Someone or something that is disruptive is usually associated in a negative way. The subprime mortgage crisis has disrupted financial and housing markets. That’s bad. My son was messing around at dinner while someone else was talking. That is also bad.
But I think that the idea of being deliberately disruptive can be very positive when used in the development of strategies, organizations, products, business models and markets. Specifically, disruption may be for those companies trying to serve low-income markets and eradicate poverty, all while building a successful business enterprise.
In early 2005, I read CK Pralahad’s The Fortune at the Bottom of the Pyramid and Clayton Christensen’s Innovator’s Solution just as I started my new job as General Manager of the Emerging Markets Platforms Group at Intel. Our group was responsible for developing and selling new mobile and PC products designed to meet the specific needs of those at the bottom of the pyramid. One of these products is the Classmate PC, which has become famous mainly due to the ongoing public battle between it and Nicholas Negroponte’s OLPC XO laptop.
The theories presented in Prahalad and Christensen’s books, combined with my experience trying to create a viable business with clients earning just $1 to $2 a day, is the foundation on which I believe a disruptive approach is the way forward. when building businesses. focused on selling and improving the lives of the poor.
When I talk about being disruptive, I mean strategies and techniques that change the game, overturn the status quo, and ultimately have the biggest impact possible. In this post, I will touch on the following areas where I believe disruptive strategies are required:
- product strategy
- Business models
- leadership and management
Disruptive Product Strategies
Let’s start with the product strategy. Clayton Christensen’s theory is that a disruptive innovation or technology is a product that is easier to use, more affordable, and adds unique value that the market-leading product does not have. These products become wildly successful, often displacing the existing product or technology entirely. Think of the PC displacing the mini-computer. The telephone displacing the telegraph. Digital photographs displacing traditional photographs. The list goes on. Will the mobile displace the PC? Maybe. If it does then it becomes an interruption for the PC.
I think the product that will displace the PC will come from a company that has developed an affordable, easy-to-use device that has very useful “unique” value for those at the bottom of the pyramid. That was my conclusion after reading Prahalad and Christensen, and it was the path I wanted to put Intel on.
Classmate PC is not a disruptive innovation. The idea was to create R&D labs in four emerging market countries and incubate various devices based on ethnographic research conducted in those regions. Unfortunately, due to the world’s attention on Negroponte’s OLPC and the competitive pressure it put on Intel (the XO uses AMD chips, Intel’s competitor), the Classmate PC project has absorbed most of the available resources and, therefore, Therefore, I think it’s unlikely that Intel will create such a disruptive device, and as such, it’s not taking the world by storm (at least not yet).
Is the OLPC XO a disruptive innovation? Probably not. It has some differentiating qualities in the “unique value” category, but nothing that is mind-bogglingly new or different. A single value is usually very simple. The phone lets you talk vs. touch the telegraph The transistor radio was portable. Unique value is often a game-changing quality. It also strives to be more affordable, though any computing device faces the same challenges of cost and component and distribution economics as the floor. It has been built with an interface that works to improve ease of use, but often these features are superficial and are challenged as you go deeper into the software and content.
There is nothing to prevent any of the devices from eventually becoming a disruptive innovation… many innovations are iterative vs. incremental
disruptive business models
In general, the penetration of technology products in emerging markets has not had a significant impact on closing the digital divide, even with higher overall growth rates than those typically found in mature market countries (with the mobile phone the exception). Some argue that it is the lack of one or more of the “disruptive” product attributes (affordability, ease of use, value). Maybe.
Again, looking specifically at PC affordability, there have been a multitude of companies that have aimed to bridge the PC gap by giving out very cheap and sometimes free computers. None of these companies have taken off on a large scale, at least not the ones I know of. Please point me to any that are successful (for example, have shipped millions of units in at least 5 or more countries on different continents).
I think the key is that the business model Strategy is often given a lower priority than product development. The business model that is needed in emerging markets is very different from the one that necessarily works in traditional markets.
Take the price for example. Not the actual price, but how the “pricing model” works. One of the reasons mobile phones are so successful is that it has the qualities of a disruptive innovation AND it has a business model that allows very poor people to buy phone services. In most emerging markets, the prominent payment method is through prepaid cards vs. Safaricom subscriptions have further altered the billing model: they bill in seconds instead of seconds. minutes. Safaricom is an example of a company that seems to understand how to build a successful business in Kenya for the base of the pyramid. I recently wrote an article on my blog, Disruptive Leadership, exploring Safaricom’s disruptive business processes titled “Safaricom Has Found It.”
So I’d think a similar model could work for the PC: offering pay-as-you-go service for the PC via subscription or prepaid cards. Microsoft introduced such a service called in 2006 and has yet to scale beyond small tests. Insuring the PC and its components against resale (a PC is an open device with multiple replaceable parts, unlike a mobile phone) and getting banks to offer financing services are just two of the challenges facing the project. Bottom line: the business model must be appropriate for the specific device or solution.
Beyond the pricing model, a disruptive strategy may be needed to think about how a company gets product to the customer (at Intel, we call it channels). Outside the big cities of many developing countries, especially in Africa, there are few or no PC outlets. How do you get PC to a client when you don’t have a channel?
An innovative idea is to sell PCs through the post office. We at Intel are looking at doing this in Egypt with a government joint venture to increase access to PCs in areas outside of Cairo and Alexandria, Egypt’s two main cities. There are few PC stores in smaller cities and towns, but there is always a post office. We started a project to bring PCs to post offices where people could buy PCs directly.
Finally, I would like to expand the definition of a business model to include How is the company set up and how does it work? Whether the company is to be established as a for-profit company with a mission to create a successful, high-growth business that provides a return to its investors (for example, Intel), or is to be established as a non-profit organization that relies on of donations. and grants to finance your operations even when you sell a real product (eg OLPC)? I have made the argument that OLPC would be much more successful in achieving its goals if it were a for-profit company, discussed in detail on OLPCNews.com. By virtue of the number of comments and their intensity, this article clearly struck a nerve. Or maybe I’m wrong… maybe the most successful “company” model is a hybrid between a for-profit and a non-profit company. This is something I would like to explore more in future posts.
Disruptive Leadership
I posit that in addition to disruptive innovation and a business model, “disruptive leadership” is needed. I believe that disruptive leadership captures the essence of what it takes to be successful as a business leader trying to figure out the secret formula for growing in very dynamic emerging markets.
I did not invent the term “disruptive leadership”; just Google the term and you will find interesting articles, like this one by Edward Marx in which he states:
“If I’m not upsetting the proverbial apple cart, then I’m adding little value. By simply maintaining what has been done in the past, I will generate little or no profit. Don’t get me wrong. This is not about stirring the pot.” for the sake of stirring the pot. Disruptive leadership must have a purpose and be supported by a vision.”
Another good one from Ted Santos talks about how good leaders create problems:
“What separates extraordinary leaders from managers? One way to tell the difference is to compare the mindsets of leaders and managers. Managers are great at solving problems. Leaders, on the other hand, exude their greatness by creating problems.” “.
A disruptive leader stirs the pot, thinks outside the box, is willing to challenge the norm, thrives on change and uncertainty, and most importantly, can navigate the choppy political waters that are inevitably created in reaction to Various Disruptive Strategies AND Leaders A disruptive leader creates a corporate culture that encompasses all of these concepts.
These leaders are few and far between. I loved a quote from a recent article in The Economist about the career of Mr. Ramadorai, CEO of one of India’s largest software outsourcing companies, about how he believes that dealing with adversity only makes companies stronger. “If everything is peaceful, don’t strain yourself,” he says.
“Adversity” has negative connotations, just like the word “disturbing.” But as Mr. Ramadorai says, adversity makes you stronger. I think being disruptive does too.
