CPD Reply 5
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Reply to these two other posts with at least 3-4 sentences of constructive feedback and new information/ideas.
Every organization needs to determine its own specific response according to the unique circumstances facing it (Responses to disruptive strategic Innovation). Charles Schwab used Clayton M. Christensen’s theory of disruptive innovation, which can be viewed as an outline for the way a business deals with social problems.
Gillette chose to focus its resources on its traditional business to improve its competitive standing relative to the new way of doing business (Responses to disruptive strategic Innovation). The company put their focus on producing new products, using the traditional business, which in the 1970’s saw a decline in the disposable razor industry. Even through the development of a new line in 2002, Gillette stayed focused on their main business, disposable razors.
There are four key elements in the Theory of Disruptive Innovation:
1. Incumbents are improving along a trajectory of innovation
2. The pace of sustaining innovation overshoots customer needs
3. Incumbents have the capability to respond but fail to exploit it.
4. Incumbents flounder as a result of the disruption.
It is hard to determine the least or the best response, as they go case by case. Most companies adapt the elements in some form. The companies that do not embrace Disruptive Innovation, choose to remain focused on their core business and their way of existing and competing. Even when there is a rapid improvement curve and potential for the improvement to exceed customer needs, the theory of disruptive innovation should be considered a warning rather than a prediction (King and Baatartogtokh).
According to the case report “Responses to Strategic Disruption,” there are multiple ways that a company or business can respond when a disruptor is introduced to the market. Each of these strategies have their own pros and cons. The key is to know which the best is for your company so that these disruptors don’t bring about the collapse of your business. These strategies include; focus on traditional standards, completely ignoring the disruptor, attack back, adopt and innovate (playing both sides), and embrace and scale up.
The first strategy that I will be talking about is the one that Charles Schwab used when faced with a disruptor. In 1995, two Chicago based brokerage firms, Howe Barnes Investments and Security APE decided to try something new. They decided to join forces and offer an internet based brokerage firm called Net Investor. Charles Schwab chose to completely embrace the innovations and scale it up as much as possible. Established companies take longer to embrace new strategies for many reasons. They have to relocate budgets to new areas of interest, gather new personal and technologies, and learn how to best market these new ideas. Because Charles Schwab was already an established name, they were able to generate the funds to make a big bush in this new market. They were also able to send a “clear signal” (Responses, 4) that the market was about to go through a change, and reach out to the customers that are more likely to embrace it. One thing that actually helps established companies is that they do not have to be the ones that come up with the “game changing” new ideas. They only need to recognize when the market is about to shift and then charge ahead and embrace it.
The second strategy that I will be talking about is the idea to attack back. Disruptors are successful because they bring something knew to an established market. The old adage of “the best defense is a good offense” applies here. When the disruptor introduces a new strategy, the established companies need to do the same. A good example of this is the Swiss watch company. For years they were the established brand, marketing their watches as having the best craftsmanship and accuracy. Unfortunately, disruptors came into the market that chose to target cost and features. What Swiss decided to do, instead of adopting the same strategy, was to flip the market again. They disrupted the market by appealing to customers in the form of style.
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