Innovation, Disruption and New Consumer

A product is valued for its problem solving ability. For instance a watch measures time and camera captures images. This distinction becomes the basis of industry classification which gives rise to structure and strategy dynamics. Industry structure within which firms compete is defined by factors like seller and buyer concentration, product differentiation, barriers to entry and exit, degree of vertical integration and growth rate of demand.  The product based conception of structure accordingly etches boundary that divides one industry from the other. Firms ‘conduct’ (strategy) in a structure and produce performance outcomes. Hence a camera company like Nikon directly competes with another camera producer Nikon or a computer brand like Lenovo wrestles with HP. This view of competition is direct. Firms evolve strategy and develop success blueprint based on an idea of their competitors and their competitive behaviors.

 In a way industry conceptualization allows managers to identify which competitive space they belong and ‘not-belong’ to. Accordingly it lends ease in identifying competitors and their behaviors. Thus a car maker like Ford should fight with others in the car marketing space like GM, WV or Toyota. This is one of the ways to conceptualize competition known as direct competition. But a need can be satisfied by a different product. For instance transportation can be taken care of by a whole range of non-car products like cycle, scooters, airplane, and railways. That is a firm may face competition indirectly from products that ‘do not belong’ to a given industry. Managers often fall into a myopic strategy trap when they fail to factor in the implication of these indirect competitors. In this regard Ted Levitt had cautioned managers to answer the question, ‘what business we are in?’  It may be myopic to think of an industry in product or technology terms.       Sony Accy MN2 Smart Watch

 The competition indirectly can come from anywhere. The new emergent business environment is rendering the industry boundaries totally fluid and permeable. This is both a threat and opportunity. It all depends upon how far the vision of a manger can go.

Mobile phones are embedded with time keeping utility. Is it wise to consider that Nokia or Apple is not a threat to brands like Nikon or Olympus? Is a computer is computing or entertainment devise? Wrist watch is now being increasingly conceptualized as a ‘device’ with fluid functional boundaries. Many companies like Apple, Sony and Nike are eying wrist for potential business opportunities. Burg has already launched a device for the wrist which combines the watch and mobile phone space into one. This is a watch phone. Burg calls it ‘new smart watch’. Consider the following:

  •  Sony’s Smartwatch has two inches screen and can show emails and twitter posts which it can extract from Android phone.
  • Nike’s Fuel can feed a lot of data about your daily body statistics like calories burnt to a smart phone.
  • Pebble can play music and display text indicating needed information
  • Nokia and other mobile phone brands are building higher imaging capabilities.

 The linearity of thinking causes managers to seek incremental innovation. The accent is placed on betterment of existing value for instance, increasing the accuracy of a watch or refinement of reception of a television panel. But now the character defining core functionality which sat at the center is being decentered in many cases. A radically different perception is needed to view everyday objects. This depends upon an understanding of what makes sense to new emergent customer. It may be wrong to assume that the new generation is a linear extension of the previous one.

 Is computer something to ‘computing’ with or something to ‘accessorize’ with?


6 thoughts on “Innovation, Disruption and New Consumer

  1. Since the competition is indirect, company can look at launching a new brand if the competition is becoming mainstream. But how to deal with indirect competition until it becomes mainstream?? It is a big challenge from a brand communication perspective to venture into different category. For e.g. it is difficult for a Nikon or Canon to address the issue of Nokia coming up worlds highest resolution camera. How can Nikon/Canon address it, should they choose to?

  2. Interesting insights indeed! Adding an example to your post, the mobile payments sector is an extremely burning case. Traditionally software/internet based companies like Google, Apple, etc. are lining up against financial services like American Express, Visa, etc.

    To answer your question, a computer’s role has evolved from something that “computes” to something that “helps” you achieve a goal/solve a problem. The accessorization bit is primarily an attractive feature that is “good to have”. But with time, that becomes a necessity. For example, a camera on a phone was something that good to have, but now, they are an absolute necessity. In fact, today, someone was flaunting his new Blackberry to me, and the first thing he said about it was that “it has 5.2 MP Camera!”.

  3. Its interesting article carrying a innovative message. Its the degree of competition, customer preference, and innovative steps of marketeer to differentiate their brand which determines the expansion of product category. In above article technologically equipped companies are making entrance to new allied customer segments to increase product life cycle.

    The same is also apply to computers as well, as computers will accessorize with communication excellence n projection. Through it computers product category will encompass the other allied categories.

  4. Innovation is indeed a holy cow. few years back there was an ad by IBM where a lady stood in a large vacant room, when asked what the room is for, she replied it is a room where we will come to innovate, when further probed so what are you doing to innovate the answer was we are not innovating now, but when we do, we do this in this room. levitt does bring a paradigm shift but isnt innovation easier said than done?

  5. As always, an Interesting post, sir.

    I liked the part where you mention that the competition for a product can come from anywhere and the present business environment is rendering the industry boundaries totally fluid and permeable. And definitely, it is both a threat and an opportunity. It is a threat for the companies who won’t innovate at the rate at which the competitors may innovate.

    We can easily relate it with the example of Apple. Apple has been the center of innovation for over many years. They introduced the world to the Personal Computer (Mac), a personal Music listening device (iPod), the iPhone and then the iPad. Now for each of these products, the consumers might not have felt that there is a problem in the first place. There are statements like Ken Olsen’s from DEC claiming that “there is no reason anyone would want a computer in their home” and multiple people arguing that there is no need for the telephone, including the head of the British Post Office, noting that “we have plenty of messenger boys.

    When Steve Jobs presented the world, the iPhone (A must see video if you haven’t seen it-, he presented the iPhone as a combination of (1) Wide Screen iPod with Touch controls (2) Revolutionary Mobile Phone (3) Breakthrough Internet Communications device. So Apple seized the opportunity by breaking the permeable boundaries between these three products. Due to Apple’s disruptive innovation, companies like Blackberry and Nokia are reeking blood. Blackberry suffered losses of $235 Million as compared to profits of $ 329 million in the same quarter the last year. So these companies seem to have lost the opportunity.

    I also went through another interesting article on innovation and consumer behaviour- It is easy for people to miss disruptive trends here-

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