MGMT30006 · Managing Entrepreneurship and Innovation
Disruptive and Sustaining Innovation
Week 4 of University of Melbourne MGMT30006 draws the line between sustaining innovation and disruptive innovation in Christensen's precise sense, covering low-end and new-market footholds, why incumbents are vulnerable, and how they should respond (the 'two games at once' framework and Blue Ocean strategy). The classic exam trap is applying the 'disruptive' label loosely — you must correctly classify a case and justify it against the mechanics, not the hype. Responding to a disruptor with the first steps of 'two games at once' is a confirmed exam archetype.
What this chapter covers
- 01Managing innovation by type — efficiency (exploit, lower cost), sustaining (exploit, strengthen the model, may overshoot), disruptive (explore, needs a new model)
- 02Disruptive innovation mechanics (Christensen): low-end foothold (incumbents overshoot; entrant serves 'good enough') and new-market foothold (turn non-consumers into consumers)
- 03The trap: disruptive innovations are always radical, but not every radical innovation is disruptive; the first cars were NOT disruptive, the affordable mass-produced car was
- 04Incumbent responses — proactive watching, a separate division, respond-don't-overreact
- 05'Two Games at Once' (Markides & Oyon) five-step decision framework; Parallel Play for brand-new markets
- 06Blue Ocean strategy — red vs blue oceans, value innovation, the Four Actions (Eliminate/Reduce/Raise/Create) and the strategy canvas
- 07First-mover vs follower advantages and disadvantages
- 08The innovation portfolio (newness-to-market × newness-to-company) and the innovation-success-probability logic
Respond to a disruptor with the first three steps of 'Two Games at Once'
- +1Diagnose the threat first: the startup is a new-market disruptor — it turns non-consumers (people with mild loss who never bought a clinical device) into consumers with a 'good enough', accessible product. That framing is what the three steps then act on.
- +1Step 1 — should I enter the new market space? Yes: the non-consumer segment is large and growing and, left alone, the disruptor will move upmarket toward your clinical customers. (If you judged 'no', you would instead invest to make the premium clinical model more attractive.)
- +1Step 2 — can I do it with my existing business model or do I need a new one? A new one: your clinic-channel, high-touch, high-price model cannot deliver a cheap self-fitting online device, so forcing it through the existing model would fail on cost and channel.
- +1Step 3 — adopt the invader's model or disrupt the disrupter with your own new model? Build your own distinct online self-fitting line rather than copying the invader head-on (adopting an invader's model directly usually fails), using your brand and clinical credibility as an advantage the startup lacks.
Key terms
- Sustaining innovation
- Innovation that builds on the existing business model to strengthen it — better products, new channels or geographies for current customers. Relatively low risk with substantial financial impact, but it can overshoot what mainstream customers actually need.
- Disruptive innovation
- A firm with fewer resources challenges incumbents from a low-end foothold (serving overshot customers with a 'good enough' offer) or a new-market foothold (turning non-consumers into consumers), then moves upmarket. It changes the basis of competition and needs a new business model. Always radical, but not every radical innovation is disruptive.
- Low-end vs new-market foothold
- Two entry paths: low-end targets the least-profitable customers incumbents have overshot and ignore; new-market turns people who previously did not consume at all into customers (e.g. personal copiers versus corporate machines). Both let a small entrant climb toward the mainstream.
- Two Games at Once (Markides & Oyon)
- A five-step framework for responding to a disruptive business model: (1) enter the new space? (2) existing or new model? (3) adopt the invader's model or disrupt-the-disrupter? (4) how separate should the new unit be? (5) how to manage it and exploit synergies. Exam questions often ask only the first three.
- Blue Ocean strategy
- Creating uncontested market space to make competition irrelevant by breaking the value–cost trade-off (differentiation AND low cost) through value innovation. Executed with the Four Actions Framework — Eliminate, Reduce, Raise, Create — visualised on a strategy canvas.
- First-mover vs follower
- First movers can pre-empt scarce resources, secure patents, set standards and build loyalty, but carry cost and risk and cannot learn from others; followers free-ride on the pioneer's R&D and buyer education more cheaply, at the cost of a 'copycat' reputation.
Disruptive and Sustaining Innovation FAQ
What is the most common disruption mistake in the exam?
Calling anything new or better 'disruptive'. In Christensen's precise sense, disruption is entry from a low-end or new-market foothold followed by a move upmarket — not simply a superior product. The subject's own example: the first expensive automobiles were not disruptive, but the affordable mass-produced car was, because it democratised access. Always justify the label against the mechanics.
How do I decide low-end versus new-market foothold?
Ask who the entrant first serves. If it targets the least-demanding, least-profitable customers the incumbent has overshot and would happily cede, it is a low-end foothold. If it brings in people who previously did not consume the product at all, it is a new-market foothold. Then trace the upmarket climb that makes it a disruption rather than a niche.
When should an incumbent NOT respond aggressively?
The framework's guidance is 'respond but don't overreact'. If entering the new space is not warranted — for example the new segment is small or the disruptor cannot climb toward your core — you are better off increasing the attractiveness of your traditional model. And adopting the invader's business model head-on usually fails; building your own separate model is the more reliable route.
Can AI help me classify disruption cases?
Yes. Sia can drill you on sustaining-versus-disruptive classification, walk the 'two games at once' steps on fresh cases, and check your Blue Ocean ERRC grids. Use it to rehearse the reasoning; it does not do graded assessment, and University of Melbourne integrity rules apply — confirm details on Canvas.
Exam move
The single highest-value skill here is classifying a case correctly and justifying it against the mechanics, so build a small 'backpack' of archetypes (a budget airline, a personal-device version of a corporate machine, an affordable mass-market version of a luxury good) and practise arguing why each is or is not disruptive. Rehearse the first three steps of 'two games at once' on several incumbent/disruptor pairs, giving a decision and reason at each step. Learn the Blue Ocean Four Actions (Eliminate/Reduce/Raise/Create) and be able to sketch a before/after value curve. Keep the first-mover-versus-follower trade-offs ready as a comparison. Watch the label trap constantly — disruptive is always radical, but radical is not always disruptive. When you are unsure of a classification, ask Sia to trace the foothold and upmarket climb with you. Confirm the exam date and format on Canvas and the University of Melbourne exam timetable.
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