Essay About Disruptive Innovation And Bottom Of A Market

Disruptive Innovation
Explain the term disruptive innovationAccording to Christensen (1997) disruptive innovation is “ a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up the market, eventually displacing established competitors.”A product used by Christensen as a classic example of disruptive innovation is the personal computer, which was first marketed as a children’s toy and now has completely displaced its predecessor. As with the personal computer, products of disruptive innovation are not necessarily considered new products, but are made available more cheaply to a larger portion of the population that may have been previously ignored. This portion of the population is considered at the bottom of the market or bottom of the pyramid (BOP). Key features of businesses that engage in disruptive innovation include low profit margins and niche markets.Critically discuss how disruptive innovation could help the bottom of the pyramidAs discussed previously, disruptive innovation products are marketed to those persons considered at the bottom of the pyramid. The Bottom of the Pyramid is a term used to describe a large segment of the world’s population, numbering about four billion. This socio-economic group is considered to be the world’s poorest people. This market is either invisible or unattractive to most large multinational corporations and faces many challenges which include limited access to infrastructure, technology, education and low income. Although this group is said to live on less than $2.50 a day, estimates place its purchasing power at around $5 Trillion. Such a large purchasing power makes this group very attractive to innovative businesses willing to cater to this market via disruptive innovative products.

The persons at the bottom of the pyramid were traditionally thought of as a burden to society and not worth wasting effort and resources on. However Professor Prahalad (2004) in his book ‘The Fortune at the Bottom of the Pyramid” proposed that we “stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers”. This revolutionized that way this segment of the population was viewed. Prahalad (2004) went on to suggest that a partnership be created between private enterprise, development and aid agencies, bottom of the pyramid consumers and entrepreneurs, civil society groups and government to help eliminate poverty. Corporations can create innovative products and services for the BOP that can generate large profits and growth opportunities, while helping to alleviate the social and economic problems faced by this group. Initiatives that companies can develop to assist the BOP include the creation of eco-friendly products, redesigning existing products to cater for BOP needs, helping to develop infrastructure and promoting of the education of customer in product usage.