Disruptive Innovation

Innovation in Company Administration

In company administration, innovation is the use of efficient and superior solutions to meet brand-new demands, unmet requests, or current market needs. The present market may be considerably impacted by these new solutions, or it may not be significantly altered at all. This is made possible by more efficient technology, better terms of service, and better products. There are two types of innovations: sustaining innovation, which doesn't fundamentally alter the market as it currently exists. Either evolutionary change or revolutionary change can sustain innovation (Yu and Hang 436). Evolution sustaining innovation improves a product in the market according to the consumers’ expectations while sustaining revolutionary innovation is the creation of an unexpected new product which does not disrupt the existing market.

Disruptive Innovation

Disruptive innovation is an innovation that through a different set of values creating a new market through the provision of a different set of business norms, values that unexpectedly, and ultimately displaces the existing market. The outsiders and entrepreneurs but not the existing market-leading companies mostly produce this type of innovation. These companies tend to enjoy the conducive business environment, which does not allow them to do disruptive innovation that is not profitable enough at the beginning and the scares resources that are required to maintain the existing companies from competitions (Rotheram-Borus, Swendeman and Chorpita 463). According to Christensen, disruptive innovation can interfere with well-managed, successful companies that are responsible to their customers’ demands and they tend to ignore markets that are more susceptible to disruptive innovations that majorly target the gap between the current companies and the customers’ needs.

Company’s Background Information

US Mills company is an existing packaged food product. It is an American based privately owned company started in 1908 the company is specialized in production, distribution, and supply of the natural food products such as organic cookies cereals and crackers. The company is located in Massachusetts. Its target customers are supermarkets, wholesale grocers, and natural food distributors. The ordinary individuals and customers do not feel and enjoy the services of this company. Its focus is large consumers such as supermarkets and wholesales leaving a gap between the ordinary consumers and small-scale retailers. I intend to set up a groceries company that is ready to serve the common consumers, and small-scale retailers with enhanced natural food products increased efficiency in supply and greater reduced and affordable prices. This company is called Aziz Mills.

Sustainability Innovations and Addressing Challenges

This type of innovation will take the low end of the established market by taking advantage of the forgotten and neglected part of the market by established companies that aim at highly profitable areas (Yu and Hang 437). The incumbent large established companies do not notice these areas. Such areas as giving cereals and other products on credit to small consumers, online marketing, and selling, reduced the price of commodities and improved customer services. Having in mind the challenges faced by setting and starting up a disruptive innovation company, such as high cost of business set up, low profit at the beginning and customer establishment, I have come up with solutions to address such challenges. If innovation is only seen as understanding and meeting customers need, it may result in lack of technological progress that may eventually lead to a competitive edge in the market. Therefore, as much as customers’ needs are desired to meet, care must be taken to address issues such as competition from the existing market (Rotheram-Borus, Swendeman and Chorpita 463). This can be achieved through the analysis of the ten innovation models that are profit model, network, structure, process, product performance, product system service, and channel, brand and customer engagement. The first four models can be grouped as configuration the last four models as experience and the middle two models as offerings.

Profit Model

This model finds a unique way of converting a company’s offerings and other sources of values into cash. As an entrepreneur, I must take into considerations what my customers like and cherish most and where pricing and new revenue might lie (Vanhaverbeke and Cloodt 258). The main role played by the innovation price model is to find out and challenge the routine and old methods of getting revenues, pricing, and offerings. This model comes up with a new technique of pricing products, getting and giving out offers and revenue collections. In many companies, innovation price model is not utilized and goes unquestioned. Taking advantage of this innovation model, the problem of low profit and the high cost of setting up my company will not be experienced.

Network

With high technology and network in today’s world, a company can and should not do business alone. It should be connected with other companies and firms to form a network for a smooth run of chains of commands. Network innovation provides an opportunity for a company to take advantage of other companies’ brands, technologies, offerings, channels, and processes to kick-start and run new innovative companies (Clayton, Raynor and McDonald 45). These network corporations can be brief and enduring and can be formed even between the strong competitors. Network innovation can help reduce the risk among the executives as they produce new products and make new ventures. Through this innovation, the nightmare of improved technology and networking shall have been addressed.

Structure

Structure innovation mainly deals with how to organize and arrange your talents and assets in a firm. It is, therefore, an important tool in organizing company’s tangible assets such as human labor and hard assets as well as intangible assets such as liquid cash and services like excellent management and heavy capital equipment (Vanhaverbeke and Cloodt 281). Taking into consideration and application of this model, Aziz Mill will have excellent and organized flow of business chain of commands. This will enhance service delivery to my customers. My enterprise fixed cost and corporate functions will also be improved such as human resource and IT departments. Structural innovations may also attract talents by offering a high level of service delivery which is above other competitors (Markides, 23). Through this, problem of competition and customer creation in disruptive innovation is solved.

Process

This innovation model majorly focuses on how I use my superior methods to run my company. It entails the activities and functions that yield the company’s main offerings. Using this innovation, swift and dramatic changes are required that move the company from its normal luxurious business mode to a shifted high mode. This will able the Aziz Mill to use unique capabilities, functions efficiently, building proper market leading margins and adapt quickly to the new market. This will form the core of business competition from US Mill, allowing Aziz Mill to thrive and gain establishment (Vanhaverbeke and Cloodt 260). Proper use of process innovation provides a very different and difficult tool for the competitors to imitate. Through this unique quality, my company will face insignificant competition pressure from US Mill. The above four innovation models can be grouped into configuration model because they focused entirely on the innermost working and organization of the company and its business system.

Product Performance

Product performance innovation focuses on how the distinguishing features are developed and how they function. These distinctive features are unique ways, values and quality models for running a company. This is not a total of company’s innovation but one of the ten innovation models that is very easy to imitate and copy hence to subject the company to dangers of competition (Clayton, Raynor and McDonald 45). Therefore, a long-term and lasting product performance innovation model is a recommendation for a new company to thrive in a market with established companies. Therefore, this type of innovation must be exercised with a lot of care even though it is one of the most important business innovation modals as it may serve as the easiest route to the fall of a company.

Product System

Product system innovation focuses on how entrepreneur’s products and services integrate a fast and scalable system in starting and running a company. Connection and bundling of these products and services provide a stable running and execution of the company’s chains of command. This integration is promoted through modulation, interoperation, and other ways of creating meaningful connections between disparate and distinct offers. Through product system, complementary products and services are created which foster captive and delight environment for customers against competitors. Product system innovation is, therefore, an essential tool in setting up the sales and creating new customers in a new market by providing and instilling confidence in them on the products against the competitors (Clayton, Raynor and McDonald 47). Product performance and product system innovations can be grouped to form offering innovations. This is because they mainly focus on giving incentives and other offerings such as reduced price, giving credits and product complementary to the customers.

Services

Service innovations utilize and enhance performance and value of offerings. It explains how to amplify and the value of the company’s offerings. Service innovations make it easy for trials, usage, and enjoyment of the products and services, through revealing features functionality and qualities customer are likely to ignore, thereby fixing problems and difficulties a customer may encounter through the process of purchase and consumption of the products (Clayton, Raynor and McDonald 48). When properly used, service innovations can increase the taste of products and services making customers come repeatedly for more. This increases the establishment of customers by elevating their trust on the products and services.

Channel

Channel innovations focus on the flow of goods and services from the company to the market and finally to the customer. E-commerce is an important tool in today’s business with high level of technologies (Vanhaverbeke and Cloodt 280). Even though traditional channels such as physical stores are still very important to customers, especially those in rote areas where accessibility is a problem, e-commerce is slowly replacing the traditional channels (Markides 23). Channel innovations are very important especially in the massive delivery of experience and multiple but complementary means of product and services delivery to the customers. Using this innovation model my company will be able to deliver a lot of diverse products to the customers simultaneously thereby addressing high market demand. This will address the issue of high demand and supply to the customers. The main aim of these innovations is to ensure that customers can buy what they want, how they want it and when they want without the constraint of cost and maximum delight.

Brand

Brand innovations deal with the representation and presentation of products and services and the entire business. It is a very important model for customers in recognition the products and services of a company. Brand innovations allow the customers to remember, identify, and recognize the products in the market. Proper brands convey a distinct identity and attract buyers towards the products and services (Markides, 23). This attraction can be achieved typically through the proper crafting of the brand and implement through many touch points between my company and the target customers. Brand innovations are done through proper communications, service interactions, advertisements, employee, and business partner conduct and channel environment. The importance of brand innovations is that it can transform goods into value products thereby giving meaning to the products and the whole company.

Customer Engagement

Customer engagement innovations area very important models in starting up an innovation company as they help in understanding deep desires of customers to a particular product and services of a company. These aspirations of customers and other users are important in developing a meaningful connection between the customer and the products and services of that particular company. Excellent and great customer engagement innovations are vital in providing broad avenues for exploration and give people an opportunity of finding their way and making their lives memorable and delightful (Rotheram-Borus, Swendeman and Chorpita 463). These innovations are excellent ways of fostering and compelling interactions between the company and its customers. These last four innovations namely service, channel, brand and customer engagement innovations can be grouped to form one innovation model called experience. This is because these types of innovations rely on and address more of customer-facing elements of a firm and its business enterprise.

Disruptive Innovation Challenges and Macro Environmental Factors

As the company tries to innovate, it tends faster than the customer’s needs change; it tends to end up producing too expensive and sophisticated products for many customers in the market. This leads to a detachment between the customer's preference and the product. Therefore, it is essential for an entrepreneur to exercise a lot of care during disruptive innovation to avoid the creation of this gap between the product and the customer. Many companies tend to sell their products and services very expensively through a historical law since this is where they get a lot of profits (Vanhaverbeke and Cloodt 275). Some of these products and services are too complicated for many customers in the market. However, by using these sustainability innovations, they open ways for disruptive innovations that take advantage of the lowest end the market to create products and services that address the demands and willingness of the customers (Markides 23). Aziz Mill has used this opportunity created by the US Mill and the common customers to come up with the natural and organic food products which are cheaper, easy to access, and readily available to the customers. According to Christensen, some of the features of a disruptive innovation business, especially at its early stages are lower gross margins, narrow target market and simpler products and services that may not seem to be as attractive as the existing solution to the traditional demands (Clayton, Raynor and McDonald 46).

Macro Environmental Factors

Demographic Factors

These are the general change in general population. When the population increases, there will be more availability of human labor hence more production of goods and services, and when the there is a decrease in human population, there will be low human resource hence low production.

Economic Factors

When people lose jobs, they become worried about their income and fail to spend or unwilling to spend. This may affect the customers desire to buy goods and services, and when there is income, they are free to spend since they are secured from their income. This gives the customers the urge and motivations to spend since there is a flow of money.

Social and Cultural Beliefs

Each society has its traditional cultures and beliefs especial on what they consume. This might affect the buying of the product of the existing company should they produce a product and services which are against the community’s norms and cultures. Production of the products that are accepted by the society increases the consumption rate, hence more products produced. The prices of my products targeted the over-served customers by lowering the price of my products to. Since my company will focus on the lower end of the market, the existing company will not be motivated to fight back the competition since the customers were forgotten and overlooked with insignificant considerations (Vanhaverbeke and Cloodt 270). The use of network innovation models makes the company produce a high quantity of products and services and deliver them to the market faster hence improve the product fast enough to keep up with the customers’ expectations (Markides 23). At the same time, the use of channel innovation has created a better link between the products and services and the target customers thereby providing a smooth flow of services and products from the company hence creating new value network and non-monetary values. This company disrupts all the incumbents since the company exploited the lowest end of the market that almost all the existing companies ignored.

Conclusion

Every business aims to make profits. Established enterprises tend to concentrate more on the activities that bring more revenue to the company thereby producing very sophisticated and expensive products and services to their customers. Without alternatives, these customers suffer high market prices of goods and services. Even though starting up an innovation company has many setbacks such as high cost of setting up, small market margin and low-profit margin at the beginning, it serves to salvage the overwhelmed customers from the high price of the same commodity or an alternative cheaper products and services. In the interest of the entrepreneur, whose main aim is to maximize the profit, proper use of business models saves the company from both internal and external macro and micro environmental forces.

Works cited

Christensen, Clayton M., Michael E. Raynor, and Rory McDonald. "Disruptive innovation." Harvard Business Review93.12 (2015): 44-53. Retrieved from: https://hbr.org/2015/12/what-is-disruptive-innovation

Markides, Constantinos C. "How disruptive will innovations from emerging markets be?." MIT Sloan Management Review54.1 (2012): 23.

Rotheram-Borus, Mary Jane, Dallas Swendeman, and Bruce F. Chorpita. "Disruptive innovations for designing and diffusing evidence-based interventions." American Psychologist 67.6 (2012): 463.

Vanhaverbeke, Wim, and Myriam Cloodt. "Open innovation in value networks." Open innovation: Researching a new paradigm (2006): 258-281.

Yu, Dan, and Chang Chieh Hang. "A reflective review of disruptive innovation theory." International Journal of Management Reviews 12.4 (2010): 435-452.