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BW Businessworld

@ The Speed Of Disruption

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The great power struggle among companies in the marketplace is a balancing act between status quo and disruption. Those at the top tend to seek the former, while the ambitious lot press for the latter. More often than not, the ambitious either remain also-rans, sell out for the lure of cash or just get muscled out of business. But once in a while, they cause an upset or two. This special issue of BW is about this breed of companies in India Inc.

The 10 listed here are either known for their creative disruption — such as, which has made the neighbourhood travel agent redundant — or disruptive creation — such as, which is determinedly creating its own business model of customer experience. Or, Samsung, which has weathered the Apple storm and Nokia's might to emerge as a global leader in smartphones, eager to repeat the story in India. These qualities make all these firms the most disruptive forces in their industries. Their radical business models inspire hundreds of others across the country.

The disruption theory in management — the genesis of this issue — owes its origin to Clayton Christensen's 1995 article ‘Disruptive Technologies: Catching The Wave' in Harvard Business Review. The piece was aimed at managing  procurement executives. But he refined the principle further in the book The Innovator's Dilemma: When New Technologies Cause Great Firms To Fail. Finally, in the sequel, Innovator's Solution, Christensen coined the term disruptive innovation to denote changes that create a disruptive influence in industries.

The principle has since evolved generically to mean companies and their actions that, at the minimum, disturb the market, cause discontinuity and promise to change the status quo. And business models that shake the incumbents out of their comfort zone, forcing them to change.

The biggest disruption, of course, is brought about by first-generation entrepreneurs who not just define their journey, but also create their own road. They are hungry, fresh. They sense an opportunity, and go after it. Besides MakeMyTrip, this issue has iYogi, an online tech support firm that began by catering to demanding markets such as the US, UK, Canada and Australia from Gurgaon. Tell them a device whose software is giving you a headache, they will fix it. For serious trouble, they even send a technician.

Then there are the challengers, who have all the traits of the first-generation entrepreneurs. Mostly, they find the leaders complacent. Samsung pounced on the opportunity offered by an uninterested Apple, a struggling Nokia and a tentative RIM. Its mobile business raced to the top in India's smartphones market in 2011 with a 41.2 per cent marketshare as of December 2011.

A refreshing change in retail is Bharti Retail's Easyday stores and Bharti Walmart's Best Price cash-and-carry stores, which are rolling out the Walmart way. The network of 200-odd stores with 2.5 million sq. ft has been set up in 30 months against market leader Pantaloon's 16 million sq. ft over 20 years.

And in IT sourcing, no one deserves the challenger's tag as much as the $4.6-billion Cognizant Technology Solutions. In just 17 years, it has overtaken India's third-largest IT firm Wipro, and is about a billion dollars short of the second largest, Infosys. Its business model, straddling the onshore (US and Europe) and the offshore (India), is a departure from the classic offshore-heavy model of most Indian firms.

Among traditional brick-and-mortar firms, Panasonic India has sworn to bulldoze its way to leadership in consumer durables by 2018. Coincidentally, also the date it has set for global leadership. In two short years, Panasonic has shaken the market with aggressive pricing, latest technologies and products such as the Cube Split air conditioners at the price of a window AC. It has grown marketshare in televisions four-fold (though it faces stiff contest from Toshiba's innovative battery-operated televisions). But expect Panasonic to keep the interest alive in the industry this year with its brand new forays into affordable washing machines and refrigerators.

Interestingly, disruption is not the sole prerogative of challengers such as Samsung. Even leaders cause disruption. Well, to remain leaders! A year ago, PepsiCo India created a mini-Pepsi within itself to realise its dream of reaching out to those who cannot afford its current offerings. That meant creating the Value Foods Organisation, only to launch disruptive products at disruptive pricing through disruptive manufacturing and distribution model. The result: a low-cost model that PepsiCo hopes will be 25 per cent of its foods business in three years.

And there is Malvinder and Shivinder Singh- owned Fortis Healthcare. Having conquered India, it set its sights higher to create an Asia Pacific-wide healthcare company within 12 months of whirlwind acquisitions. It is now a significant differentiator a few domestic rivals are trying to replicate. But as many of these firms realise, disruption is only a means to an end, not an end in itself. It takes a lot more than just disruption to reach the holy grail of market leadership. You also need perseverence, consistent innovation and some luck. Some have it, some do not.


(This story was published in Businessworld Issue Dated 13-02-2012)