 Transformative innovations: timing the strokes
Roopen Roy (Views expressed are personal) Innovations are constantly happening around us. Some innovations are taking place in scientific labs, others in businesses. Some innovations are incremental, others transform the industry. Clayton Christensen of Harvard Business School (HBS) calls them disruptive. When radical innovations happen, some of the leaders in the industry
bite the dust. One way to survive when disruption is underway is to ride the wave and not go under. The chances of survival often depend on how fast and how ruthlessly you cannibalize your existing business. But if the disruption is only incremental and you bet the farm on the success the new technology, you may take the business down . This a dilemma that each player faces in making the conviction call. There are many examples of disruptive innovations in history. Digital
photography is a good one. Some players like Polaroid believed that they were in the business of manufacturing cameras for instant photographs. They soon realized that they were in the business of instant imaging. If a competitor could also add quick portability to instant imaging then it changed the game. Some players ignored the potential, some understood it late and a few embraced with passion.In the third category, Nikon, Canon and Leica not only survived but emerged as leaders in the new paradigm. But it is not easy to figure out at an early stage, which innovation
is incremental and which one is disruptive and create business strategies to take advantage of it. I recently saw a friend smoking an e-cigarette. He believes that it will completely disrupt the cigarette industry as we know it. An electronic cigarette, or e-cigarette, is an electrical nicotine delivery device. It simulates tobacco smoking by producing an inhaled mist bearing the physical sensation, appearance, and often the flavor and nicotine content of inhaled tobacco smoke. The device vaporizes a propylene glycol or glycerin-based liquid
solution into an aerosol mist, similar to the way a nebulizer vaporizes solutions for inhalation. My friend bought his e-cigarette device from a website @ www.gamucci.com. Are we seeing a disruptive technology which is a healthier option to smoking as the website claims? If there is widespread adoption, it will. I personally believe it will create a niche market and not replace conventional smoking. But the cigarette companies must not take their eyes off the ball. Out of curiosity I searched the internet and I found that the big boys were hedging their bets. Philip Morris International Inc. (PM), the maker of Marlboro and Benson & Hedges recently took a license to a patent on a nicotine-delivery system intended to reduce the harm of smoking. Professor Jed Rose, who heads the Duke University’s Center for
Nicotine and Smoking Cessation Research, was among the inventors. The technology licensed by Philip Morris “has the potential over time to offer an attractive alternative to conventional cigarettes, thereby reducing smokes’ exposure to carcinogens and other harmful smoke constituents,” Rose said in the statement. I found the expression “over time” to be pregnant with meaning. Let us look at another disruptive innovation in music delivery
literally as it is happening. Apple has just announced i-cloud. It is not the first player to offer music in the clouds. Amazon was offering it already. Question: what should a player like Gramophone Company of India (GCI)
do in the face of this disruption? Should it join hands with Apple, Amazon or Google to sell and distribute its music titles? If they do, they run the risk of losing the customer relationship. They may then become, to coin a new term, a “royalty arbitrage” player. In this model, they pay Shreya Ghosal Rs 2 per song and charge the cloud distributor Rs 5 yielding a royalty arbitrage of Rs 3 per song. The business model in real life is far more complex . The advantage of
a “royalty arbitrage” model is easy to see. You have no hassles of creating or maintaining infrastructure. A player like Apple can handle promotions and distributions well , through their i-tunes stores and now i-Cloud. You do not require a collection infrastructure and you do not even need an interactive portal. You focus on creating great music albums, identifying the stars of the future, negotiate contracts with artists that create the framework for continuous streams of “royalty arbitrage” cash flows. That’s it. It has another option though. It can keep the “ownership” of
customers and outsource to a cloud infrastructure provider –say Amazon -without giving up its last mile rights to the customer. So if you bought, in aggregate, ten albums you may get 10 GB space in a music vault in the cloud for free to store your music there and play it on any device- anytime anywhere. The notion is not as Utopian as it may seem. Just look at China. Which is the largest search engine there? Google or Bing? Wrong-it is Baidu –a homegrown search engine. Which is the largest on-line trading site? E-Bay? Wrong again –it is Alibaba. Using a combination of Bollywood and vernacular music and videos GCI could create its own branded cloud store.are by far the largest segment –so why not create an Indian digital music store in the cloud not from scratch but by creating a framework with intelligent outsourcing of infrasrtucture and promotion. How fast should HMV embrace the cloud. The speed of adoption will depend on access to internet and mobile technology and which devices will consumers prefer to use to listen to their music. If folks in India prefer to listen to music on their mobile telephones then adoption may be faster than one thinks. But if, by and large, many consumers do not wish to throw away their CD players and do not wish to listen to music on their cell-phones or laptops, then it would be highly risky to bet the farm on cloud. In cricket stroke play is important but timing is critical. And what is critical is timing! |