Category Archives: Strategy

Customer Preference Array based Distruptive Innovation

In an earlier post, I explained why I think Clayton Christensen’s classic description disruptive innovations is just a special case of a more general theory of disruptive innovation.

Today, I will sum in an even more succinct and, in my opinion, spot-on way what disruptive innovation actually is and how to design a business to be disruptive.

The idea came to me while I was reading MJ DeMarco’s excellent book Unscripted, which I can highly recommend (no-bullshit truths in there). In the chapter about Need, MJ describes how your business delivers a “benefit-array”, i.e. an array of benefits, and that different businesses deliver different such arrays of benefits, where different customers value different “benefit arrays”.

This made me understand something fundamental about what Disruptive Innovation actually is.

A disruptive innovation is something that fulfills the following conditions:

  • Your product provides a “Customer Preference Array” that is not interesting for the incumbents’ best customers.
  • The delivery of your Customer Preference Array is incompatible with the incumbents’ delivery of their best customers’ preference array. (Or in other words, the Strategy Map that is required to deliver this Customer Preference Array is incompatible with the one that the incumbents must use, lest they straddle and fail at both.)
  • Your strategy map that is used to deliver this customer preference array optimally is based on some fundamental technology that will improve over time, in such a way that the values in the array you deliver will grow in such a way that it will also “engulf” the values in the incumbents’ customer preference arrays.

If you fulfill these conditions, your strategy map becomes impossible for the incumbents to compete against, and you will overtake them over time.

The reason for this is that they cannot deliver your customer preference array simultaneously as their own in an optimal way, lest they straddle and lose to other incumbents. (I.e. you take away their greatest strength – their existing processes and resources. Sure, they can form a new company, but they will need to start from scratch, just like you. Their “incumbent advantage” simply vanishes.)

Therefore, a better way to describe “disruption” would be to call it “a strategy of delivering a product that neutralizes the ‘imcumbent advantage'”

porter activity map

Innovator’s Strategy: An alternative description of disruption theory

Raynor’s definition of a Disruptive Business Model

In Innovator’s Manifesto, Michael Raynor describes a model of Disruptive Innovation that expands upon Porter’s concept of Strategic Differentiation. This is better than previous descriptions, but it still gets the categories somewhat wrong. Continue reading

Why it is time to sell your Apple stock

Apple is built on uncompromising design choices. This is a foundational piece of their strategy and what makes them unique.

Last time Steve Jobs left the helm, Apple started compromising on its strategic position. While not immediately visible since short-term revenues went up, after a few years it was clear that Apple had lost its way.

When Steve Jobs came back, all compromises were cut and dumped – including entire product lines. He focused on what makes Apple Apple: Uncompromising design choices where every decision had to fit with every other decision still in effect, as a congruent whole.

From this core, he then added logistical, sales and marketing decisions, where again every decision fit with every other decision.

Apple was entirely about internally consistent choices, with its uncompromising design philosophy at the core. Because of this, nobody could do it like Apple. Either you had to copy the entire company, or accept unsolvable incongruency costs.

Today, it has only been a few years since Steve Jobs left the helm, and we are already starting to see the same type of design compromises as last time creep in.

Battery case add-ons, and an ugly and badly designed one at that. A keyboard on an iPad, it also badly designed and full of compromises. Other small design compromises forced by unnecessary features.

None of these compromises would have been accepted by the old Apple.

Michael Porter’s excellent article “What Is Strategy?” warns about exactly this type of straddling.

In doing this, Apple has started to erode its core strategy and unique position. If they continue like this, they will soon become like everybody else. It will be impossible to distinguish between a product made by Apple, Microsoft or Samsung. Financial results will follow.

Right now, Apple is at the top of the world. They are the most profitable company in history. But the straddling will soon prevent them from keeping this position.

That’s why I am selling all my Apple stock today. And I recommend you to do the same.