Wednesday, May 29, 2013

Disruptive Innovation in the Telecommunication Industry

The level of innovation in the telecommunication industry is very high. New technological advancements are quickly coming up to meet the ever changing customer needs. Incumbent technologies in the market are regularly displaced by new, more improved technologies that offered better services to the customers. Disruptive innovation can be caused by new technology or solution and is eventually accompanied by alteration of the existing business model (Christensen & Bower, 1995). Innovators should regularly scan their environment and identify available innovation opportunities from various sources. It is important to understand the immediate and distant surroundings of a particular business. Organizations should develop a close relationship with their key stakeholders for them to sense opportunities and capitalize on them (Chesbrough & Appleyard, 2007). Although it is difficult to accurately predict potential disruptive innovation in a business environment, early indicators can be detected. This indicators signals that there is an imminent disruption which is about to take place. In the telecommunication industry, the use of landline telephone faces a potential disruption by mobile telephones. More people are shifting from the use of fixed/ landline telephones to the use of mobile telephones which signals a potential disruptive innovation within the industry. Disruptive innovation occurs as a result of various elements that collectively act in a certain way under prevailing market conditions (von Hippel, 1988). Mobile telephones are likely to cause a disruption in telecommunication industry by fully replacing land line telephones. The rapid growth in the use of mobile phones across the world is an indicator of potential disruptive innovation. More people as well as companies are adapting the use of mobile phones in their daily operations. Land line telephones have dominated in most companies for years. These types of phones have captured a very wide market share after they emerged as better alternatives to fax and postal mails. Telephones were considered a fast and convenient mode of communication leading to the fast growth of land line telephones. However, these telephones could not effectively meet the communication needs of all people as they were fixed in nature. Technological innovations led to establishment of a mobile telephone which is portable and offers more services to its users. The mobile phones started as an inferior entrant to the market dominated by land line telephones. It targeted individual users segment which had been ignored by land line manufacturers. Mobile phone manufacturers capitalized on the needs of individual users to have portable phones and have continuously improved their products over time taking into consideration consumer needs. This has led to a rapid growth in the use of mobile phones among individuals and companies have also started adapting their use. This signals a potential disruptive innovation for the land line telephone companies in the near future. Landline telephones use a solid medium telephone line such as fiber optic cable or metal wire to transmit information as opposed to a cellular mobile phone that uses radio waves. Landline telephones rely on physical cables to transmit information and can only be used in a fixed location. Users cannot access landline services from different places other than the designated locations. This limits access to their services which is exploited by mobile phones that can be used in any place. Mobile phones are portable and can easily be carried along for convenient purposes. Despite efforts by landline companies to remain competitive by introduction of fixed wireless telephones, these devices can only be used in fixed locations. Fixed wireless telephones usually draw their electrical power from the mains electricity as opposed to mobile phones which are battery-powered. This restrains the use of fixed wireless devices to specific locations where there is constant power supply. These telephones cannot be used in case of a power blackout or natural disaster as they rely on electricity. A mobile phone can make and receive calls over a radio link that covers a wide geographical area. This technology connects cellular networks provided by a mobile phone operator which allows access to the public telephone network. The mobile telephones also support a wide range of services such as multimedia messaging, text messaging, email, short-range wireless communication (Bluetooth and infrared), internet access, gaming, photographing and business applications. Smart phones have continuously evolved to incorporate special features for their users. These features have appealed to many people over year causing a rapid growth in the mobile phones market share. Individual users have adopted the use of mobile phones because of their portability which allows them to move with the phones. Extra services provided by mobile phones also give them a competitive advantage over fixed line telephones. Landline telephones do not offer services such as messaging, photographing, internet access among others. Several companies have also adapted the use of mobile phones as they offer more services that facilitate communication. Text messages can be easily send to all members of staff using a mobile phone as opposed to calling every person. It is also easier to store and access contacts from a mobile phone than a landline telephone. This indicates a potential disruptive innovation that will fully displace fixed line telephone. Disruptive innovations can create a new market and displace a successful incumbent business off its path (Christensen & Bower, 1995). This is common in technological industry where new technology can completely replace the existing technology. A new technology can displace the incumbent if it offers solutions to customer needs. The incumbent may have built its customer base over a long period of time and the customers are demanding more and more from what is offered. As a result of increasing demands, the incumbent may ignore the needs of other potential customers. Disruption takes place when the needs of ignored customers are provided by the new entrant in a different way than the incumbent. In this case, landline telephone manufacturers built its market share but concentrated more on businesses and organizations ignoring the needs of individual users. They concentrated on improving fixed line telephones and capturing more organization as opposed to individuals. The mobile phone manufacturers capitalized on this weakness by satisfying the needs of individual users hence developing its market share. Mobile phones started as inferior entrants but they have expanded its market share and they are threatening to completely replace landline telephones. To be successful, a company should balance between path-dependent innovations and path-breaking innovations (Shehabuddeen, 2007). Executives must watch out and continuously respond to potential disruptions within their business environment. This can be achieved through open innovations where companies access external sources of innovation and sell their intellectual assets when suitable returns can be obtained. Bibliography Chesbrough, H.W. & Appleyard, M.M. (2007) ‘Open innovation and strategy’, California Management Review, 50 (1), pp.57-76. Available from: http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu?title=California+Management Review&volume=50&issue=&spage=57&date=2007&issn=&eissn= Christensen, C.M. & Bower, J.L. (1995) ‘Disruptive technologies: catching the wave’, Harvard Business Review, 73 (1), pp. 43-53. Available from: http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu?title=Harvard+Business+Revi w&volume=73&issue=1&spage=43&date=1995&issn=&eissn= Shehabuddeen, N. (2007) Innovation in real life: a hands-on guide to genuine innovation. Liverpool: Open Innovation. von Hippel, E. (1988) The sources of innovation, Oxford University Press [Online]. Available from: http://web.mit.edu/evhippel/www/sources.htm