying the processes that lead to success or failure in new growth businesses. The book summarizes a set of theories that can guide managers, who need to grow businesses with predictable success, to become the disruptors rather than the disruptees. It reviews the disruptive innovation model from the perspective of both the disruptee and the disruptor. This helps organizations shape their strategies, in order to pick disruptive fights that they can win. It goes on to discuss the role of sustaining innovations in generating growth and how some of the best sustaining companies ignore disruptive threats & opportunities until it is too late. A Disruptive Business Model Is a Valuable Corporate Asset & can generate attractive profits at the discount prices required to win business at the low end. It can carry the business model up-market & compete at the margin against the higher cost disruptee. Two types of disruptions: New Market disruptions- They induce incumbents to ignore the attackers Low End disruptions- They motivate the incumbent to flee the attack

What Products Will Customers Want to Buy? Failures in a new product development process are predictable and avoidable. Market segments that are defined must correspond to the circumstances in which customers find themselves while taking purchase decisions. This will lead to products that will connect best to the customers. It is essential to understand that customers hire products to do specific jobs. Circumstance-based categorisation asserts what features, attributes and functionalities will cause customers to buy a product. The demand for crisp quantification in resource allocation processes of companies and the focus of advertising practices on customers rather than circumstances, results in attributebased segmentation that has counterproductive outcomes. A brands meaning should be positioned on a job to be done as customers always define quality within the context of the job to be done. Now after gaining a foothold in a market, growth happens when sustaining improvements are required to meet more needs of profitable customers. Who Are The Best Customers For Our Products? To find ideal customers there are four elements of new-market disruption: 1. The target customers are trying to get a job done, but they lack the money or the skill 2. These customers will compare the disruptive product to having nothing at all; hence, they are delighted to buy it even though it may not be as good as other products

available at high prices to current users with deeper expertise in the original value network. 3. The technology that enables the disruption might be quite sophisticated, but disruptors deploy it to make the purchase and use of the product simple, convenient, and foolproof. It is less money and less training that enables people to begin consuming. 4. The disruptive innovation creates a whole new value network. The new consumers typically purchase the product through new channels and use the product in new venues. Getting the Scope of the Business Right: A company has to always work with the dilemma of what to outsource as what may seem a core activity today may turn out to be non-core tomorrow. As any industry matures, competition increases and firms start assembling products rather than developing proprietary, interdependent architectures. The proprietary architectures give a performance less than what a customer desires and modularity by taking away some degrees of freedom, gives more than what a customer desires. Companies should analyze whom they are competing with and then take a decision: integration or modularity. Also it should be remembered, a low cost product can disrupt the industry which satisfies exact demand and gain market share. For companies to remain competitive, it should open its integrated architecture as industry matures so that low cost providers adopt it and it finds it as an industry standard. The rule is company should be integrated across interface where performance is not good enough relative to what customers required at next stage of value addition. A company must remember customers will not buy your product unless it solves an important problem for them. How to Avoid Commoditization: The process of commoditization in a value chain is complemented by de-commoditization at work somewhere else. De-commoditization is what enables companies to garner profits. In more-than-good products market, either disruption or commoditization will take place. To keep profits, a company should up-market so that it can keep competing with high cost proprietary products. As outsourcing increases in modular products, the subsystems began getting differentiated and de-commoditization takes place. The companies producing these systems will capture the profit. Also, the power of brand will shift to such subsystems. Instead of looking at core competence, managers should look at what adds value to a customer. Managers should own/acquire, and manage such suppliers as separate growth oriented businesses. Capabilities and Strategies in Organisations for a Disruptive Growth: The suggested method to judge an organizations capabilities to build a successful new growth business here is the RPV framework, which means resources, processes and values of

an organization. There is no one size fits all approach and as a result, it is imperative for a business to have a complete synchronization between the RPV and the new tasks/challenges at hand. As a new growth organization evolves, dependability of its success shifts from resources to processes and values, which when get embedded in to an organization form a culture. Also something disruptive for one organization can be just sustaining for another and remember that organizations cannot disrupt themselves. Another option available is to acquire the required RPV, but utmost care needs to be taken in terms of the extent of integration. Having a suitable strategy development process is pre-requisite to successfully compete in a dynamic business environment. Broadly there are two interrelated processes, deliberate and emergent, first being highly analytical and detailed and the latter being based on the day to day managerial responses. Primarily depending upon the cost structure and the size threshold, ideas are put through the resource allocation process, result of which is the actual strategy. The switch from an emergent to a deliberate strategy mode is crucial to success in a corporation's initial disruptive business. Also managing the development process throughout the maturity phases is the key to success. There are three major focus areas outlined for the manger to focus upon: i) To Control the initial cost structure of a new-growth business to determine the values that will drive the critical resource allocation decisions in that business. Actively accelerate the process by which a viable strategy emerges s using tools such as discovery-driven planning. Continuously exercise judgment about whether the circumstance is such that the business needs to follow an emergent or deliberate strategy-making process.

ii)

iii)

As most innovators seek funding for their projects from corporate executives, it is essential to work on the amount and type of this funding because it decides the degree of control desired to be given by the innovator as well as that desired to be possessed by the funder. The monetary funding may fall into one of the two types: 1. Patient for growth but impatient for profit : Good money- gives innovation time to compete with non-consumption and create an accelerated disruption leading to a successful new-growth strategy 2. Impatient for growth but patient for profit : Bad money Good money may turn bad due to the five step death spiral: 1. 2. 3. 4. 5. Initial success blinds it to low-end, price-sensitive business Growth-gap: Difference between expected and needed rate of returns Impatience for growth sets in Temporary losses are neglected Initial big loss stirs retrenchment

Role of Senior Executives in Leading Growth: a. b. c. d. Focus on patterns of market rather than financial results of the innovation Prepare policies before-hand to avoid good-to-bad money transition Start early with small and rhythmic investments Demand early success from the innovation

The role of senior executives is crucial as they hold a long-term, personal responsibility for investing the right amount of money in the right type of project. Many of these senior executives end up leading a disruptive innovation through proper investment. E.g.: David Packard led microprocessor-based computers at HP, Sam Walton led Sams club at Wal-Mart etc. The disruptive-growth-engine has the following chain of command: 1. 2. 3. 4. Start before you need to A senior manager in charge Expert team of movers and shakers Training the troops