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COMPSCI 230- Midterm Exam Guide - Comprehensive Notes for the exam ( 16 pages long!)


Department
Computer Science
Course Code
COMPSCI 230
Professor
Ulrich
Study Guide
Midterm

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Auckland
COMPSCI 230
MIDTERM EXAM
STUDY GUIDE

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Assignment 2 Research
What is disruptive innovation
They start by clarifying what classic disruption entails—a small enterprise targeting
overlooked customers with a novel but modest offering and gradually moving upmarket to
challenge the industry leaders. They point out that Uber, commonly hailed as a disrupter,
doesn’t actually fit the mold, and they explain that if managers don’t understand the nuances
of disruption theory or apply its tenets correctly, they may not make the right strategic
choices. Common mistakes, the authors say, include failing to view disruption as a gradual
process (which may lead incumbents to ignore significant threats) and blindly accepting the
“Disrupt or be disrupted” mantra (which may lead incumbents to jeopardize their core
business as they try to defend against disruptive competitors).
The authors acknowledge that disruption theory has certain limitations. But they are
confident that as research continues, the theory’s explanatory and predictive powers will only
improve.
The theory goes that a smaller company with fewer
resources can unseat an established, successful
business by targeting segments of the market that have
been neglected by the incumbent, typically because it is
focusing on more profitable areas.
As the larger business concentrates on improving
products and services for its most demanding
customers, the small company is gaining a foothold at
the bottom end of the market, or tapping a new market
the incumbent had failed to notice.
This type of start-up usually enters the market with new
or innovative technologies that it uses to deliver
products or services better suited to the incumbent’s
overlooked customers – at a lower price. Then it moves
steadily upmarket until it is delivering the performance
that the established business’s mainstream customers
expect, while keeping intact the advantages that drove
its early success.
Disruption happens when the incumbent’s mainstream
customers start taking up the start-up’s products or
services in volume. Think Blockbuster and Netflix.
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These upheavals occur, according to Christensen, not
because established companies do not innovate (they
do), but because they’re focusing on making good
products better for their existing customers. (This is
called "sustaining innovation" and it is different from
disruptive innovation.)
“These improvements can be incremental advances or
major breakthroughs, but they all enable firms to sell
more products to their most profitable customers,”
Christensen, Raynor and McDonald write.
Meanwhile, disruptive companies are exploiting
technologies to deliver new or existing products in
radically different ways. (Netflix moved away from its old
business model of posting rental DVDs to customers to
streaming on-demand video.) Their offerings are initially
inferior to the incumbents’, and, despite the lower price,
customers are usually not prepared to switch until the
quality improves. When this happens, lots of people start
using the product or service, and market prices are
driven down.
What about Uber?
Uber has not moved up from the low end of the market:
it targets customers who already use cabs. Nor is it
primarily going after people who take public transport or
drive themselves. And the service, while competitively
priced or slightly cheaper than traditional taxis, is not
generally regarded as inferior.
“Disrupters start by appealing to low-end or unserved
consumers and then migrate to the mainstream market.
Uber has gone in exactly the opposite direction: building
a position in the mainstream market first and
subsequently appealing to historically overlooked
segments,” write the authors.
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