Aug 22, 2005

Low end customers drive innovation: Clayton Christensen

Clayton Christensen's first book ‘The Innovator’s Dilemma’ talked of how new technology can cause companies to fail. In ‘The Innovator’s Solution’, he said that through disruptive innovations, companies can outpace their rivals. His latest book ‘Seeing What’s Next’ shows how even successful firms could discover new sources of growth. In Mumbai recently, Christensen was interviewed by ToI’s Neelima Mahajan.

An interesting comment from the interview was Christensen's comment that

"generally the innovations that create big new ways of growth actually occur at the beginning of the low end of the market. If somebody makes a product that is simple and affordable then a whole new population can own and use that product. They will almost never be your (lead) customers who lead you to innovations. So you as the management will have to go out and watch the people who are down there and look at what they are trying to do and then take out a product that they can use. Nobody has done it repeatedly well."

And the reason why it's not instinctive for managers to listen to these people is that these customers currently account for low profit margins or numbers. He suggests setting up of separate organizations to take care of such contradictions.

As Christensen says

"In India, Hindustan Lever should have done that. They had a very dominant position in the detergent market and they thought about trying to come down to the low end, but they didn’t set up a separate organisation. Because of that, when push came to shove they always would give priority to the highend product because it generates higher profit margins. Nirma came in at the low end of the market. They keep expanding and moving upmarket. That is a more sensible strategy."