Disruptive Innovation

Innovation Frugal innovation refer to the types of innovations that aim at reducing the complexity or cost of goods or the production process. In most cases, frugal innovations involve an elimination of non-essential elements of a good in order to meet specific demands of a specific market. They key is to deliver the greatest customer value at a pre-determined, usually affordable price point. To illustrate, frugal innovations in the car industry may involve removing features such as cruise systems, advanced sensors and other similar features from a car to make it more affordable for regions such as Africa.

Some of the key aspects of frugal innovations include commercialization, innovations around limited resources and quality of goods, and affordability of goods (Christensen, Raynor & McDonald, 2015). Frugal innovations relate to disruptive innovations relate to disruptive innovations in that disruptive innovations that are able to meet all the basic requirements at affordable price points and focus on rugged reliability, modular serviserability, product simplicity, and extreme affordability. Frugal and disruptive innovations are to a great extent similar with regard to how they respond to limited resources.

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In both cases, innovators leverage on limited resources to challenge incumbent business processes and improve product and services for niche markets. However, despite this, frugal and disruptive innovations are inherently different. On one hand, frugal innovations focus on using limited resources to develop economic goods for mass markets such as India and China. On the other hand, disruptive innovations use fewer resources to challenge established businesses by targeting the market segments which are not adequetly catered for by the big businesses (Chase, 2016″ ” Christensen, Raynor & McDonald, 2015).Roles and Dimensions of Incremental Innovations Incremental innovations refer to types of innovations that occur in a series of improvements and upgrades to existing products, product development processes or services. The rationale for incremental innovations is to continually improve efficiency, productivity and help a business differentiate its product to create a competitive advantage.

There are four main dimesions of incremental innovations. These are product, process, position and paradigm. These dimensions are reffered to as the 4Ps in Tidd and Bessant and their role is to help create an understanding of innovations and their influences on business processes and product development. Teslas 5 questions To understand whether Tesla is a disruptive technology or not, a set of five questions as proposed by Bartman are applied. The questions are” ” whether the company target an already over-served market by offering lower price or targeting a new market, does the company create asymmetric motivation, can the company improve its performance fast enough to keep up with its customers expectations while maintaining the cost structure, does the company create new value networks, and does the company disrupt all the existing players. From the evaluation, it is evident that Tesla is not actually a disrupter as defined by Bartman (). This is premised on the facts that there is no fundamental aspect of the business or business process that enables Tesla to compete on price and that the company does not actually disrupt the existing players.

In essence, Tesla concentrates on a small segment of the market which is currently not attractive enough for the large players. According to the analysis by Bartman, Tesla would face significant competition if it expanded its product lines to, for instance SUVs, which account for significant portion of car sales.Open Innovations One of the most unique qualities of Teslas business model is open innovations, a factor that may affect its overall impact on the market. In essence, Tesla has adopted a policy in which it shares all its innovations for free to the public. In an industry where dominant design and product innovations can lead to market dominance, Teslas open innovations strategy may seem as counterproductive. In fact, Tesla?s technology and portfolio of patents are considered to the companys greatest source of competitive advantage (Karamitsios, 2013).

However, the company has long term objective of growing the electric car industry by encouraging new entrants into the market. As a result, its open innovation strategy may have the long term implication of disrupting the entire car industry and may enable the company to scale beyond the current small segment of the market constituting of people who are willing to pay a premium to purchase electric vehicles. Understanding Transition and preventing Disrupting Tesla has a well defined transition strategy.

The company aims at transitioning from the high-end car market to mass market by creating and adopting incremental innovations around its production processes. Currently, electric vehicles are very expensive and hence most of car makers in this segment target the high end market. This is mostly due to the high costs of electric innovations and cost of components. However, Tesla aims to break into the mass market by reducing concerns with the cars maintenance and reliability and innovations related to vehicle elements such as the battery, charging systems and a new value configuration that makes it affordable to the mass market.

References

  • Chase, R., 2016. We need to expand the definition of disruptive innovation.? Harvard Business Review.Christensen, C.M., Raynor, M.E. and McDonald, R., December 2015
  • What is disruptive innovation.? Harvard Business Review, pp.44-53.Karamitsios, A., 2013. Open innovation in EVs: A case study of Tesla Motors.”
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