Summary - 3 Approaches To Creating New Growth Business

Dimension

Sustaining innovations

Low end disruptions

New market disruptions

Targeted performance of the product or service

Performance improvement in attributes most valued by the industry's most demanding customers. These improvements may be incremental or breakthrough in character

Performance that is good enough along the traditional metrics of performance at the lower end of mainstream markets

Lower performance in traditional attributes, but improved performance in new attributes - without losing functionality, simplicity & convenience

Targeted customers or market application

The most attractive (profitable) customers in the mainstream markets who are willing to pay for improved performance

Over-serviced customers in the low end of the mainstream market

Targets non-consumption: customers who historically lacked the money or skill to buy and use the product/service

Impact on the required business model (processes & cost structures)

Improves or maintains its profit margins by excluding the existing processes and cost structures and making better use of current competitive advantages

Utilizes a new operating or financial approach or both - a different combination of low gross profit margins and higher asset utilization to gain attractive returns at the discount price required to win business at the low end of the market

Business model must make money at lower price per unit sold and at unit production volumes that initially will be small. Gross margin dollars per unit sold will be significantly lower.

(source: Clayton Christensen et al, 2003; Richard Branson, 2008))

 

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