Fledgling competition and the source of disruption

Clayton Christensen's "Innovator's Dilemma" left us with many brilliant examples, I take the obvious one with a pinch of salt. The 2012 New Yorker article on Christensen reconstructs this is in many ways.

If all integrated steel companies were successful, they would have never seen any benefit in getting into recycling; this is true for Aluminum as well. The integrated output at low costs would never leave a chance for recycled input into smaller mills.

All the steel and aluminum disruption happened with recycled output.

Or take the typical example of the success of high end products. If the source of all profits was in the high end of the product stream, all ratios worth management attention would be constructed on ensuring that it suits to produce high end items.

Whereas the competition could be coming from the low end of the market (it almost always does) and the "most successful companies" become more than happy to leave that space to this fledgling competition.

Clayton Christensen believed that this low end entry point is the source of all disruptive change. The existing market leaders would never even imagine in the wildest of dreams that the low end entry point could be the disruption they were never prepared for.

If one studied disruption in competitive strategies, one would see that the disruptor will start from where the established player is most comfortable in handing over the reins.

Think of political strategies and new entrants and you will see the same thing panning out. The weakness of existing establishments lie not in the most lofty promises, but in the most mundane things that the majority should be interested in. Instead of grand promises for the overall economy, it could well be that the very basic things that the populace could be concerned could be missing in the debates. Bringing such topics and items into the agenda is the attacker's best bet.

For "successful companies", the way to measure success is well entrenched and the set of matrices that deliver results is so commonplace that no one ever challenges that. The ratios are drilled down to further smaller elements, but all that it does is do more of the same.

The new entrant starts with the most uncommon way to start, do what successful companies are rejecting as a strategy; making low end is one such rejection of sorts.

We have seen this with the first Chinese products that entered India, they were really low end and cheap. They disrupted the existing paradigm for sure, the prices were so bizarre that existing players stopped making them.

Today think of it that the most common steel item, which does not need high technology inputs, the steel container manufacturing has entirely shifted to China. Nobody has the wherewithal to make steel containers any more.

This is a strategy that once you muster the art of producing low end items you make them in such large numbers that these products are taken off the production line by all established players.

The "success' paradigm looks at fledgling competition as if it was there to serve a purpose to play second fiddle. But not quite, it is the fledgling competition that steers its way into creating a product mix that leaves the successful companies with no other choice but to steer clear of the low end.

It is in the low end of the market, where the disruption game must be played out to the full. That is where success is challenged and the established ratios must be altered.

It not surprising that the maximum competition that we face from Chinese products is not any more on the low end. It is now in the highest end of the product mix.

From low end to high end is an easy switch for the entrants, but the reverse for existing players becomes almost impossible to achieve.