Seeing What’s Next: Using the theories of innovation to predict industry change: Chapter 1

“The historian in all of us cares about the past, while the decision maker in all of us cares about the future.” Clayton Christensen

In chapter 1 Christensen begins to talk about the three types of customers with which entrepreneurs looking to innovate and existing firms should be concerned with. The first is the customer that is not consuming the product or only consuming in inconvenient settings. This person would be known as a non-customer and is the key group to focus on when building a disruptive innovation. These people are those that would be using the product or service if they were able but are excluded due to complexity of use, price or inconvenience. For that reason, Christensen suggests creating new market disruptive innovations to reach them. The easiest way to think about this is to find an area where the customer must be creative in order to take part and replace it with your innovation. In other words, you should innovate so that the customer doesn’t have to. The example given in the book is the telegraph dominance and the introduction of the telephone. The telephone was the first invention that allowed a regular person to contact others within an area without the need for a telegraph operator or large amounts of travel. This took the complexity out of the situation and allowed the customer to conveniently enjoy communication.  The drawback of disruptive innovations that one should consider is that they lack the functionality of existing and tested products. Therefore, the entrepreneur should emphasize the new benefits, convenience, customization and lower prices that they may offer. It is also important to consider that not all people are open to change, and some might even be intimidated by a new and confusing product or service. For this reason, you should make the product as standardized and simple for the consumer as possible in the beginning. An example of this would be the introduction of the first cell phones with the same style dial pad as existing land lines. This allowed consumers to use their existing experience to operate the new product.

            The second type of customer to consider is those that are undershot by existing products or services. Undershot customers are those that are not satisfied by the performance of the current solutions and would pay a premium for a better solution. In this case a new innovator would look to launch upmarket sustaining innovations. This simply means providing more expensive products with superior features that appeal to affluent customers. An example of this might be customers that pay for premium music services that are ad free rather than listening to the radio. The third type of customer are those that are overshot by current products within the market. This means that they are more than satisfied by current solutions and cannot use all the features offered by the given product or service. Offering a low-end disruptive innovation will allow entrepreneurs to satisfy these customers.

            By understanding markets and adapting strategies accordingly, an entrepreneur can see opportunities within niche markets. Similarly, investors within existing industries or venture capitalists can seek out companies that are entering niches and respond accordingly. It is important to understand the shortcomings of each method and plan to combat them with the assumption that competitors also recognize opportunities.