Christensen Got It Wrong; Apple Won’t Become A Victim of Low-End Disruption

  • September 27, 2013

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Many of you might be familiar with world-renowned business school professor – Clayton Christensen. His book – classic book The Innovator’s Dilemma, was reportedly one of the Steve Jobs’ favorite.

Clayton Christensen posits the following two theories (via Stratechery):

  • The theory of new market disruption – This describes how incumbent companies ignore new technologies that don’t serve the needs of their customers or fit within their existing business models. However, as the new technology, which excels on completely different attributes than the incumbent’s product, continues to mature, it eventually takes over the market.
  • Low- end disruption – In this case an integrated approach (Apple’s strategy) wins at the beginning of a new market, because it produces a superior product that customers are willing to pay for. However, as a product category matures, even modular products become “good enough” – customers may know that the integrated product has superior features or specs, but they aren’t willing to pay more, and thus the low-priced providers, who build a product from parts with prices ground down by competition, come to own the market.

I’ve always believed that Apple is very susceptible to the “low-end disruption” theory based on the way they priced their products. More often than not, it gives competitors an opportunity to create “junk” products, which inevitably ends up with the largest market share in that specific category. This clearly did not happen with the iPod since Apple was able to offer a variety of form factors at different price points in this category.

However, after the launch of the iPhones and Tim Cook’s interview with Bloomberg Business Week, I’m more confident that ever that Apple is on the right track with their integrated approach and refusal to take part in the junk market.

Here is a video of Steve Jobs talking about market share and pricing strategy (via Ben Evans):

Additionally Ben Thompson of Stratechery, provides us with the strongest counter argument yet to Clayton Christensen low-end disruption theory and why it does not apply to Apple.

Ben Thompson:

Low-cost is absolutely a viable strategy. The existence of Wal-Mart, Wrangler, and Kia attest to that. But differentiation is a sustainable strategy as well, and nothing about technology changes that. True, you can’t differentiate on technology alone, but Apple has been clear – explicit even – that their focus is on the sort of differentiation that matters to consumers.

Apple is – and, for at least the last 15 years, has been – focused exactly on the blind spot in the theory of low-end disruption: differentiation based on design which, while it can’t be measured, can certainly be felt by consumers who are both buyers and users.

Ben Thompson concluded his piece by saying “It’s time for the theory to change.”

Agreed. What about you?

Posted by | Posted at September 27, 2013 09:48 | Tags: , , ,
Storm is a technology enthusiast, who resides in the UK. He enjoys reading and writing about technology.

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