Disruptive innovation describes introducing a product or service into a well-established sector that outcompetes the existing market players and, in most cases, achieves that through a lower cost. The concept explains how a newer, smaller firm effectively competes with “established market players” by meeting the needs of a previously unmet market segment. A new product or service may not initially be superior to the market leader (Christensen et al., 2015). Still, if the upstart keeps improving its offering, it may eventually provide superior functionality at a lower price, attracting a significant user base. As a result, the demand for the product or service the startup offers grows beyond its initial niche market. Ryanair is an example of a company that operates through disruptive technology. When it first took off three decades ago, Irish low-cost carrier Ryanair caused a stir in the European aviation sector. More than 90 million passengers annually and annual revenues of 875 million euros have propelled Ryanair to the position of Europe’s largest airline (Diaconu, 2012). Ryanair has been successful due to a combination of a compelling value proposition for customers and a lean business style.
When introduced to the market, a low-level disruptive product will have at least one of the following characteristics: it will be cheaper, lighter, smaller, and more convenient, but it will also be inferior in quality or power (Barrett, 2004). In the beginning, Ryanair just copied Southwest Airlines’ low-cost model. The company has a simple business model: To provide budget-friendly plane travel for frugal consumers. Ryanair’s primary focus is customers who might otherwise choose less expensive or nonexistent travel options. The majority of the company’s operations are short-haul flights inside Europe.
The first step in disruptive technology is the disruption of the incumbent. At this point, the market has a new product, service, or technology that appears to replace an older one. The innovator is thrown into a dilemma. It is common knowledge that startups and established businesses may benefit from adopting innovative technologies. Although new technologies have great promise, it is rare that an established company will risk its future on them. Therefore, new companies are the most common source of such inventions (Christensen et al., 2015). Traditionally the European Aviation industry was dominated by national carriers that the government heavily protected. Consequently, customers had to incur the high costs of traveling. However, a deregulation initiative influenced by the European Commission and the European Parliament opened the market for airlines. Ryanair was founded in 1984 by three Irishmen: Liam Lonergan, Christopher Ryan, and Tony Ryan. The company aimed to provide Irish and British passengers with low-cost air travel between the two countries. After making losses for several years, the company introduced the low-cost model in 1991 (Diaconu, 2012). It is making the service cheaper opened markets for customers who had not considered airplanes as a means of traveling due to cost.
The second step in disruptive technology is rapid linear evolution. When a new technology or product gains widespread popularity, developers focus on “filling out” the product. Product initiators in this step are still disruptors; they innovate along the path they have established for themselves, with a consideration on the first adopters who are also disruptors (Barrett, 2004). The innovators are moving in the direction they see fit. The current leaders keep on their prosperous course, thereby guaranteeing their doom. At the idea’s inception, industry players such as Southwest Airlines had shifted their focus to generating revenue by maximizing customers rather than the yield per passenger. Ryanair Airlines shaped its model by following the strategy by Southwest of offering no drinks and snacks to reduce the service cost. Ryanair faced stiff competition from other, more established airlines when it first took flight. However, they could break through the market because their pricing was so low. Because it mainly served minor rather than principal airports, it maintained its low fares.
The third step of the disruptive innovation process is the “Appealing Convergence.” As market redefinition continues, the category in which a new product is placed begins to shift subtly. Doing novel things well is no longer sufficient; the market demands replacing the current technology with the new. The market as a whole “wakes up” to the new product’s potential at this point. New airlines fighting for customers’ dollars emerged after the European countries’ deregulation, which made it possible for them to enter the market under more advantageous terms (Christensen et al., 2015). Competition on international routes expanded, prices became more competitive, and the dominance of national airlines was dwindling. In the 1990s, many low-fare airlines emerged; they included Virgin Express, Go, EasyJet, and Buzz.
The fourth step in the disruptive innovation process is “Complete Reimagination.” There is always someone with newer, more advanced technology who can disrupt the disruptor’s technology or product; therefore, they can never truly rest easy. The innovator’s curse describes this phenomenon. A company must regularly upgrade its product to manage and increase the competition and stay ahead of the curve (Christensen et al., 2015). At this point, the technology is wholly rethought so that the game-changing technology can receive consistent updates. The company has made tremendous developments to achieve the low-cost strategy. Most of Ryanair’s pilots are independent contractors rather than regular employees. Ryanair only compensates its pilots under these terms when they are actively flying and being put to good use (Barrett, 2004). Employee benefits are structured to cover any necessary professional expenditure. Due to this incentive, employees are reportedly vacationing at budget camping resorts in the south of France. The corporation can sidestep salary and benefit regulations mandated by several European nations by employing Irish labor contracts with its employees (Diaconu, 2012). Ryanair’s fleet consists entirely of Boeing 737s. As a result, Ryanair may save money on MRO, cut down on employee training, and have more leeway in how they’re deployed. The company is currently working on improving customer service and targeting business-class customers.
The International Business Machines Corporation (IBM)
In 1911 the IBM Computer Tabulating Company was founded the forerunner of today’s International Business Machines. By 1924, the company had become known as IBM. IBM’s main business areas are Hardware, Software, Consulting, and Hosting. IBM has come a long way since its inception; it has been around for over a century (Teece, 2007). Hardware, software, cloud services, and cognitive computing are all areas of expertise for IBM, a global technology business. Its headquarters are located in New York City, and it operates via five distinct divisions: finance, IT, telecommunications, business services, and software. IBM offers a comprehensive suite of goods and services and caters to a wide variety of clientele on a global scale. This ensures IBM’s continued dominance in the IT industry by ensuring that customers never go without the items they have ordered. IBM’s general approach to competitive advantage and intense expansion plans have allowed it to thrive in the global information technology market.
IBM’s standard tactic for gaining an edge in the market is to achieve cost leadership. The goal of this approach is to achieve competitive pricing or to maximize profit margins through the use of reduced costs in corporate operations. IBM’s significant economies of scale allow for these low prices. For instance, the company’s size allows it to offer cloud platform goods and specialized services at competitive prices (Walker, 2007). As a market leader in terms of cost, IBM is in a position to provide meager prices on various goods and services. Expertise in manufacturing processes and materials management also contributes to a competitive advantage within the context of the cost leadership generic strategy. IBM has operated for almost a century, giving it unparalleled knowledge and streamlined efficiency in all aspects of IT product and service creation (Teece, 2007). IBM’s information technology business is supported by economies of scale, which may be improved by implementing the general competitive cost leadership strategy. The corporation, for instance, may benefit from putting more money into enhancing its software development procedures to reduce the price at which it creates new solutions for its clientele (Harreld et al., 2007). Investment in R&D to increase IBM’s product value competitiveness is another strategic goal based on this general competitive strategy. The firm’s aggressive growth plans built on this generic strategy’s core provide the company with its competitive advantages.
IBM has relied heavily on product innovation as a means of rapid expansion. Implementing a product development strategy aims to expand the business by releasing new items into the target market regularly. Using this aggressive approach, IBM may expand via the creation and distribution of cutting-edge computer systems and automation solutions. The cost leadership generic approach helps the organization deliver innovative goods at affordable rates by reducing waste and increasing productivity. IBM’s purpose and vision stress the need to lead the industry, and this competitive advantage helps achieve that goal. The company’s IP portfolio benefits from this specific strategy as well.
IBM’s information technology division uses market penetration as an intense growth strategy. Increasing the company’s market share across all product lines and categories is a primary goal of market penetration as a business strategy (Walker, 2007). For instance, IBM is trying to increase its share of the cloud platform industry. The cost leadership generic competitive strategy includes cost reduction measures to ensure the company’s success with such a labor-intensive plan. Since the company is already among the world’s leading competitors, expanding into new markets is less crucial to its future success.
IBM uses market expansion as a backbone method to expand the company. One of the company’s goals should be to find novel uses for its existing products so that it may expand into untapped areas. One example is the new uses of the company’s information technology in autonomous vehicle research and development. The cost leadership generic strategy encourages expansion into new markets and segments by efficiently using resources that provide a competitive edge. With this aggressive expansion plan, IBM will be expanding into new areas, each of which will require adjustments to the company’s 4Ps of marketing.
Its active diversification strategy aided IBM’s expansion inside the IT sector. The plan’s end game is to broaden the company’s reach. IBM can buy up smaller companies in unrelated fields as one expansion method. Increased potential advantages based on diversified company skills support the generic competitive strategy of cost leadership (Harreld et al., 2007). The corporation may pursue this aggressive expansion plan to take advantage of the trend toward technology integration across markets.
IBM had to adjust its decision-making structure as part of its efforts to implement its global integrated enterprise strategy. For this approach to work, a corporation must provide regional managers with the autonomy to make choices based on the specifics of local markets (Harreld et al., 2007). However, management must keep in touch with corporate offices (Teece, 2007). The new approach also necessitates a shift in the organization’s communication structure away from a strictly vertical one and towards something more horizontal. Given IBM’s stated goal of maintaining its position as the market leader in both the domestic and international arenas through further acquisitions, the current strategic decision framework that the corporation employs is the leadership strategy.
IBM uses market-oriented and value-based pricing strategies. This market-oriented pricing approach aims to establish prices for particular products that are in line with the going rate in the IT sector. Due to the intense competition and price sensitivity in the market for cloud-based services, IBM’s online goods, such as cloud platform services, are offered at reasonable rates. However, the company’s value-based pricing strategy is implemented for specific product lines (Walker, 2007). The plan determines the market value for IBM’s products by considering customer perceptions and requirements. For instance, the company’s specialized office computers for restaurant chains are priced using a value-based pricing strategy. The cost leadership strategy and the enthusiastic market penetration approach impact this facet of a company’s marketing mix.
IBM has an elaborate structure that is strategically fitted to discharge its mandate. IBM’s CEO, Samuel J. Palmisano, takes a far more hands-on approach to management, collaborating with his direct reports to implement the company’s policies. IBM’s departments have a say in their leadership, but its top executive is ultimately responsible for its actions (Teece, 2007). Every team member contributes to fundamental activities, including defining objectives, discussing the significance of those objectives, and putting those objectives into action. Participatory leadership is viewed from this vantage point. The approach views a leader as a facilitator or coordinator of organizational matters. Instead of simply giving commands, the leader encourages everyone to participate in all they do.
References
Barrett, S. D. (2004). The sustainability of the Ryanair model. International journal of transport management, 2(2), 89-98.
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation? Harvard Business Review, 93(12), 44–53.
Diaconu, L. (2012). The evolution of the European low-cost airlines ‘business models. Ryanair case study. Procedia-Social and Behavioral Sciences, pp. 62, 342–346.
Harreld, J. B., O’Reilly III, C. A., & Tushman, M. L. (2007). Dynamic capabilities at IBM: Driving strategy into action. California management review, 49(4), 21–43.
Teece, D. J. (2007). Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic management journal, 28(13), 1319–1350.
Walker, L. (2007). IBM business transformation enabled by service-oriented architecture. IBM Systems Journal, 46(4), 651–667.
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