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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.

Rarely have I read a newspaper article peppered with as much clearly disruptive language as “The Tell-All Campus Tour,” by Jonathan Dee in the 9/21/08 New York Times Sunday Magazine’s annual College Issue. The story shines a spotlight on Unigo.com, a new college-search website that allows current students to review their school, posting videos and photos as well as extremely, um, candid opinions.

The site is so new, in fact, that last Friday when I clicked over to it midway through reading the article, I got an error page. But once I successfully accessed the site and poked a round a bit, I found a plethora of information — the kind of nitty-gritty details I would have killed for when I went through my own fraught college search.

About my alma mater, one of the 24 lengthy student reviews opened with: “The best thing about __ is that almost every single good thing you will read about in the recruiting materials is true. The one thing I would change is the level of outrageous unresponsiveness the administration often displays. The __ beurocracy [sic] is probably the one major reason why some people decide to transfer.” (I admit, it pained me to see the typo, but I felt a familiar twinge of Red Tape Angst.)

Unigo’s extremely entrepreneurial 26-year-old founder, Jordan Goldman, also co-founded one of the first college review books to include quotes from students, rather than being written exclusively by professional reviewers. But he still saw a huge gap between the needs of high school students and their families as they seek the perfect school, and the standard offerings from companies like Princeton Review and U.S. News and World Report.

“My whole family chipped in for me to go to college,” Goldman said in the Times. “They were saving from when I was 2 or 3 years old. That the best resource for a four-year, $200,000 decision are these books — with no photos, no videos, no interactivity, only three to five pages per school on average, fully updated usually once every several years — just doesn’t make the grade. This is the most important decision people that age have ever made, and the information is just not there.”

OK, so we have a clear unsatisfied need. What’s the disruptive angle? Let’s let some denial do the talking. The Times contacted Christopher Gruber, who heads admissions for Davidson College in North Carolina, one of the 268 colleges currently covered by Unigo. His reply when asked if he’d looked at the site (the company sent letters to the admissions offices of all the reviewed schools, granting them early access before Unigo went live): “I’ve got to be honest with you, I’m not spending a ton of time navigating those student-driven sites. My sense is that the traditional big players, like Princeton Review, are the major sources for online information too, in part because those are the names that parents still recognize... The ones that we supply information to are the ones that we spend the most time on.”

If the Unigo model works, it will likely disrupt the typical college guidebook business, giving free, ad-supported content in far greater detail than the average Princeton Review manual can provide. But it will also shake up how college PR and admissions teams have to do their jobs. Challenged by a well-organized, extremely comprehensive resource that gives students a warts-and-all view of the school, official viewbooks and campus tours won’t seem as convincing. (Dee, the writer of the Times story, mentions one video posted about Notre Dame, in which an official tour guide goes around the campus with a friend, giving the official spiel and then letting her friend tell the left-out bits.)

“You can review anything online,” Goldman said in the Times. “You can review the most trivial things, but you can’t review your college. There’s no platform for this incredibly important decision that costs so much money.”

In the year preceding its launch, Unigo developed a network of unpaid interns at the colleges it covers, who in turn got fellow students to write about their schools. 100 of the interns were sent Flip video cameras (another disruptive product!) and filmed typical scenes on campus or interviewed fellow students.

From the Times article:

“[Unigo] changes the game from an economic standpoint too: it costs a lot of money to travel far away from home to check out schools, and Unigo offers an unfiltered, detailed, often somewhat eccentric view of campuses all over the country. A 45-second video in which an unseen student pans around the courtyard at Sarah Lawrence on a sunny day and simply describes what she sees (including a student-run barbecue pit called PETA, which stands for “People Eating Tasty Animals”) is so evocative that it makes the one-page U.S. News summary — or the descriptions in Sarah Lawrence’s own admissions catalog, for that matter — read like junk mail.”

And one of the young editors for the site, Max Baumgarten, summed it up nicely in the article: “I don’t think [the colleges] know the numbers. The whole package is something they should be a bit scared of, but they’re not. They don’t really understand the immensity of it.” 

As a loyal supporter of Amazon.com's Kindle e-reader, an email from a client titled "Throw that Kindle away!" was sure to catch my interest.

The email linked to a video demonstrating an electronic reader that a U.K. company called Plastic Logic plans to launch next year. The video is eye-catching. Plastic Logic's device — which is powered by the same E Ink technology behind readers offered by Amazon and Sony — is the size of a sheet of paper and has a stunning 13-inch screen.

As the company's name implies, the device is based on plastic technologies originally developed at Cambridge University. Plastic Logic is betting that lower capital costs and a simpler production process will provide it with a sustainable cost advantage over devices based on silicon.

A beautiful design and a sustainable cost advantage certainly sound troubling for Amazon. How worried should Amazon's CEO Jeff Bezos be?

Innosight's lenses suggest not too worried, unless Plastic Logic dramatically shifts its approach.

There are two problems with Plastic Logic's approach. First, the company appears to be targeting business users. Its demonstration showed how users can carry the device instead of bushels of documents.

What's wrong with that focus? After all, the business market is where the money is after all. And who likes being weighed down by thick stacks of paper?

Read the rest on Scott's Harvard management blog, Innovation Insights.

With the launch of its banking-by-shoebox service, Amsterdam-based bank Insinger de Beaufort created an elegantly simple offering that overcomes the barriers of time and skill that limit consumption of financial services.  While Insinger’s shoebox service targets high-end consumers, could the model be altered to create a low-end disruption?

Here’s how the service works: After meeting with a private banker to discuss financial planning goals, Insinger’s customers receive a shoebox by mail into which they can drop everything from tax return forms, speeding tickets, insurance-related forms, bills to be paid, investment statements, and bank statements.

On a monthly basis, Insinger collects the box via courier service, processes all the paperwork inside, and sends the clients a notice of the resulting transactions within three business days.  Once every quarter, clients receive a full report outlining the status of their transactions, accounts, spending patterns, and overall financial position. This information serves as fodder for annual discussions between the client and his/her banker to assess changes in financial position and planning.

The shoebox service addresses functional jobs, such as “Pay my bills on time,” “Ensure I don’t miss any payments,” “Remove the hassle of handling my finances,” and “Have more time to do what I enjoy.” Just as critical are the emotional jobs addressed by the service, such as “Reassure me that my financial affairs are taken care of and nothing has slipped between the cracks,” and “Know that someone is keeping track of my spending and investments to help me make good financial decisions.”

In its current form, the shoebox service is a sustaining offering, given that it targets the most profitable, demanding banking customers with a high-cost service (rumored to run €415 to €850 per month, depending on service level).

However, many of the jobs and barriers addressed by the service are ones also found amongst low-end non-consumers of financial services.  While the low end of the market may not have as many jobs related to investment management, these potential customers are also constrained by time and skill when trying to satisfy jobs related to bill payment and financial management.

Could a similar service have disruptive potential at the low end of the market by using a different business model? At Innosight, we would ask the following types of questions to assess the feasibility of such a model:

• Which components of the service are critical for meeting the jobs most important to low-end customers and, therefore, need to be retained? Which components can be cut without diminishing the value to low-end customers? For example, could the personalized financial planning service be stripped out and replaced with templated trend reports of a customer’s spending and investments, along with automated recommendations based on those trends?
• Could the service be offered through a low-cost business model relative to Insinger’s labor-intensive, personalized approach? For example, could the transfer of documents, bill payment, or trend analysis be automated to avoid the costs of couriers and manual processing?
• Are there distinct jobs and barriers for low-end consumers that should be considered in designing the product? For example, is there an additional job of, “Make sure I don’t overdraft on my bank account” that is related to the cash-flow challenge faced by many low-end consumers and is important/unsatisfied for this market? Could this job drive development of a new feature to provide a credit cushion to customers or otherwise prevent overdrawing on accounts, or is the cash-flow challenge a big enough barrier to prevent such a service from taking hold with the masses?
• Are there potential partners with capabilities that could minimize the investment required for an initial service offering and that would be motivated to support the model? For example, would Intuit (maker of TurboTax) be interested and able to provide automated report generation capabilities or input on selling the service as a subscription or as a software product?

If the questions above can be answered favorably, a viable opportunity may well exist for a disruptive product that could enter the low-end market and eventually develop into a good-enough alternative to more traditional, expensive financial services.

You want to surprise people in your office? Ask them to estimate the percent of U.S. mobile phone subscribers who use email on their phones. Depending on who's doing the estimating, the figure ranges from seven to 13 percent .

A startup company called Peek looked at those figures and saw disruptive opportunity. After all, one of the most powerful ways to create new growth is to expand markets by making consumption simpler, more affordable, or more convenient.

This week, Peek's first product appeared in Target stores. The simple device, designed by product design powerhouse IDEO, costs $99. It allows users to send and receive email using T-Mobile's wireless network for $20 a month. And that's it. No phone, no wireless Internet connectivity, no attachments. Just email.

Will Peek follow the Apple iPod or Pure Digital Flip video camera--both elegant devices that have grown markets through simplicity--on the road to disruptive success?

Read the rest on Scott's Harvard Management blog, Innovation Insights.

In need of legal advice, a man went into a lawyer's office. He knew how expensive lawyers could be, so he inquired, "Can you tell me how much you charge?"

"Of course," the lawyer replied, "I charge $500 to answer three questions."

"Don't you think that's an awful lot of money to answer three questions?"

"Yes it is," answered the lawyer, "What's your third question?"

To an average family or small business owner, legal advice feels expensive because you pay (a lot) and you pay by the advice. What you get is assurance that your interests are protected against generally unlikely events or liabilities. The majority of families, who rarely consult with lawyers and have not been on the losing end of a legal issue, are not accustomed to spending $200 per hour for advice. To those families, the benefits of legal advice don’t seem to outweigh the costs. Could the popularity of greedy lawyer jokes be the indicator of a disruptive innovation opportunity?

Yes! Even those of us who do not have frequent needs or resources to regularly seek legal advice still relate to the emotional satisfaction of having a lawyer in our corner to make us feel more protected. The question is, why can’t legal advice be more affordable, to satisfy this need for assurance amongst those who don’t have deep pockets?

Prepaid Legal (PPD) recognized this opportunity back in 1972, when its original founder began to offer legal expense reimbursement to motorists through a membership club after he suffered a collision and significant legal fees not covered by his car insurance. Prepaid Legal Services developed into a membership-driven organization that provides a range of specific legal services to any member for a flat monthly fee. 

Here’s how it works: You pay Prepaid Legal a monthly fee ($16 per month in Massachusetts for a standard family plan). This membership provides you access to a lawyer at a local law firm who is a part of Prepaid Legal’s partner network. For that membership fee, you get access to an attorney for phone consultation at any time. If the lawyer believes it would be prudent to pursue a legal matter in more depth, you have access to a menu of services that are limited to a set number of specific activities per year, such as document review or drafting legal letters. 

Prepaid Legal has proven it has a successful business model, with over 1,481,531 active memberships reported at the end of first-quarter 2008. What makes them an interesting example in the disruptive playbook?

Targeting constrained customers: By focusing on the question of “How can we make legal advice accessible to non-consumers?” Prepaid Legal discovered an innovative way to design the pricing and distribution model for legal services, making it accessible for those who were previously priced out of the market. Sixteen dollars a month for on-going basic legal service is much more feasible to these customers than paying $500 to hire a lawyer one time to review a document.

Offering “just good enough” service: Customers get an inferior product by traditional standards, sacrificing unlimited service for a cheaper price point. If you need a lawyer to review documents to purchase a home, a membership affords you up to two reviews of legal documents that are no more than 10 pages. If additional services are needed, you are entitled to a 25% discount on your lawyer’s regular fees.  For the majority of infrequent advice seekers, this level of benefit is a good deal. Their legal matters tend to be straight forward and the reassurance of having a lawyer on call by phone provides a significant emotional and practical benefit.   

Changing the business model: What makes the offering possible is the scale that Prepaid Legal can provide to the distribution channel (its partner law firms). This is done through multiple business model innovations that deliver the same old legal services from the same old law firms, but to new consumers: 

• Prepaid Legal changed the financial model to aggregate receivables before legal services are rendered. Their partner law firms benefit from a predictable revenue stream
• Prepaid has created a marketing network of associates who are usually members and who receive commissions for referrals. This pyramid type of marketing approach has garnered criticism for its ability to drive sustainable growth. But it keeps marketing and sales expenses low and allows the company to remain profitable with its low cost positioning.
• Finally, the company created a new value proposition in the marketplace that positions legal services much more like insurance. This was done by limiting the features and benefits of the service to the most scalable and frequent kind of legal advice, and by targeting that advice to traditional non-consumers.

Scott Anthony recently blogged about Google’s new Chrome browser, concluding that the offering has potential as a disruptive threat to Microsoft. I agree, but not because the browser itself is particularly remarkable; specifically, I see Chrome as a small part of a larger, Google-backed movement toward more Internet-based computing as opposed to Microsoft’s current desktop applications. I think that Chrome itself is a sustaining move in the browser space, but that it may help foster more disruptive change.

I’ve been using Chrome since its debut, and there’s no doubt that it’s clever. The frame the browser creates around the sites it displays (known to developers as its “chrome” – get it?) is impressively small: there’s no menu bar, tabs are all the way at the top, and the status bar at the bottom only pops up when it needs to, leaving extra space to view websites the rest of the time.  Useful features and shortcuts abound, like the versatile, search-capable address bar known as the “omnibar”.

Chrome is also technically innovative: it’s speedy, of course, and there are many innovations under the hood. One of the cleverest enhancements is the way tabs work. Each tab is completely separated from all the others, so when an especially complex (or unfortunately buggy) website causes problems and a tab crashes, everything else keeps humming along smoothly.

Finally, it’s… well… cute. Its features are introduced in a comic. Chrome reminds you that browsing in its unique incognito mode (in which no history is kept and no cookies are saved) won’t protect you from “secret agents” or “people standing behind you.”  When a tab crashes the error message is “Aw, Snap!” Typing "about:internets" into the address bar will take you to a Ted Stevens joke.

These innovations allow Chrome to do the things other browsers do (they all get at the same Internet) and to do them incrementally better. Through that lens, I’m not sure how successful Chrome will be; remember, as Scott mentions, Microsoft’s Internet Explorer maintains a 72.2% market share despite the existence of superior alternatives. All major web browsers out there are equally free, and many are also open source.

Viewed as part of a larger strategy, however, Chrome could be a small part of a truly disruptive change in computing. Google has been pushing hard in recent years to expand the range of jobs consumers are able to do online in the cloud, from word processing to working with spreadsheets to creating presentations, and Chrome is a speedier, more stable platform for those sorts of applications than other browsers. Furthermore, because Chrome is open source, Google is making it easy for other developers to adapt its features.

Chrome may not be disruptive to other browsers, but it will help enable the adoption of Internet-based computing which, as it provides enhanced portability at a low (or no) price in exchange for fewer features, fits the disruptive mold nicely.

On its own, Chrome is nothing earth-shattering, breathless pundits prophesying the gruesome demise of Microsoft notwithstanding. On the other hand, Chrome’s features do make Internet applications marginally easier to use and more reliable, and Google is working diligently to continue that trend. Relying entirely on the Internet to get our computing jobs done may seem difficult to imagine now, but viewed as part of a larger movement Chrome is certainly a small step toward a much "cloudier” future. 

It didn't take long for the hype machine to gear up. Seemingly minutes after news began to appear about Google's new Web browser (called "Chrome"), pundits started talking about "browser wars" and Google's "Microsoft killer." In this case, the hype might be justified, if Chrome delivers on its disruptive potential.

Early descriptions sound ominous for Microsoft. Google's browser was built from the ground up to make it easier and faster to run Web-based applications. It is completely open source, meaning developers can modify the source code and easily design applications that work with the browser. And of course, it is free.

Google hopes the browser will lead more people to spend more time using its applications, browsing the Internet, and contributing to its advertising revenue. Further, it hopes to lessen the chances that Microsoft uses its browser dominance to subtly push people towards its own Web sites and applications. 

Chrome presents an obvious threat to Microsoft's Internet Explorer software. But Chrome could do much more. ...

Read the rest at Scott Anthony's Harvard Management blog.

The recently christened “netbook” market has exploded over the past year as new entrants and established computer manufacturers have released a bevy of new, inexpensive products into the disruptive category.

Netbooks, relatively small and very inexpensive notebook computers designed primarily for mobile Internet connectivity and useful for little more than browsing, e-mail, and running productivity software, fit nicely in a niche for consumers who have been simultaneously overserved by traditional laptops and underserved by high-end smartphones.

If this niche seems familiar, it should. Manufacturers have struggled to shoehorn attractive products into this niche for years, but until recently they tended to be unwilling to aim low enough on features or on prices.

Some have sought to fill that gap by focusing primarily on size and producing ultra-slim laptops with feature sets (and price points) comparable to those of larger computers. Lenovo’s X Series and the $1799 MacBook Air, for instance, actually charge a hefty premium for providing features similar to those of a midsize laptop in a more portable package.

Microsoft, on the other hand, was more willing to limit features and provide a “good-enough” product when it developed its “Ultra-Mobile PC” platform (known as Origami), but Origami-powered devices failed to catch on as high prices (not to mention horrific usability problems) turned potential customers away.

Netbooks, however, seem more attractively positioned than these products, and they have great potential to disrupt the laptop industry. Consider, for example, Acer’s new Aspire One, now widely available for $379. It’s hopelessly outgunned by pricier laptops: its screen is small, it runs Linux instead of Windows, it comes with relatively little RAM, its processor is slow, and its solid state drive is Lilliputian.

But those shortcomings aren’t terribly important to consumers when their goals are simply portability, connectivity, and productivity at a low price; an ultra-portable that can run Crysis is ludicrously overwrought in comparison.

It seems very likely to me that there's much more expansion in store for this segment of the computing market as manufacturers introduce still more products, the cost of computing power continues to decline, and consumer awareness of these options grows.  I'll be curiously watching as the low-end disruption develops.

Earlier this year on InnoBlog, Natalie Painchaud discussed the ASUS Eee Surf's potential to be used as a second computer for families.

One of the excellent editors at Harvard Business Publishing forwarded me a link to a BBC article in an email with the subject line: "Could Windows by Disrupted?" I didn't have to click on the link to know the answer is yes.

You see, everything could be disrupted. The important question is will disruption play out in a way that favors or kills the incumbent market leader? The real interesting question is "Will Microsoft disrupt Windows?"

The forces of disruption are at work in every industry. It can happen more quickly in some industries than others, but the potential is omnipresent. And as Clayton Christensen pointed out in his seminal book The Innovators' Dilemma, market leadership isn't just an insufficient buffer against disruption, in some cases it is the root cause of failure.

Consider the management classic In Search of Excellence. While some of the companies featured in the book continued to excel after it was published, companies like Amdahl, Atari, Data General, Digital Equipment Corporation, Eastman Kodak, and Kmart all encountered serious difficulties. In fact, an analysis by IMD Professor Phil Rosenzweig in his worthwhile read The Halo Effect found that the average "excellent" company from In Search of Excellence generally under-performed the stock market in the years after the book's release.

What about Microsoft? ...

Read the rest on Scott's Harvard Management blog.

On Tuesday, Michael Arrington from TechCrunch.com had a fascinating post about his experience playing around with a startup called YouNoodle, which tries to do for start-up funding what credit scoring did for personal lending.

Before the 1950s, lending depended on the wisdom and judgment of loan officers. Then, a company called Fair Isaac developed a way to use four simple variables to develop a credit score that reliably predicted the risk of lending to an individual. Using the approach could allow any individual to meet, if not exceed, the accuracy of a loan officer, whose judgment might be clouded by extraneous factors.

Further refinements to the credit scoring methodology fueled disintegration and disruption in the banking industry, spurring the rise of credit cards and specialist providers of auto loans, home mortgage loans, and small business loans.

Likewise, YouNoodle has developed a database that it claims can predict the valuation of early-stage startup companies. It developed the database by assessing 3,000 startup companies. The model relies on four basic areas: the team, financial factors, the concept, and advisors. A startup comapny fills in a survey with detailed questions focused on these four areas, and out pops the valuation.

Read the rest at Scott's Harvard Business blog, Innovation Insights.

This article was co-authored by Michael Putz, a Business Development and Strategy Director at Cisco Systems. Putz was an integral contributor to the ideas presented in Seeing What’s Next through collaboration between Cisco and Clayton Christensen on the future of the telecommunications industry. The post reflects the personal views of the authors, not of Cisco Systems.

Click here to read Cuil's Dangerous Strategy Part I.

New-search-kid-on-the-block Cuil Inc. has its work cut out for itself. First, it has to fix embarrassing bugs that plagued its hotly hyped launch this week. Then, it has to figure out how to break from the pattern showing that companies that try to leap over market leaders with a better-performing product typically fail.

Cuil could look to Apple for signs of hope. Apple was far from the first mover in the digital music space when it introduced its first-generation iPod in 2001. That player was superior, and more expensive, than devices offered by Rio, Cabo, Archos, and others. Apple’s iPhone was a late entrant to the smartphone industry. Research in Motion, Motorola, Nokia, and Samsung are still struggling to match Apple’s intuitive interface and powerful computing platform.

In both cases Apple entered an established market with products that were functionally superior to established products.

Harvard Business School Professor and Innosight founder Clayton Christensen’s research found this approach — which he termed a sustaining strategy — tends to not work because it entices devastating response from motivated incumbents who have the right skills to fight back.

In fact, in 2007 Christensen publicly predicted the iPhone’s failure, telling BusinessWeek: “The iPhone is a sustaining technology relative to Nokia ... History speaks pretty loudly on that, that the probability of success is going to be limited.”

Yet, Apple’s digital music strategy has been an unqualified success and its mobile phone strategy appears on its way to similarly rarefied heights. Why has Apple been able to buck the trend? In both cases it recognized that it had to create a completely different value system to disrupt an entrenched incumbent value system.

Read the rest on Scott Anthony's Harvard Business blog, Innovation Insights.

An article in the Wall Street Journal today described how a startup company called Cuil Inc. has assembled a “dream team” of engineers to try to dethrone Google Inc. Odds are that Cuil (pronounced "cool") ends up like the seemingly unbeatable team of NBA players that finished sixth in the 2002 FIBA world championships.

Cuil’s search engine launched today. It claims to cover three times the number of Web pages that Google covers (in trial runs this morning it ran very slowly and found nothing under my name!), and displays its results like a magazine. President and co-founder Anna Patterson, an engineer who helped build Google’s search index, told the Journal, "You can't be an alternative search engine and smaller. You have to be an alternative and bigger."

To top Google, Cuil built a top-flight team of engineers with search experience at eBay, IBM, AltaVista, and, of course, Google. It is backed with more than $30 million of venture capital.

Cuil is playing a dangerous game. ...

Read the rest on Scott's Harvard Business blog, Innovation Insights.

By Rebecca Waber

Recently, I took a vacation to Europe with my little brother, a trip I was determined to keep inexpensive despite the weak dollar. This goal turned out to be particularly difficult in Stockholm, where a McDonald’s value meal will set you back $11. Because of the prices, I took a local friend’s suggestion and booked a private room in a youth hostel. Never having stayed in a hostel before, I was unsure about what this cheap alternative would be like.

Actually, it turned out to be a great experience. It was a comfortable, perfectly “good-enough” place to sleep. I began to reflect upon what one gets from staying in a hotel.

It occurred to me that I was perfectly happy without a maid’s “turn-down service” and a private bathroom, and that for a vacation like this, a traditional hotel overshot my needs. What’s more, I discovered that I valued the benefits along new dimensions of having access to a kitchen and being in a casual, friendly atmosphere.

I think the important lesson here is that until I became aware of and experienced a hostel as a potential “European trip lodging solution,” I didn’t realize that I was overshot by hotels, and I didn’t realize that I valued the new ancillary benefits offered by hostels.

I felt surprised and delighted to find a solution that was a better fit than I even knew existed, but I couldn’t have articulated this solution, or even the need for a new solution, beforehand. This is part of why it’s largely impossible to calculate the size of a market that doesn’t yet exist — it’s hard for an individual person to know, a priori, their precise requirements and desires when it comes to different aspects of performance.

And yet after finding that a particular solution is a perfect fit, a person can retrospectively see where in the market spectrum they fall. This is why the task of uncovering the fundamental jobs-to-be-done in a given market context tends to require sophistication and multiple research approaches.

Ultimately, my hostel experience makes me wonder what other, potentially disruptive solutions out there might be a better fit for me than the one I’m using, that I just haven’t experienced yet! Companies that are able to intuit what consumers value, but are unable to articulate, hold the keys to innovation success. 

At some point during the past few years, Adobe’s Flash technology became one of the most often used formats to encode streaming video on the Internet. From its start as a niche animation tool in the mid-1990s to one of the top streaming video formats today, Flash has followed a decidedly disruptive path, taking market share away from all traditional streaming video format heavyweights.

In the late 1990s, as Internet connections became capable of carrying streaming video content, a format battle arose. RealVideo, a purpose-built platform designed to handle the challenges of Internet streaming, quickly captured dominant share. Windows Media, despite the inclusion of its player within all Windows-based PCs, lagged far behind, slowed initially by poor video quality and streaming capabilities. Finally, despite offering the highest video quality, Apple’s Quicktime format lagged Windows Media’s share, suffering from a lack of promotion, the need to download and install a player application, and niche ownership of Macintosh computers.

A few years prior to the format wars of 2000, San Francisco’s Macromedia acquired a vector-based animation package, FutureSplash, and rebranded it as its Flash product. Flash was easy for novice and experienced developers alike to use, and its applications and animations could also be easily compressed to a small, Internet-friendly file size. As Flash applications and animations began to pop up throughout an increasingly interactive Web, Microsoft agreed to bundle the Flash plug-in within Internet Explorer 5. By 2000, it was being distributed within all AOL, Netscape, and Microsoft web browsers. In 2002, it shipped within all releases of Windows XP for an installed base within 92 percent of all Internet-connected PCs.

Initially, Flash was a format perfect for interactive applications and animations, but could not be used for the encoding of video. Over time, however, as the Flash platform evolved, it became capable of supporting increasing content frame rates. Soon, the line began to blur between animation and video. In 2002, after the release of new capabilities within Macromedia Flash MX and Flash Player 6, Flash’s broad installed base compelled developers to begin to use Flash as a format for encoding video. While its video quality lagged that of incumbent formats, Flash was “good enough” for some web video content, particularly in light of the fact that the majority of users could consume such video without needing to download and install a separate player application — a big plus.

Over the last six years, and more recently under Adobe’s ownership, Flash adoption has grown dramatically. Today, television channels including CBS, NBC, CNN, and ESPN, along with user-generated content sites such as YouTube, MySpace, Google Video, and Yahoo Video, all encode their videos using Flash. CBS.com, for example, is also just one example of many sites streaming Flash video 720p HD. According to a report published in April 2008, Flash-powered online video websites are now responsible for substantially more than 91 percent of online video traffic. While RealNetworks' RealVideo, Microsoft Windows Media, and Apple Quicktime remain players in the world of online video, Flash has clearly taken the lead.

Since its acquisition and re-launch by Macromedia in 1996, Flash has followed a classic disruptive trajectory through the world of streaming video. Its initial foothold, the world of web-based animation, provided a perfect niche for Flash to incubate. Bundled within all major web browsers, Flash then hitched a ride on a dynamite distribution mechanism, finding a home within 98.45 percent of all Internet-enabled PCs as of June 2008. Improvements to Flash technology, combined with its installed base, next enabled it to move up-market, tackling increasingly complex content until the line between animation and video was gone, along with the lead that had been enjoyed by the streaming video format incumbents.

I have to give credit to the folks at advertising agency Modernista! for dismantling the company’s existing website in favor a “site-less” approach. In this disruptive move they’ve done much more than simply save on site design.

By foregoing the breadth of information available on a traditional site, they focus viewer attention on the company’s art and creativity. It’s a big win (and just plain cool).

The company’s new homepage consists only of a small menu that floats over the viewer’s referring site or over the Modernista! entry on Wikipedia. Click on the “Print work” menu tab and you’re directed to the company’s work as presented on Flickr; click on “TV work” and up pops a You Tube page with videos of Modernista!-created ads.

This new approach is different, budget and very simple. To many, it would be a leap down in terms of the traditional metrics that define good website design. The company’s “conventional” website was a resource-intensive, complex site that resembled a kooky (yes, I said it) haunted house. It was impressive yet overwhelming, flexing the firm’s creative muscle with more animation than most viewers could handle. The new site is perhaps less user-friendly for those expecting a traditional website structure, and offers less context for the depicted company work. The new format could also yield negative user-generated critiques of Modernista!’s work on the social media pages that serve as its website.

The trade-off for these drawbacks? A cleaner site that demonstrates the firm’s creativity, confidence in letting its ads speak for themselves and comfort incorporating Web 2.0 platforms in its work. The site has generated more blog traffic and buzz in a wider range of forums than a traditional website with fancier features would have done, with this blog post as a case in point. Isn't that the goal of a website as a marketing tool? And the move isn’t one that other leading advertising agencies are likely motivated to follow. Voila! Disruption.

But that’s just the web site. The real disruption will be if Modernista! applies a similar leap-down approach in developing client advertising campaigns that have worse performance on some traditional dimensions but are, perhaps, simpler and more affordable relative to conventional advertising.

The iPhone 3G hogged its share of the spotlight over the weekend. The “twice the speed, half the price” phone sold upwards 1 million units over the weekend. But while most of the spotlight was focused on the new phone itself (and the difficulties experienced during the launch), I believe time will show the iPhone App Store — a iTunes-integrated online store that allows consumers to easily install a seemingly endless variety of games, utilities and other applications — was the Apple release most deserving of the weekend spotlight.

The new features (3G antenna, standard headphone jack, etc.) are improvements, don’t get me wrong. But they are the sort of sustaining improvements that customers expect, and they don’t exactly break new ground. I doubt whether these features alone can propel the iPhone to the level of success that Apple’s other “i” product has achieved. (If they could, you’d see a lot more buzz about the LG Dare and the Samsung Instinct).

It is the App Store that adds features in a disruptive way that other phones can’t match. With it, the Apple finally gives consumers a way to conveniently add third-party programs to their phones. (I’ve used both Palm OS and Windows mobile devices and can testify that until now this has been neither a quick nor a convenient process). In the same way that the iTunes music store made the iPod much more than another digital music player by allowing the consumer to easily buy, organize, sync and play music, the App Store makes the iPhone more than another smartphone. It turns it into a computer in your pocket, ready to be customized with the applications that you want.

How significant will the effect of the App Store be? Well, if the history of the iPod before and after iTunes is any guide, the effect will be enormous.

Prior to the release of iTunes in April, 2004, no more than 1 million iPods has been sold during any quarter. After it was released for Windows in October of 2004 (it was a Mac only release for the first few months), at least 4 million iPods (and as many as 22 million!) have been sold every quarter.

Of course, there are differences. Consumers already had well-established habits relating to buying and listening to music that the iPod + iTunes could build on. Similar habits relating to the use of third-party applications on mobile devices may not be as prevalent. And this time, the competition isn’t as far behind. Google is hard at work pushing its own mobile platform, Android, with headset makers and application developers (and might even be developing a Google phone). Also, incumbents like Nokia, which acquired Symbian recently, aren’t sitting still either. Both may be able to offer consumers devices that are as flexible and application ready as the iPhone in the near term.

In the face of these challenges, it will be interesting to see whether Apple will be able to repeat the success of the iPod. It is doing plenty right. But will it be enough?

Stuttgart is “going green.” The German city recently signed a letter of intent with Ultra Motor to implement an infrastructure to support eco-friendly scooter-bikes. Launch is expected in 10 months and the idea is catching on; according to BusinessWeek, Ultra Motor is currently in negotiations with 12 other major European cities.

Driving this effort is Ultra Motor’s new A2B Light Electric Vehicle (LEV) — a scooter-bike with a conscience. The tagline even has an anthropomorphic ring to it: “The heart of a bicycle. The soul of a scooter.”

Experience LEV technology: Hop on a comfortable seat surrounded by a lightweight, aluminum frame. Enjoy as much exercise as you choose by pedaling or cruising at 20 mph. Want to ride further? The standard range of 20 miles can be extended to 40 with the addition of a lithium ion battery pack. New technology provides one-third more force than electric motors; helpful when ascending hills or darting through traffic. A dashboard indicator signals energy remaining. Dwindling charge? Simply plug in.

Current customers of the A2B vehicle include commuters, students, employers, fleets, and local authorities. However, through our lenses, jobs define the marketing strategy and are linked to attributes:

Social job: “Have a positive impact on the environment”
The A2B is a zero emissions mode of transportation, powered by a lithium ion battery. The vehicle efficiently functions at approximately one-tenth the running cost of a gas-powered scooter.

Emotional job: “Allow me to enjoy my commute”
The rider is able to enjoy the outdoors and a quiet ride. The extended driving range provides freedom and the vehicle is easier to handle than a gas-powered scooter. Modular storage options are also available.

Functional job: “Provide a way for me to reduce transportation costs”
Savings are self-evident — no gas required. The A2B model is currently available in 20 states across the U.S. for about $2,200. In Stuttgart, a monthly subscription will cost $23; a mass transit pass costs $84.

In the spirit of business model innovation, Ultra Motor is exploring new networks of transportation, one of which will be utilized in Stuttgart. The “LEV City Initiative” outlines this potentially disruptive system featuring charging stations; purchase a subscription, locate a station, swipe your card and enjoy the ride.

We applaud Ultra Motor for encouraging consumers to “go green” in new ways. Learn more from the source at www.ultramotor.com. You’ll notice as the website loads, the screen cleverly notes: “Charging up.”

The last couple of years haven’t been kind to former disruptive poster-child Sony. Yet the company has taken a series of actions that could position it to return to disruptive prominence.

What has Sony done? Is the company about to introduce new products or services that could be the building blocks of billion-dollar businesses? Not exactly. Sony has done something more prosaic—it got its core businesses under control.

It’s odd to suggest that this has anything to do with innovation, but in fact it's a vital part of the process. As we discuss in the first chapter of our new book The Innovator’s Guide to Growth, a core business that is in control is one of several necessary precursors to innovation.

Why? Well, when your core business isn’t in control, unexpected crises inevitably pop up. When those crises hit, managers necessarily and appropriately divert attention from growth initiatives toward making sure that the core business doesn’t go down the tubes.

That's what happened to Sony. From the mid 1950s to the early 1980s, Sony was an unstoppable innovation machine. It systematically launched about a dozen disruptive product lines, including the transistor radio and the Walkman.

But since the 80s, Sony’s innovation engine has suffered a long, gentle decline. It introduced innovative products like its Vaio line of notebook computers and its PlayStation line of video game consoles, but it rarely pioneered new markets.

Read the rest at Scott's Harvard Management blog.

In an Atlanta Journal Constitution article last week, Marty Nemko, an education consultant, career counselor, and author, argues that traditional colleges are over-promising and under-performing for a large group of students in the United States. The students he has in mind are those who graduate in the bottom 40% of their classes and then attend traditional 4-year colleges. After 8 ½ years, two-thirds of this group have not yet earned their diplomas.

Nemko argues that dropping out of college devastates self-esteem while generating burdensome debt, all just to land an income and a job the student would have been qualified to earn with a high school diploma. Even when these kids beat the odds to earn their degree, they are more likely to be among the bottom-performing college graduates competing for jobs upon graduation, a recipe for disappointment. Colleges are selling the promise of bigger salaries and fast-trajectory careers, but failing to deliver a better post-high-school career outlook to the bottom 40 percent.

Colleges should do a better job of preparing students to compete in the global economy for high-skill careers by investing less in research, campus beautification, or sports, and more in providing quality teaching and mentorship Nemko suggests. Another alternative -- why not encourage the least academically prepared high school graduates to set their sights more realistically and just avoid college? The service sector is the fastest-growing job segment in the US and there is absolutely no shame in pursuing a trade.

Nemko proposes a solution for colleges: Through government mandates, create standardized and transparent performance data on every accredited institution of higher learning. He cites several examples of the type of data that might colleges might be required to report.  These include:

• Standardized testing. Administer an exam that measures skills important for career success, such as the ability to draft a persuasive memo, analyze a financial report or use online research tools to develop content for a report. A school's results would be public information.
• Retention data. Institutions should reveal the percentage of students returning for a second year, broken out by SAT score, race, and gender.
• Graduation rates. The four-, five-, and six-year graduation rates, broken out by SAT score, race and gender.
• Employment data. Show the percentage of graduates who, within six months of graduation, are in graduate school, unemployed or employed in a job requiring college-level skills, along with salary data.

However, this solution assumes that the primary goal of graduating high school students is to optimize their future financial position. Assuming that's correct, one way students could achieve this goal is to develop a high level of skill through an advanced degree. Another way is to simply avoid the high probability and high cost of failure and avoid college altogether.

Nemko’s recommendation for more data transparency addresses both options. Low-performing colleges would come under public and embarrassing scrutiny…the kind of pressure that might shame them into reforming their own business model so they can show better outcomes. Low-performing high school graduates would have compelling and dissuasive data on their true odds of acquiring an education and achieving their career goals.

Although Nemko makes a classic case for low-end disruptive innovation, his proposed solution would stifle innovation. Mandates would force all accredited institutions into a sustaining competitive battle on exactly the same career-oriented performance dimensions. While a few institutions might change their game, it seems more likely that this approach would simply thin the ranks of traditional colleges and college students in the US.

For example, what might such scrutiny do to disruptive business models like that of the University of Phoenix, which has removed barriers such as access and wealth to make education available conveniently at home to those who otherwise might be nonconsumers? Does it matter that the University of Phoenix's four-year graduation rate is below 10 percent? Not to its students, who happily make the trade off between a time-structured physical classroom curriculum and the opportunity to study at very low cost, on-demand through the Web.

In the US, there are more than 2 million students pursuing occupational curricula at career colleges that specialize in preparing students for careers ranging from culinary arts to automotive technology.  Enrollment has grown by 17 percent in these programs over the last 2 years, in line with the 19 percent growth in jobs requiring two-year degrees.  But these students number far fewer than the 17 million enrolled in four-year colleges estimated by the census in 2006. Why aren’t more of the “bottom 40” who go to college choosing these programs, which demonstrate very compelling graduation rates and career metrics?

The plausible reason is that students have a whole slew of other jobs-to-be-done that have nothing to do with landing a high-paying career:

• Mature as an adult in a relatively controlled environment for a few years before being released into the wild
• Find out what they enjoy doing
• Discover strengths and weaknesses
• Have some fun for a few years before buckling down
• Develop a new skill
• Meet a new and diverse set of people who broaden their network and perspective on the world

We expect that the most innovative and disruptive approaches to preparing the “bottom 40” for the work world will come from outside the traditional university system, and even from outside the education sector. While the traditional four-year institutions are locked in a sustaining battle to compete for the best pool of applicants they can attract, disruptors like University of Phoenix and others can hone their business models on nonconsumers and the lowest-performing students.

Can you imagine Facebook U.? 

Attendees of the Mobile World Congress in Barcelona earlier this year might have easily overlooked what could become a huge success. Modu, an ultracompact cell phone launched by the Israeli technology start-up modu mobile, might be the first truly modular phone – a technology with significant disruptive potential in the mobile communication devices category. However, highly relevant questions on consumers’ jobs-to-be-done and the business model need to be thoroughly considered for modu mobile to be successful in the marketplace.

The technology

In essence, the 1.41 oz., 2.8 x 1.4 x 0.3 inch device is a no-frills cell phone with a small screen and just a few buttons that can be wrapped in one of multiple “jackets” to become a more advanced cellphone (e.g. with a full QWERTY keyboard, a bigger screen, or individualized design). When merged with a “mate,” the modu becomes the core of an entirely different compound device with different performance dimensions such as a portable music player, a car radio, a GPS-system, a bike computer, a camera, or an alarm clock with a docking station that displays incoming text messages. The modularity of modu’s hardware and software allows its processor, memory, and wireless technology to run the compounded devices. 

The job

The modu is set for success only if it precisely targets consumers’ jobs-to-be-done and does not get distracted by the technological possibilities. Instead it should focus on specific circumstances consumers face during their day where the modu could be a winning solution: “Help me enjoy my commute” when getting to work and back, “help me access my emails while on the go” during the work day, and “help me become available for communication” when going out at night might be examples. Now, each of these jobs is already addressed separately by illustrious products such as Apple iPod, RIM Blackberry, and small form-factor cell phones by Nokia, Motorola, Samsung and others. 

At the moment, modu mobile’s answer to these competitors seems to be a lower price. The anticipated price of $200 for a modu bundled with two jackets that range in price from $20 to $60 each might differentiate modu from its respective nonmodular competitors. Yet, competitors could simply decide to sell for less, cutting their margins to outcompete modu.

The true power of modu’s technology lies in its modular architecture. Modu mobile can create a competitive edge by translating the device’s customizability into two distinct performance dimensions. First, modu's modularity can facilitate the individualization of consumer electronics -- a trend that predates its most common and unfortunately popular example, the personal ringtone. The second performance dimension follows the broad job “help me make my daily life easier.” This might sound more straightforward than it actually is, but figuring out how precisely to align communication technology with cross-architectural usefulness will be key for modu to challenge the iPods, Blackberrys and Nokias of this world. In this context, swapping the modu between multiple jackets and mates per day needs to be as quick and easy as its teaser suggests.

The business model

Modu mobile plans to launch its device with support from major cellphone carriers in Italy, Israel and Russia this October, followed by the U.S. and other European countries in 2009. Modu's business model focuses on selling the phone while licensing the technology to third-party manufacturers, who will build jackets and mates on their own. Manufacturers could profit from licensing modu’s technology by launching their products without a slow and relatively expensive licensing process with the Federal Communications Commission, because the modu is already a phone.

Modu mobile, in turn, keeps full control over the core component of what they hope will become as standard as flash data storage devices, the last undertaking of modu founder and CEO Dov Moran, who was formerly CEO of msystems inventor of flash data storage devices that was acquired by SanDisk Corp for $1.6 billion in late 2006). The two main advantages of licensing technology to other manufacturers for modu mobile are that with an increasing number of jacket and mate manufacturers the modu would be more and more cemented as a standard, and as other companies also strive for success, modu mobile hedges its risk of failure by potentially not getting the job quite done for consumers.

The future

Modu mobile has the potential to disrupt the mobile communication devices category. It can target overshot and/or nonconsumers (an interesting occurrence of a potential low-end and new market disruptive innovation), if it is able keep the low-price promise along with increased ease of use, or by introducing a new performance dimension around the device’s modularity and striving for increased customizability. The business model appears promising, if the self-reinforcing mechanism of initial success results in a large base of third-party manufacturers.

These are all big ifs, and I am really curious to see what the future will bring for modu. 

Our own Scott Anthony was featured in the HBR IdeaCast podcast series, talking about Disruptive Innovation. We've just now added the link to our Innovation Resources section. Enjoy!

Lillian Zhao

When I first was told that Mocospace was getting VC backing in early 2007, I skeptically thought: “Who’s going to use another social networking site?!”

Eighteen months later Mocospace has grown to become the leading mobile social networking site in North America. With more than one billion mobile page views per month, it’s holding its own against incumbents like Facebook (which has more than 300,000 mobile page views per month).How did Mocospace become so popular?

What I didn’t realize when I first heard about Mocospace was that it has a powerful, disruptive business model that has successfully targeted a new distribution channel (the mobile phone) and a new customer base (non-consumers of existing social networking sites). This disruptive business model has propelled it to a leadership position in mobile social networking.

New Channel

Mocospace was one of the first to create a social networking site specifically designed the mobile phone. There is a subtle though distinct difference in how people use social networks on the PC vs. the mobile phone that stems from the basic differences between the PC and the mobile phone –- the PC is a static, multi-function device, whereas the mobile phone is an always-on, always-connected, communication device.

Mocospace realized this early on, and optimized its features for the jobs-to-be-done of a mobile phone user: instant communication, quick entertainment, killing time, and staying socially connected. Mocospace offers every type of communication (chat, IM, mail, messaging, micro-blogging and even voice-messaging) in one place. Other entertainment options include games, rating other people’s photos, watching videos, contributing to forums (my personal favorite are the ‘yo mama jokes’ in the jokes forum). Mocospace’s “friend finder” application also serves members’ job-to-be-done of meeting new friends and staying connected with existing friends.

Mocospace’s strategy is different from the incumbents, Facebook and MySpace, which emphasize content rich user pages and graphic-intensive applications –- all awesome features that work great on a PC’s screen, but are too cumbersome to navigate on the phone. As such, they’ve naturally chosen to use the mobile to extend a subset of their online features. However, MySpace’s initial strategy was to charge users an annual monthly subscription, shared with the carriers, to use their mobile site. That strategy was not overly successful and has now been de-emphasized.

In contrast, Mocospace’s site is extremely mobile-phone user-friendly, as all functions have been optimized for the small screen and numeric keypad input. For example, it leverages icon-based navigation and limits the amount of words and excess visual distractions per page. The results are clean, easy-to-navigate pages.

Meeting the needs of nonconsumers

Mocospace’s functionality serves the jobs-to-be-done of a previously untapped market: nonconsumers of existing social networking sites designed to be accessed on the PC. A large portion of the US population doesn’t have constant, private access to a PC with a broadband connection, for a variety of reasons that could include on-the-go lifestyles, economic limitations, and/or remote locations. However, most of these users have a mobile phone. Some use unlimited data plans from carriers like Leap Wireless and MetroPCS, in lieu of a PC. This eclectic group of urban youth and mobile workers were the early adopters of Mocospace. They didn’t have PC access 24/7; but they had mobile access 24/7.

While Mocospace has clearly done extremely well to date as a mobile social networking site, I still wonder if it can sustain its leadership position. Despite impressive monthly growth, will it be able to continuously grow its user base to solidify its dominance in the mobile social networking sector? Or will incumbents Facebook and MySpace, or even a new start-up, take the mobile lead away from Mocospace? If so, how will Mocospace’s strategy’s change?

Time will tell. And, I am scheduling an interview with the founders of Mocospace soon, and I'll be sure to ask about these issues.

Watch for the “Voices of Disruption” interview with Mocospace co-founder, Justin Siegel, in the July/August edition of Strategy & Innovation. 

Perform an Amazon search for INSEAD professor Philip M. Parker and you’ll see that he’s authored over 85,000 books. No, that isn’t a typo. The actual number, in fact, might even be higher (this New York Times story put him over 200,000). He hasn’t written each and every one in the traditional way, of course; to do so would take a person sixty years of writing nine books a day. Instead, he’s developed a system of computer algorithms that use publicly available information to author his works.

As this video demonstrates, many of his works are economic or market analyses and forecasts, but he also uses the technology to write about obscure medical topics – both genres that he’s able to succeed in because they are underserved by traditional authors.

Take the first Philip M. Parker work that comes up on an Amazon search: "The 2007-2012 Outlook for Lemon-Flavored Bottled Water in Japan". I can’t imagine that more than a few dozen people and/or firms on the planet are interested in this work (at most). No author or market research firm is going to write this book with such a low potential for sales and even if they did, the time and effort involved would make it expensive.

Mr. Parker, however, creates his books, on average, in half an hour and at a cost of about twelve cents (excluding printing). He can sell a single copy for $495 and make a handsome profit. If he doesn’t get any orders, he loses almost nothing. Multiply this opportunity by 80 to 200,000 books and it isn’t hard to see how he can be successful. It’s a great example of a technology facilitating a successful low-cost business model.

In her previous post, my colleague Kathleen considered the implications of disruptive innovation as it applies to the business of charity. In making her point, she mentioned CK Pralahad's 2004 book, The Fortune at the Bottom of the Pyramid, and one of the success stories cited within, that of the Hindustan Lever Limited (HLL).

HLL's success is a great story of a company creating a business model customized to the local market; it is also a great story of an incumbent reacting to a disruptive startup. However, HLL almost failed to spot the disruption until it was too late, and the story of their success partially obscures the achievements by the true innovator -- a company called Nirma.

Nirma was founded in 1969 by Dr. Karsanbhai Patel, a science graduate and government chemist. Patel had been experimenting with ingredients in his back yard to make a detergent. After discovering a simple recipe, he founded Nirma to sell his product door-to-door in the neighborhood. In interviews, Patel has discussed the company's origins saying, "It all started to earn a side income, and at that stage, I had never imagined this kind of success."

Nirma retailed at only a fraction of the price of competing products, costing only Rs.3 per kg instead of Rs.13 per kg charged by the competing brands. The product was a great success not only because of its low cost and high quality, but also due to the unique door-to-door distribution model pursued by Patel.

Initially, Patel had a great deal of difficulty in persuading the local shop owners to stock his product. It was only when he recruited local housewives to help sell and create demand for the Nirma product that he stumbled upon a compelling and scalable business model.

By the early 1970's Nirma had appeared on the radar screen of executives at Hindustan Lever Limited. HHL was the manufacturer of Surf, one of the best-selling detergents in the country. However, their reaction was dismissive, saying, "That is not our market”,and “We need not be concerned."

Their perspective was that Nirma was an inferior quality product being sold to people who weren't currently purchasing Surf, and that their sales would be unaffected by any growth in Nirma's popularity.

Luckily for HHL, they soon recognized the disruptive threat posed by Nirma, and were able to adapt their own strategy to compete, launching Wheel detergent to try and stem the (ahem...) tide of Nirma into the low end of the market.

In developing their strategy to fend off Nirma, HHL’s wheel product was created specifically for low-end consumers. HHL noted that the primary source of water for washing was river water, and so created Wheel with a high percentage of oil relative to water. HHL also created entirely new production, distribut