Session Outline

  • Competition Driven by Innovation

    The Creative Destruction process & the 4 I's.

  • The Industry Lifecycle

    From Introduction to Decline: How strategy shifts.

  • Crossing the Chasm

    Bridging the gap between Early Adopters and the Early Majority.

  • Types of Innovation

    Incremental, Radical, Architectural, and Disruptive.

  • Platform Strategy

    From Pipelines to Platforms: Network Effects.

Learning Objectives

1.

Outline the four-step innovation process (4 I's) from idea to imitation.

2.

Describe the competitive implications of the five stages in the industry life cycle.

3.

Apply the Crossing the Chasm framework to new technology adoption.

4.

Categorize innovations using the Markets-and-Technology framework.

5.

Explain why and how platform businesses can outperform pipeline businesses.

Fundamental Question

How could a highly profitable, dominant company like Blockbuster be virtually wiped out by a startup like Netflix, which started with a less profitable business model (mailing DVDs), in less than a decade?

Innovation is the "perennial gale of creative destruction." While Coca-Cola protects its trade secret to sustain advantage, tech firms like Netflix must innovate continuously—moving from DVDs to Streaming to Content—because patent disclosure would reveal their algorithms.

Global Case: Netflix

Continuous Innovation

Netflix avoided patenting its recommendation algorithm to keep it secret. It gained a lead by using AI to predict demand and personalize viewing. But to sustain advantage, it had to pivot twice:

  • Pivot 1: DVD-by-mail (Business Model Innovation).
  • Pivot 2: Streaming VOD (Tech Innovation).
  • Pivot 3: Original Content (The Crown, Queen's Gambit).

Indian Case: Reliance Jio

Disruptive Force

Launched in 2016, Jio disrupted the Indian telecom market (dominated by Airtel/Vodafone) by offering free voice and cheap data. It built an all-IP network from scratch.

Architectural Innovation

Jio made data the new oil. It acquired 100M subscribers in 170 days, forcing a massive industry shakeout.

Waves of Disruption: Global vs. India

Type Global Example Indian Example The Effect
Physical to Digital Blockbuster -> Netflix Local Kirana -> Blinkit/Zepto Convenience & Speed win.
Platform Shift Taxis -> Uber Taxis -> Ola Asset-light model disrupts incumbents.
Fintech Cash -> PayPal Cash -> Paytm/UPI Digital payments enable micro-transactions.

Context

The Perennial Gale of Creative Destruction

Schumpeter's theory in action: How superior formats ruthlessly replace the old. The journey from grainy tapes to 4K streams is a perfect case study.

The Evolution of Home Video

80s

VHS (Video Home System)

An analog magnetic tape format. It dominated the 1980s and 90s despite low resolution. It was the era of "Be Kind, Rewind."

00s

DVD (Digital Versatile Disc)

A digital optical disc format. It offered better picture quality, sound, and convenience (no rewinding!). It largely replaced VHS in the early 2000s.

10s

Blu-ray & Ultra HD

Uses a blue-violet laser for High Definition (1080p). Emerged after a format war with HD DVD. Later evolved to Ultra HD Blu-ray supporting 4K resolution (3840 x 2160 pixels) and HDR for home theater enthusiasts.

Now

The Dominant Format: Streaming

While physical media (Blu-ray) still offers superior technical quality (bitrate), the market has shifted to Streaming Services (Netflix, Amazon Prime, Hulu).

Why? Convenience and on-demand access to a vast library without the need for physical storage space displaced the need for discs.
Masterclass Lecture

The "Perennial Gale" Explained

The Perennial Gale

"Stabilized capitalism is a contradiction in terms."

- Joseph Schumpeter

Fundamental Question

If the pace of innovation is accelerating dramatically, how can any firm achieve a sustainable competitive advantage?

"When you think of success, you think of stability. But Schumpeter saw capitalism as a churning ocean. He called the force driving it the 'Perennial Gale of Creative Destruction.' It’s not just competition; it’s industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

Destruction
VCR / Old Tech
Creation
Smartphone / New Tech

Trigger Question

How can the destruction of an entire industry possibly be good for an overall economy?

"Schumpeter argued you can't have progress without tearing down the old. The VCR industry didn't just adapt; it vanished. That is the 'destruction.' But that destruction freed up capital and labor to build the smartphone ecosystem—the 'creation.' It is a transfer of resources from low productivity to high productivity."

BLOCKBUSTER
Asset: 9,000 Stores
Became Liability
NETFLIX
Asset: Algorithm
Created Value

Trigger Question

How could a highly profitable giant like Blockbuster be wiped out by a startup with a seemingly less efficient model (mailing DVDs)?

"Blockbuster was optimized for equilibrium (late fees, physical stores). Netflix introduced a model that addressed pain points. When the internet speed 'Gale' arrived, Blockbuster's biggest assets (stores) became massive liabilities. They couldn't pivot because their entire revenue model depended on the old way."


PCO Booth

Jio / 5G
"The PCO didn't evolve. It evaporated."

Indian Context

The PCO was a robust micro-business across India. Why did it vanish almost overnight?

"The 'creation' of affordable connectivity by players like Jio made the time-metered public phone obsolete. This wasn't a gentle sunset. It was a violent shift of capital from millions of small booths to massive 4G infrastructure. Similarly, Kirana stores now face the 'Gale' of E-commerce. They must adapt (digitize) or risk the same fate."

Conclusion: Surviving the Storm

"The gale is perennial. It never stops blowing. As future business leaders, your success won't depend on how well you manage a stable ship, but on how effectively you navigate the constant storm of change. Be the disruptor, not the disrupted."

Context

The Accelerating Speed of Innovation

Change is the only constant. The rate of technological change has accelerated dramatically. It took 84 years for the car to reach 50% U.S. adoption, but only 6 years for MP3 players.

Years to Reach 50% U.S. Adoption

Why is it accelerating?

  • Infrastructure Layering: Earlier innovations (Electricity, Telephone) built the rails for new ones (Internet, AI) to run on.
  • New Business Models: Dell's direct-to-consumer and Walmart's IT logistics fueled explosive growth, making innovations accessible faster.
  • Viral Networks: Social media and the internet allow information (and adoption) to spread instantly compared to word-of-mouth.

First Principle Question

Is a great idea alone enough to succeed?

No. Innovation is the commercialization of invention. Google's PageRank is an invention; Google Ads is the innovation that monetized it.

The 4 I's of Innovation Process (Click to Explore)

1. Idea

Abstract Concepts

2. Invention

Transformation

3. Innovation

Commercialization

4. Imitation

Competition

Select a stage above to reveal details and examples.

Deep Dive: Patent vs. Trade Secret

Feature Trade Secret Patent
Protection Strict confidentiality (NDAs). Government grant of exclusive rights.
Disclosure Must be kept secret. Requires full public disclosure.
Duration Indefinite (if secret). Limited (~20 years).
Cost Low (Security costs). High (Legal fees).
Examples Coca-Cola Recipe, Google Algorithm. Edison's Bulb, Pharma Drugs.

Fundamental Question

How does strategy change as an industry evolves?

Industries follow a predictable S-curve: Introduction, Growth, Shakeout, Maturity, and Decline. The core competency needed shifts at each stage.

1. Introduction (Tech Enthusiasts)

Core Comp: R&D. High Cost. Global: EVs (2010). India: EVs (Current).

2. Growth (Early Adopters)

Core Comp: Marketing. Demand spikes. Standards emerge.

3. Shakeout (Early Majority)

Core Comp: Efficiency. Weak firms exit. Price wars ensue. India: Telecom post-Jio.

4. Maturity & Decline (Laggards)

Oligopoly. Zero growth. Options: Exit, Harvest, or Consolidate.

Strategic Logic

Strategic Shifts: Adapting to the Life Cycle

As an industry evolves along the S-curve, firms must adapt their strategic focus from R&D to marketing to efficiency.

Stage 1

Introduction

Tech Enthusiasts. Small market. High cost.

Core Competency

R&D and Design. Getting the product right.

Global

Tesla EVs (2010s) - Focus on battery tech.

India

Tata Nexon EV - Focus on range & charging.

Stage 2

Growth

Early Adopters. Rapid demand. Standards emerge.

Core Competency

Marketing & Scale. Capture share quickly.

Global

Smartphones (2000s) - iPhone vs Android wars.

India

E-commerce Boom - Flipkart/Amazon logistics war.

Stage 3

Shakeout

Early Majority. Price wars. Consolidation.

Core Competency

Efficiency & Cost Control. Process innovation.

Global

US Airlines - Mergers & bankruptcies.

India

Telecom - Jio entry forced Vodafone-Idea merger.

Stage 4

Maturity/Decline

Laggards. Saturation. Oligopoly.

Core Competency

Operational Excellence, Harvest, or Exit.

Global

Film Cameras - Kodak managing decline.

India

PCO Booths - Operators exiting business.

Fundamental Question

Why do early leaders fail to capture the mass market?

The gap between "Tech Enthusiasts" and the "Early Majority" is where most innovations die. The majority wants solutions, not just cool tech.

Crossing The Chasm

Geoffrey Moore's framework. To cross, you must transition from selling "potential" (to visionaries) to selling "reliability" (to pragmatists).

[Image of Crossing the Chasm Bell Curve]

Case: BlackBerry vs. iPhone

2007 Era

BlackBerry's Mistake: They focused on "Encrypted Security"—a feature loved by corporate techies but irrelevant to the mass market at the time.

Apple's Victory: The iPhone enticed the Late Majority not with security, but with "Fun" (Web, Games, Photos). Apple educated the consumer and subsidized phones via AT&T contracts (a business model borrowed from early movers).

"Timing is key. In 2007, users didn't care about data privacy yet. BlackBerry was too early with its core competency."

Fundamental Question

Can a failed innovation be reborn?

Sometimes a technology fails in its initial application/timing but finds a massive "Second Wind" later in a new industry.

The Resurrection of Iridium

In the 1990s, Iridium's satellite phone system failed to cross the chasm. It was bulky and expensive compared to terrestrial cell towers. The company went bankrupt.

The Pivot: Aireon (Flight Tracking)

25 years later, the same satellite network found a killer app: Global Real-Time Flight Tracking.

  • The Problem: Radar doesn't work over oceans (70% of Earth). MH370 disappeared in a "dead zone."
  • The Solution: Iridium's 66 satellites now host Aireon payloads, covering 100% of the globe.
  • The Value: Safety, fuel savings (better routes), and reduced greenhouse emissions.
🛰️
Space-Based ADS-B

Fundamental Question

Does the innovation utilize existing or new technology? Does it target existing or new markets?

Architectural

New Mkt / Existing Tech

Global: Canon copiers (desktop) vs Xerox.

India: Godrej Chotukool (low-cost fridge for rural markets).

Radical

New Mkt / New Tech

Global: The Internet, The Airplane.

India: UPI (Unified Payments Interface) - transformed digital payments.

Incremental

Existing Mkt / Existing Tech

Global: iPhone 13 to iPhone 14.

India: Maruti Suzuki updating car models (Swift -> New Swift).

Disruptive

Existing Mkt / New Tech

Global: Digital Photography, Streaming.

India: Reliance Jio (4G Data network disrupting voice telecom).

Fundamental Question

Why do platform businesses often outperform pipeline businesses?

They scale faster by leveraging Network Effects and zero marginal costs of supply.

Pipeline Business

Linear
  • Process: Design -> Make -> Sell.
  • Global Ex: Blackberry, Traditional Manufacturing.
  • India Ex: Godrej Appliances, Bajaj Auto.

Platform Business

Network
  • Process: Connect Producers & Consumers.
  • Global Ex: Uber, Airbnb, Amazon Marketplace.
  • India Ex: Flipkart, Zomato, Ola.
Interactive Strategy Game

The CEO Simulator: "Innovate or Die"

You are the new CEO of TechNova. Can you navigate 10 years of disruption, scale your platform, and survive the chasm? Your goal is to maximize Market Cap and Capital.

Cash Reserves
$100M
Market Share
15%
Game Progress
0/10
🚀

Ready to Lead?

You will face 10 critical strategic decisions covering R&D, Standards Wars, Disruption, and Platforms. Every choice impacts your bank balance and market position.