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[Sponsor] Going beyond theory: Strategies for capturing new markets

Much of what I write is based on the theories put forward by Clayton Christensen. I was fortunate to study under him fifteen years ago and since then his work has led to a fundamental review of what passes for business or management theory based on placement of innovation at the core of analysis.

Standing, as it were, on the shoulders of a giant, many scholars have taken the theories and adapted them to building new workman-like tools for taking the theories to practice. One such scholar, and friend, is Stephen Wunker, a classmate of mine and alumnus of both Harvard Business School and Innosight, Christensen’s consulting practice with experience as an executive at Psion, the original parent of Symbian.

Stephen has just written a new book that drills down on the questions related specifically to new market disruptions which are notoriously difficult to implement.

Consider how he frames Apple’s success:

The rise of Apple to become one of the world‘s most valuable firms is credited to the elegant simplicity of the products envisioned by its co-Founder and CEO, Steve Jobs. But the roots of Apple‘s accomplishments lie deeper –like the pathfinders of the Industrial Revolution, Apple visualizes how technology can lead to new markets. Rather than slog it out by battling low-cost computer makers cloning IBM‘s PC, it created a new market segment with the Macintosh that it has dominated for over 15 years. As growth in the computer industry began to slow, Apple re-defined the music industry with its iPod. More recently, it has generated explosive growth in smartphones and mobile applications with the iPhone, and initiated a totally new product category with its iPad. Apple has not beaten its competitors at the industry game–it has consistently changed the game to one where competitors seemed irrelevant.

I strongly recommend this book to anyone who wants to go beyond the theory of Christensen and delve deeper into practical tools that can enable a company to be disruptive.

You can purchase the book “Capturing New Markets” (McGraw Hill) here (Amzaon.com) for less than $20.

  • http://twitter.com/fcmaras @fcmaras

    Thanks for highlighting interesting areas at a constant pace!

  • Mark R

    I don't agree. Apple spots existing markets as opportunites and develops them

    The GUI on MAC/Lisa came from Xerox
    The mouse also from Xerox
    MP3 player RIO was a forerunner
    Downloadable music unmoderated from peer networking
    iPad HP had a tablet long before…

    They are the masters of the clone copy. except.

    Apple II now there was an inovation but then again Woz was the brains and Jobs the marketer and it was ever thus

    There have been plenty of failures on the way – Newton Apple III, Apple IIc, arguably LiSa and the Profile HD to name a few.
    High on marketing, low on Innovation, high on design… That's their real formula

    • asymco

      You are confusing new technologies with new markets.

  • Childermass

    The word 'innovation' seems to define a fault line between those who are impressed by what Apple has done (and is still doing), and those who are skeptical.

    I suspect this is because innovation is hard to pin down. Perhaps it helps to see innovation as a matrix based on two axes: technological change on one and user experience on the other. At one end of each axis there is the truly new all the way through to small changes on an existing design or experience at the other.

    Two axes? Some will argue only technological change matters. The user's experience is not trivial, however, and is not mere marketing or design. Without changing the fundamental underlying technology of the internal combustion engine the user experience is changing and improving all the time.

    What is truly new? Utterly and completely new would be incomprehensible to us all, so 'new' has to be based on some of what we know already to be part of the set of things that are useful. The question is: how much?

    The test of real innovation in the real world, of course, is real commercial success. The world is full of inventors, but not many rich ones.

    So we have a matrix and Apple is on it somewhere. The challenge is where? And where are everyone else?

    Take something uncontroversial and competitive like the MBP. The unibody design, the use of aluminum and glass, the back-lit keys, the size and spacing of the keys, the rest for the wrists, the trackpad, the clarity and brightness of the screen, the size and weight, all are probably to be found elsewhere scattered around the world of transportable computers, but nowhere else do they exist as a coherent package. This is not 'mere' design but essential functionality and it is unique to Apple. Everyone knows a MBP when they see one. It is clearly further along the scale of innovation for user experience than anyone else.

    That same machine has pioneered new solid-state memory, new batteries, a new core processor, a new screen, a new power attachment quite apart from OSX. Not one individually world changing, but the net effect is a machine unlike any other. Technologically Apple also score highly on innovation.

    It is also a best seller.

    Without the underlying vision of what Apple are trying to achieve and why, none of this would be possible. Mere purposeless innovation drives no company forward. This is not opportunistic, relative and lucky, but strategically, operationally and tactically innovative and coherent.

    True innovation must also include making mistakes, taking chances. Of course there are mis-steps along the way, but that doesn't stop Apple being, by both measures, easily the most innovative (and therefore disruptive) company making computers today.

    • http://www.informationworkshop.org Mark Hernandez

      Agreed. It's interesting that here in comment spaces and in blog articles we're forced to highlight a few things at most which seem to describe the secret to success, but if we took out a piece of paper and wrote them all down, it would be a long list of things that make up any successful enterprise or pursuit, all at play simultaneously. I guess that's what books are for. :-) As humans we can only keep a few to several things in mind at any one time; that's how we're made. But the world is much more complicated. Take Mark R's comment above. It's complicated and difficult to discuss simply.

      • Childermass

        Absolutely. But that doesn't stop us trying does it? ;-)

        I like this site because the majority seem to be seeking understanding rather than a soapbox. Mr Dediu deserves full credit for that, and his refusal ever to engage in bun fights. As a consequence I have learned a great deal, especially about mobile phones. We are well endowed with technologically sophisticated contributors.

        When it comes to understanding how good businesses are run – your point – the commentary is on less solid ground. Most seems to be based on a theoretical understanding of the problem rather than live experience, which is not entirely surprising.

        I am reminded of a great review of his own work done by a Harvard Business School professor, fifteen years after leaving academia to run a business. His conclusion? Almost nothing he wrote on how you trained someone for leadership was relevant. At one level it was all much simpler, but at another way more complicated.

      • http://www.informationworkshop.org Mark Hernandez

        he he! My friends and I have a running joke about the simple wisdoms of life — there are so many of them you can't remember them all! You know, like "live in the moment," etc. I've fantasized about collecting and cataloging them all just for fun, but I'm sure doing that would be violating one of them. :-) In the end, you're right — it should never stop us from trying.

        I love thinking about information and how components interact, and their hierarchies and spacial relationships to each other. That's exactly the kinds of models we actually build and work with in all our heads, but then we use words to try and describe it — like taking the 3D world of Avatar and serializing it through a 300 baud modem. :-) I have a dream, that one day our interaction tools will be much better than they are now — the text-only, serial, one level of indentation tools we're working with now!

    • davel

      If I remember correctly, Apple is one of the few companies who employ linguists, psychologists and others to help it define its user interfaces and experience.

      The smoothness of the experience is what sets Apple apart from its peers. This has always been the case.

      My first experience with Apple was at school/work where my employer had a mac. I was trying to understand Pascal on IBM/VM and the whole compile/load/go methodology. I turned on this little machine and played with it for an hour and was amazed. I think it was write and draw which were the two applications.

      Most critics take the hammer approach and say but the transistor was invented 40 years ago, the mouse, the keyboard, etc. Apple's genius is simplicity. Yes, most people stand on the shoulders of giants. Most technology has been around for at least 10 years, but Apple is able to consistently bind these existing technologies together in ways that the simple minded competition cannot comprehend or think is just silly. As this posting shows they also create new markets so there are no competitors.

      • Childermass

        I like your focus on simplicity. I guess the eternal struggle, and Mark and I were discussing this above, is how essential it is for the user to experience simplicity (and thus usability), but how hard and complex it is to deliver that.

        The 'competition' don't even understand what it is Apple is trying to achieve, which is why their copies are so inept.

        I invest in businesses that know what they are about. It is a simple approach, but for me this is where Occam's razor cuts. I hold AAPL but not GOOG or MSFT or any other tech stock. Buffet once said he wouldn't buy tech stocks because he doesn't understand them. I go a little further, I will buy tech stocks if their management knows what they are doing. Right now that is a field of one.

  • Eric D.

    Xerox might have invented the graphical user interface (GUI), but it was Jobs who had the vision to create a computer that could run it and still be affordable to the mass market. The rest of Apple's management was betting on the Lisa, a far more expensive computer that never took off. Operating a command-line PC demanded serious skills. The Macintosh and the Mac-inspired Windows systems opened up computing to millions who would never have mastered MS-DOS.

    The cell phone, up to 2007, was evolving into a miniature PC, a GUI interface assisted by ever more complicated miniature keyboards. Operating a Blackberry efficiently required a good deal of dedication and intelligence. The iPhone changed all that. It simplified computing and made the power of mobile devices accessible to a far wider range of users, which in turn spawned a huge new market for developers. The mobile phone became easy and fun to use. The iPad is the next phase of this revolution, extending the simplicity of the new computing to a bigger form factor, again broadening the market of users and opportunities for developers.

    Where's the next big opportunity for Apple? There's talk of an iOs-drive TV. But as an appliance, TV is too mature a market for the kind of margins Apple is used to. But watching 800-channel TV is a frustating experience because of the dozens of miniature buttons of the TV remote and the up and down drilling nature of the TV interface.

    How did Google try to tap into this market? By creating a device that had MORE buttons! A Blackberry for TV, if you will. But with its iOs devices, Apple has a chance to hugely simplify the TV viewing experience. The iPad can effectively combine the functions of the TV remote and the TV interface into one device. And it can also be a portable TV. Just look at Netflix and all the sports streaming apps, for starters. That's a triple threat. The number of people who have trouble operating the remote buttons, the DVR, and the search functions is at least equal to those who have managed to figure it out. Add to that the possibilities of mobile TV watching and you've got yourself another huge whopping market.

  • http://www.informationworkshop.org Mark Hernandez

    I have a saying I've used for over 15 years that it looks like I coined…

    "Simplicity allows us to rise to a higher level of accomplishment, given the fixed amount of effort we have available."

    Of course, I didn't invent it. Maybe I refined it, but I rarely hear people saying this as much as they should.

    One of the many things in common with all the big disruptions is directly related to this maxim. Especially here in the 21st century, we're all living at the edge of our "time and effort" budget. Anything that's suddenly simpler and allows us to do more is something we'll like and be willing to pay for.

    Now think about the iPod, iTunes, iPhone, iPad, iCloud, Bonjour, and on and on. Your grandpa may still be driving a car because… Now think about all the other disruptions.

    The market responds more optimally when something is simplified. Simple, beautiful, elegant, easy. Interesting.

  • Niilolainen

    Frustrating! With young kids and a demanding job I don't even get time to read The Economist any more! I'll have to check if this is available on Audible for the commuting time!

    (By the way, despite my above comments I would still appreciate more recommendations like this on books or other relevant sources of ideas and data)

  • http://www.informationworkshop.org Mark Hernandez

    Another facet is that disruptions would be easier or harder depending on the business model that you're OPTIMIZING for. (This is no-doubt covered in the book.)

    For instance, Microsoft optimizes for license fees, upgrades and average income per seat. (We learned from Horace that MSFT currently makes more money from Android than from WP7.) Google optimizes for penetration and ad impressions. Most manufacturing companies optimize for number of units sold. Walmart optimizes for lowest prices. Bentley optimizes for luxury.

    And of course, Apple optimizes for the number of hardware devices sold in a family of interactive products with high gross margins. Given that, it may follow that Apple is in a position to be more easily disruptive than other corporations, and multiple times.

    (Sorry for the multiple posts, but I just had to add this.)

  • http://www.informationworkshop.org Mark Hernandez

    One place that's long overdue for some kind of disruption is politics. Politicians think "compromise" is a wonderful thing, but it should be replaced with "optimize" instead — making a superior choice, rather than accepting the lowest common denominator.

    A system in which the minority can stop progress to embarrass the majority in power to improve its chances of becoming a majority in the next election cycle, at the expense of the populace and the nation's competitive edge, is nothing short of crazy. Plus, huge amounts of deception in political communication is acceptable.

    In business, nothing horrible needs to happen for there to be progress and positive change. In politics the opposite is usually true.

    Everyone here is thinking — it's uncool to talk about politics. Really!

    Well, consider a large body in space that can come in and disrupt the standard orbit of two other bodies with its gravitational field. In that vein, it's possible to create, say, the "Reality Party" in politics. It's members do not run for office, but are required to be involved in all debates and simply present the "optimal" informed choice and considerations along with the other two parties, providing [sharp] contrast. This "third rail" can make a massive difference and seriously disrupt the intractable dynamics of "politics as usual."

    How's that for thinking outside the box, just as a for instance? Technology shouldn't be the only place where disruptions are possible. Just imagine where a nation (and it's businesses) could be when "optimal balance" is achieved between the competing forces of the financial, business, labor, and "quality of life" sectors.

    Hmmmm. Disruption is a fascinating topic. A good business puts "everything on the table" for consideration, and we have to also double-check those things which have disappeared from view, like those post-its on our monitors. :-)

  • eyez00

    >>Just imagine where a nation (and it's businesses) could be when "optimal balance" is achieved between the competing forces of the financial, business, labor, and "quality of life" sectors. <<

    I think the upper echelons of the Communist Party of China think that nation is the PRC.

    Just a guess.

  • Bazz

    A market has to be ready for the product.
    The Newton had nowhere to go — you bought it then you had to find apps to use all while the internet was young and immature!
    The steam train/car was invented 30 years before it took off! The market was not ready! Polaroid floundered till WWII when pilots saw the advantage of glare reduction! Velcro had a long gestation time till others saw its advantages! Some never benefited from their inventions because the lag was too great. Other inventions have to bide their time while business lose favor.
    What makes Apple successful today is the accelerating pace of uptake of ideas. Its a supernova's explosion and cannot continue to infinity! The party ends when the music stops!