The Four Economic Drivers of Better and Cheaper Innovation, aka Big Bang Disruption

The Nov-Dec issue of The European Business Review features a new article by Larry and co-author Paul Nunes, “What Companies Must Do Now that Better is Also Cheaper.”  The article introduces the four economic drivers that have changed the nature of innovation and redefined the concept of industry disruption, offering readers a starting point to evaluate and respond in their own businesses.

The four drivers are:

  1. Price Deflation – The continuing impact of Moore’s Law well outside of computing and consumer electronics, ushering in the era of combinatorial innovation.
  2. Platform Exploitation – The expansion of global low-cost platforms–based on the Internet, broadband, and cloud computing–for collaboration on everything from R&D to sourcing, manufacturing, distribution, retailing and customer service.
  3. Cross-Subsidization – The use of renewable information assets to seed new markets at the expense of incumbents.
  4. Marginal Cost Elimination – The accelerated shift from physical to software-based distribution, with marginal costs approaching zero.

The combination of these forces has changed the rules of innovation in a growing range of industries.  Incumbents and start-ups alike need to change their strategy to adapt–or disappear.