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Chapter 3
Disruptive Product
Innovation Strategy:
ABSTRACT
In todays business world, many companies are in search of an innovative strategy to move on to a market
where there is as yet no competition. In view of that, many academics and managers are trying to find
a systematic framework for a strategic innovative business model. One of the examples of a systematic
framework is Blue Ocean Strategy (BOS), which provides various tools for managers to find a gap in an
existing market or to create a new market where there is no competition. This chapter uses Apples iPod
product chain to illustrate how BOS tools can be used to create an innovative strategy for two reasons.
Firstly, there are few practical examples that illustrate the BOS, as it is a recent business model and
so this chapter can be a useful illustration for those audiences who are interested in strategic innovations focusing on disruption. Secondly, the iPod is a great example of an innovative product where the
manufacturer benefits from low competition, high market share, and high profit return.
INTRODUCTION
Innovations resulting from disruptive technologies usually offer change either in products or in
services that are typically simpler, more efficient,
easy to use versions of existing products or services
DOI: 10.4018/978-1-4666-0134-5.ch003
Copyright 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.
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Disruptive
Technology
Disrupted Technology
Notes
1970s
Sony Walkman
Cassette Player
In the late 1970s, the boom box was quite popular among the younger
generation. Companies were competing on who could produce the
loudest product or the biggest product. In 1979, Sony introduced the
first portable cassette player and it became very popular in a short
time and disrupted boom box players
Late 1980s
and 1990s
The Discman
and Portable CD
Players
1990s and
2000s onwards
Portable CD Players
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Figure 1. Portable music player disruption by iPod (modified from Christensen 1997)
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THEORETICAL AND
CONCEPTUAL FRAMEWORK
The first analytical framework on innovation
management was described by Austrian economist Joseph Schumpeter in the 1930s (Sweezy
1943). J. Schumpeters idea of so-called creative
destruction defined innovation as being a trigger
to create a new market and to destroy the old
one (Sweezy 1943). Schumpeter s analysis on
innovation management, from an economists
perspective, is similar to Christensens disruptive
technology theory as both analyses consider the
previous market as being destroyed or disrupted by
the market following the innovation. Schumpeter
analyzed the innovation capability of companies
and related it to their size. He argued that large
companies have an advantage due to their monopolistic power as defined by resource based theory
but small companies have an advantage due to
their higher level of flexibility (Sweezy 1943).
Nowadays, Schumpeters pioneering idea on
innovative management is catching the attention
of many academics and managers as the strategic
management of innovation plays a greater role
in the global and local market. Currently, there
are various studies on innovation management
but there are few analytical frameworks for an
integrated approach on how a new innovation can
be created or how a new market can be created
from an innovative management perspective.
One of the theoretical frameworks that provide
analytical tools for strategic innovation is Kim and
Mauborgnes (2005) Blue Ocean Strategy (BOS).
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Figure 4. Buyer experience cycle map (Source: Kim and Mauborgne 2010)
For example, nowadays people have a great passion to go to the gym as life styles are currently
changing. Recent research shows that listening
to music whilst working out can help peoples
workout (Harmon and Kravitz 2007). Customers
want to exercise at the gym whilst listening to
their favourite songs and they are looking for a
small, lightweight and simple device. Apple with
their iPod Nano product chain miniaturized their
product and added a new built-in clip to target
those customers. Even more, Apple added a pedometer and made an agreement with Nike to
enable them to use a special Nike application on
their device with a special Nike sports kit which
makes their product even more unique. One of
the most important aspects that need to be considered with the agreement between Nike and
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iPod Market
Share (units)
iPod Market
Share
(Volume)
Mp3
Spending
per Year
2004
56%
71%
2005
72%
83%
131%
2006
72%
85%
17%
2007
70%
84%
- 4%
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an ordinary mp3 player but has unique offerings compared to other portable music players.
However, by looking at only the strategy canvas
until now, it is difficult to see the progress of
iPods strategic innovation. In the Four Actions
Framework, the four strategic questions are asked
for iPod to see how it is differentiated and what
innovative value it has. The result of this analysis
is illustrated in Figure 6.
According to the reduce section in Figure
6, it can be seen that miniaturizing the hardware
with nanotechnology applications and simplifying
the usage of the device by improving the software
added a significant value to the product. For that
reason, it may be important to find out where
Apple minimizes their advanced technology and
continuously develop and miniaturize their products further as this information can be a key point
for competition. Therefore, the manufacturer of
iPod will be analyzed in the next chapter in detail.
Also, iTunes added an extra value to the product
by reducing the price of music purchases. In the
eliminate part of Figure 6, it shows that by
eliminating cassettes, CDs, the requirement of
separate batteries and illegality of the mp3 music
sector, Apple actually offered a great bundle in a
one-single product solution to the portable music
player market. Bundling an existing product with
a new or existing product/service can be perceived
by customers as a unique value and that may lead
to an unexploited market.
The raise part of Figure 6 demonstrates that
if a product or service can be improved upon
regarding its key elements, it may lead to greater
success. In the case of portable music players,
the key elements could be stated as size, storage
capacity, battery life and sound quality. All these
key elements were raised well above the market
level when Apple introduced the iPod. Most importantly, these elements improved continuously
every time they introduced a newer version of the
iPod and are still continuing to improve which
makes it difficult for their competitors to follow
their improvements. In the last part create, it can
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Customer Productivity
In the customer productivity part, it can be seen that
the iPod covers purchase, use and the supplements
sections. The purchase section is marked because
Apple allows consumers to buy its products from
its own online site and high street shops and also
it is possible to buy them from other online and
high street companies. iTunes enables consumers to find the right album or song quicker than
by shopping in the high street and therefore the
productivity of the purchase stage is offered to
Simplicity
This is one of the areas that Apple is quite successful in generally with most of their products as they
present their products in a simple way, which is
one of their successful marketing strategies. The
iPod is simple to use and Apple adds accessibility
options in the settings to make it even simpler.
According to the accessibility options, customers
who are visually impaired can select songs without
looking at the screen with the Voiceover gesture
Convenience
The importance of innovation in the convenience
part is that the new product or service should
consist of an offering that performs the work in an
easier and more convenient way. Apple offers a feature called the Genius Mixes for their iPod, iPhone
and iTunes users. The Genius Mixes search the
iTunes library to make a list of songs that matches
customers music preferences automatically with
one single click. iTunes creates a number of lists
for customers so that they can pick the list they
like best and let them rename and save the new
playlist. This is a great feature when considering
the convenience section for iPod users because it
is time consuming to make a playlist and people
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Risk
Customers have great confidence when they
purchase their products from Apples online
store and their retail store. When the customer
makes an in-store purchase, Apple offers help
with set up, shows their customers some of the
key features of the product and teaches them how
to download new apps, which assures customers
that there is great customer service to help them
whenever they need it. It also reduces the risk of
the customer walking away and having limited
knowledge of how the product works. Also, there
is not any perceived risk at Apple online stores as
they offer great security with online purchases.
Environmental Friendliness
Apple offers its customers the opportunity to
recycle their iPods with Apple Recycling Program (Apple 2011). Accordingly, customers have
two options to recycle their products. They can
either recycle at an Apple retail store or they can
recycle via mail where postage is free of charge.
If customers recycle their products at one of
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CONCLUSION
Drawing on the analysis using different BOS
frameworks, it can be seen that the iPod is a
disruptive technology which had a significant effect on the global market by destroying previous
technologies and capturing and expanding the
portable music player market. One of the most
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