Clayton Christensen came back to academia as a forty-year-old doctoral student. He developed this model from his research that showed that what cripples successful companies is rarely that somebody comes into their own market with a better product but rather that somebody come in at the bottom of the market with an inexpensive, simple product that caters only to the needs of the least-demanding customers. And then they move up.
What we showed is that, over and over again, when a well-run company focuses on listening to its customers and investing where profit margins are most attractive, those paradigms of good management that they follow help the leaders move up market but paralyze them when somebody comes from down below. And they just can’t attack below.
Toyota attacked the American market, not by making Lexus’s, but with this crummy, little, rusty subcompact model called the Corona in the 1960’s Then they moved up market to Tercels, Corollas, Camry’s, Avalon’s, and Forerunners. And then they make Lexus’s.
Every once in a while, the leaders in the industry—GM and Ford—would look down at Toyota coming u at the and say, “We ought to go compete against those guys.”” And so they’d send down a Chevette or Pinto. But then they’d compare the profitability of a big Ford Explorer or A Cadillac Escalade, and it actually didn’t make economic sense. This is called Disruption.
ACTION POINT: Consider possible disrupters in your marketplace.
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