Title RIG_The Innovator's Solution Graphic Summary.pdf ✅

Copyright © 2023 Skool of Happiness Pte Ltd. All Rights Reserved. readingraphics.com ReadinGraphics ReadinGraphics Straddle both disruptive and mainstream businesses to assess how RPVs should be applied or adapted. Constantly monitor changes in circumstances and teach others to do the same. Build a disruptive growth engine to launch new growth businesses systematically. 3 Roles for Senior Executives Driving Disruptive Growth Disruptive businesses must be driven by someone 9. What’s the CEO’s Ideal Role? senior in the organization. Product or customer attributes don’t explain why someone buys a product. So, you may target the wrong segments and develop products that customers don’t want. Don’t Segment By Attributes Understand what customers want to get done, then help them to do those things more easily. 2. What Products Will Customers Buy? Slice the market based on when customers purchase/use the products, and why. Then, design your product to help them do those things more easily. Identify what your product is being “hired” to do, then focus on doing that job well. Segment by Circumstances Target existing customers who don’t want to pay for premium features. You must be able to make a good profit at discounted prices. For Low-End Disruptions... Identify the initial customers who’ll lay a strong foundation for the business. 3. Who’re The Best Customers For Our Product? Target non-consumers who want to get a job done, are unable to do so, yet find existing options too costly or complex. They’d prefer a cheaper-and-inferior solution to having no solution at all. For New-Market Disruptions... Don’t focus on internal core competences. Instead, match the product architecture (how a product’s parts or sub-systems fit together) to what the customers need. Focus on Circumstances, not Core Competences Match your product architecture to your competitive circumstances. 4. Which Activities to Insource or Outsource? When products are below market expectations, use an interdependent architecture: control all parts of the system so you can integrate/optimize the interfaces and improve the overall design. This also increases the barriers to entry. When products exceed market expectations, use a modular architecture so you can outsource sub-systems to offer greater simplicity and convenience at lower prices. Move between Interdependent & Modular Product Architectures In the early stages, use emergent processes to quickly test and learn what works. These are unplanned, and emerge from tactical decisions throughout the organization. Once you’ve identified the right strategy, use deliberate processes to focus your resources and grow quickly. These are intentional, top- down and analytical. Emergent vs Deliberate Processes Be aware of the factors influencing resource allocation, e.g. the company’s cost structure, minimum size of new initiatives, impact of incentives, customer preferences, or competitor actions. Shape strategy with 3 points of leverage: keep initial costs low for a new-growth business, use discovery- driven planning to test/find a viable strategy, and consciously match your process to circumstances. Tips for Leaders & Managers Use a mix of deliberate and emergent processes to 7. How to Develop Sound Strategies? match your stage of business development. Resources include people, equipment, brand, information, etc. Choose managers with the right perspectives and experiences to manage a new-growth business. An organization’s RPVs define its capabilities and disabilities. Consider how far existing processes and values fit the new business’s needs. Processes = how inputs are converted into products/services of higher value. Values = standards that determine how employees at all levels make decisions and prioritize resources. Resources, Processes, Values (RPV) The Ideal Organizational Structure Choose a setup that can best provide the required 6. What’s the Best Structure to Adopt? resources, processes and values for success. Ideally, target disruptive solutions at non- consumers, not mainstream customers Make your solution cheap yet foolproof. Concurrently develop new, disruptive channels to reach and serve the new customers. Poor Fit Poor Fit Good Fit Good Fit Fit with Existing Values Heavyweight Team, Existing Organization Heavyweight Team, New Organization Lightweight/Functional Team, Existing Organization Lightweight/Functional Team, New Organization New entrants can displace market leaders through disruptive innovation. 1. How To Beat Your Top Competitors? Modularize but risk becoming a commodity as the industry starts to disintegrate and they can no longer differentiate themselves; and/or Once a product overshoots customers’ needs, the company can either: When something is being commoditized, something else in the value chain is being de-commoditized. Get disrupted by new entrants. Commoditization vs Disruption Shift to other activities/sub-systems in the value chain where there’s a performance gap. Create or acquire growth businesses, and move them up the value chain with an integrated strategy. Move to Where The Money Will Be If you’re becoming commoditized, move to another 5. How to Avoid Being Commoditized? part of the value chain with a performance gap. Fast Profits, Not Fast Growth The type of capital you choose determines the 8. How To Fund the Innovation? expectations and obligations you must meet. Keep the Growth Engine Strong Initially, choose investors who’re patient with growth. Pushing for premature growth will force the startup toward sustaining innovations instead of disruptive ones. Insist on profits asap: this forces managers to keep costs low and to find a viable strategy quickly. Start early: Regularly launch or acquire new-growth businesses while your core business is still growing healthily. Start small. Go for small, decentralized business units which will find small returns to be attractive. Demand early successes. Don’t subsidize losses using profits from your main business. Sustaining innovation improves an existing product for an existing market. Incumbents thrive when they can keep enhancing existing products for established markets. Disruptive innovation changes the playing field with new solutions. These are usually not as good as existing products, but they create new demand by offering greater simplicity and convenience at lower prices. THE 2 TYPES OF INNOVATION Low-end disruptions use low-cost business models to satisfy overserved customers. Criteria: Customers are happy to pay less for a lower- performing product. Your company can offer lower prices and earn a profit. Large population of people who had no viable solution. Customers could only use the product at a fixed or inconvenient place. New-market disruptions target non-consumers with vastly different solutions. Criteria: 2 TYPES OF DISRUPTIVE INNOVATION Leading firms drive product improvements with sustaining innovation 1 Technological innovation exceeds what customers need and they stop paying for more improvements. New entrants with disruptive innovations offer cheaper and more convenient products that appeal to fringe/new customers, then gradually move upmarket to become the new leaders. 2 3 Time Performance Sustaining innovation Disruptive innovation Perfomance level that customers can use or support OR A disruptive innovation must be disruptive to all established players in the market. AND 9 Questions to Address for Sustained, Profitable Growth Fit with Existing Processes Financial markets expect rapid growth from companies, which is hard once a business matures. To create sustainable, profitable growth, you must become a disruptor yourself. Good companies systematically allocate resources to serve their best customers, but this causes them to neglect innovations that can disrupt their business. THE INNOVATOR’S SOLUTION Clayton M. Christensen and Michael E. Raynor CREATING AND SUSTAINING SUCCESSFUL GROWTH