Here’s a quote from Clay Christensen on Disruptive Technologies that is especially relevant in the context of software:
If you look at the history of most industries, the companies that at one point were widely viewed as the leaders that had unassailable competitive advantages, a decade later they find themselves at the bottom of the heap, displaced by a new set of companies.
A disruptive technology is something that brings to the market a product or service that is not as good as what historically had been available, and therefore it can’t be valued or used by customers in the mainstream of the market.
Yet it takes root in a different application. It isn’t as demanding, but then these trajectories slope upward faster and intersect with the customers needs and the mainstream.
One of the things that affects the probability that an innovative venture will succeed is never to frame the fundamental challenge as a technology problem. Instead, frame it as a marketing challenge and try to find an application where customers will be absolutely delighted to have a product.
Examples of Disruptive Technologies are Railroads, Telephone, Internal Combustion Engine, Electric Power, Plastics, Microelectronics and the Personal Computer. [A recent Tech Talk covered Disruptive Technologies in more detail.]
In the Indian context, an interesting example is what Amul is doing in
the Pizza market. Amul has just introduced a Rs 20 Pizza, with a 100%
margin. How? Rs 2 for the bread base (8 inches in diameter), Rs 5 for
the Cheese, Re 1 for the Onions and Tomatoes (“onions anyways come
free at restaurants at the table”), and add Rs 2 for everything else
(eg. the oven use).
It all adds to only Rs 10, leaving a similar sum
as margin for the dealer and Amul. Advertising costs are minimized by
putting up banners outside the places there the pizza is
available. Amul hopes to sell 100,000 pizzas daily by March 2002.
Amul is not trying to target the Domino’s Pizza or Pizza Hut audience. It is bringing the taste of Pizza to an entirely different section of the market which has perhaps never tasted (but aspired to taste) pizza in their lives. The market size at Rs 20 is a thousand times bigger than the elite market.
It is interesting to reflect on the words of BM Vyas, Managing Director, GCMMF (Amul):
Amul will now get into products that go straight into the consumer’s mouth. Amul will be a food brand, for pizzas, traditional Indian sweets, confectionery, baby foods, long life milk, curd. We are building the products for the future
We already sell 19,000 pizzas per day, more then both Domino’s and Pizza Hut, individually. Show me a multinational that has been able to do this in just 15 days! Our Utterly Delicious factory-frozen pizza, will come in two-variants, a smaller 6-inch for the retailer and a bigger 8-inch for the take-home consumer market. The consumer pack is to beat the multi-national competition. However, what is going to give me volumes is the bulk trade pack.
We’re a co-operative, with a vision to give the farmer the best price for his milk and the consumer the lowest price for the products he buys.
Excerpted from a cover story on Amul in Business Today.
By bringing the cost of pizza down by nearly a factor of 10, Amul has changed the Rules of the Game.
There is a similar opportunity to change the Rules of the Game in Enterprise Software.
India needs an Amul of Software.