Disruptive Innovation

Reliance Communciations has changed the rules of the game when it entered inro the CDMA mobile technology. It started offering the service to its customers at such a low price that the market leader in the mobile sector got shattered. This marketing strategy is known as Distruptive innovation. Distruptive innovation is a process by which company introduces a new product or service typically by being lower priced.

Disruptive innovations can be broadly classified into low-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption (i.e., consumers who would not have used the products already on the market), whereas a lower-end disruptive innovation is aimed at mainstream customers for whom price is more important than quality.

Distruptive innovation is mostly threatening to the market leaders as it was in the case of Reliance. Big players like Airtel, Vodafone (then Hutch) also lowered their prices and started giving lot of value added services at low prices, which on the other hand is good for customers.

According to Clayton Christenson, Harvard Business Professor and author of The Innovator’s Dilemma and The Innovator’s Solution, a disruptive innovation is a technology, process, or business model that brings to a market a much more affordable product or service that is much simpler to use. It enables more consumers in that market to afford and/or have the skill to use the product or service. The change caused by such an innovation is so big that it eventually replaces, or disrupts, the established approach to providing that product or service.

Disruptive technology does not always mean low prices. On the other hand when Computers and laptops were introduced into the market, it was like a disruptive innovation to replace Big Main frames and similar machines.

It is to believe that Tata Nano, the cheapest car in the world would be termed as one of the examples of disruptive innovations. As only middle class and upper class people were able to access the modes of transport as luxurious as car, but now mobility in a four-wheeler would not be a dream for a population of India. This is an apt example of disruptive innovation and now all the competitive companies like Bajaj, Mahindra etc. planning to foray into this market. While contrary it was a daring task to make a safe car for common man at an affordable price of $2500.

Disruptive innovation is one of the most popular strategy of the modern times and this is the strategy companies normally follow to enter in to highly competitive market.