Everybody knows why badly managed businesses fail. What's more interesting, is how companies like Yahoo, Myspace, and Dell seemed to do everything right and still didn't survive to remain market leaders.
Avoiding Expensive Mistakes: https://www.goodmanlantern.com/digita...
----
How Disruptive Digital Platforms Cause Market Leaders To Fail
Professor Clay Christensen from Harvard Business School put forward a ‘Theory of Disruptive Technology’ to explain this:
In every market there's a trajectory of performance improvement that customers are able to make use of but where this trajectory lies is different from one customer to the next. Some customers can be satisfied with very basic levels of performance, while others are demanding and will only feel satisfied by very high levels of performance.
In every market there's a trajectory of performance improvement that customers are able to make use of but where this trajectory lies is different from one customer to the next. Some customers can be satisfied with very basic levels of performance, while others are demanding and will only feel satisfied by very high levels of performance.
Disruptive technologies enter the market offering very low performance but their performance steadily improves. So, in the early days of a disruptive technology the new innovation is considered to not be good enough by most of the market but seems perfectly acceptable to those customers that never really asked for more.
This small group of customers, often referred to as ‘early adopters’, might be attracted by the fact that this “barely good enough technology” is less expensive or offers them a bit of new functionality that the old technology simply didn't provide.
The problems often begin for potential competitors or thought leaders when they are first assessing a tool. They believe that this disruptive innovation simply does not meet their customers’ needs. They apply the usual business logic and very rationally conclude that they should stick with the technology they already have.
Here's the thing:
The new technology that started out as “low quality” still gets adopted by a minority who become the app’s preachers. It steadily improves until it is good enough to meet the performance expectations of even the most demanding customers. By this time, however, it's usually too late for competitors to do much about it because they fail to develop the required capabilities and linkages to leverage the new technology.
Let’s use the example of Myspace v/s Facebook.
