When a company talks about trading off pure performance in the name of lower prices, disruptive alarm bells start ringing. After all, companies like Dell Computer, Southwest Airlines, Wal-Mart, Charles Schwab, and Nucor have prospered by following this kind of low-cost disruptive strategy.
A startup company called LifeSize Communications hopes to be next on the list. As described in a recent BusinessWeek article, the company offers reasonably high-quality videoconferencing over the Internet at prices that are sharply below emerging market leaders Cisco Systems and Hewlett-Packard. LifeSize's solutions range from $5,000 to $40,000, compared to as much as $300,000 for Cisco's solutions.
It's reasonable to predict that we'll see an increasing number of similar low-cost strategies as economic woes continue and start-up companies seek to find the opportunity in economic turmoil. Therefore, it's natural to ask: How can you tell if a low-cost disruptor is going to succeed?
Our analysis of companies that have successfully and unsuccessfully followed low-cost disruptive strategies suggest that for LifeSize to succeed, it must be able to answer yes to three key questions: ...
Read the rest at Scott's Harvard Management blog, Innovation Insights.