Factors ensuring successful innovation: Drucker and Christensen's discipline and rules

Xerox

How did disruptive innovations in the industry affect Xerox? Did it adjust; and if so, how? Discuss possible sources of innovation for Xerox

Capitalism, in general is often referred to as a "Profit System." However, a more accurate term would be that of a "Profit and Loss System." Consequently, due primarily to this loss component, innovations arise. Disruptive innovations occur when an unusual industry occurrence disrupts traditional thought process. The prevailing thoughts are often found to be incongruent with market demands. As such, innovations arise which propel companies to the forefront of their respective industries. Xerox is no exception to this occurrence. Its industry was characterized with intense competition and rapidly decreasing margins. These eroding margins resulted in subpar performance for the company in regards to revenue and net income. The increased competition, particularly from Asian countries placed downward pressure on margins due primarily to low manufacturing costs. In addition, price wars often characterized the industry as companies began to compete solely on price. Hardware was the then dominant component in Xerox's dominance. However, due to disruptive innovations, the company began to take a dual approach to its merchandise and product offerings. This approach began with the design of both hardware and software to complement each other within an integrated framework. In addition, the software was proprietary which provided Xerox with a sustainable competitive advantage relative to its peers in the industry. Xerox could also license this software to companies who demanded such as service. By incorporated the software component with the hardware component the company could better maintain margins without competing based solely on price. In addition, both the hardware and software were complementary. As such companies would subsequently need to acquire both components in order for their business needs to be satisfied appropriately. This adjustment allowed Xerox to stay competitive in an industry characterized with an increased influx of competitors.

Another, method in which Xerox adjusted with innovation is with strategic partnerships. Xerox with its new software and hardware approach is now better able to engage in long-term contracts with key vendors and purchasers. This allows the Xerox to maintain key customers while allowing for a less volatile revenue stream. Due to its innovations, the company is now better able to enter into strategic partnerships that will endure irrespective of industry climate.

Possible sources of innovation for Xerox will probably occur within the in the mobile computing space. Smartphone and internet usage is dramatically increasing around the world. As such, the propensity of consumers to use mobile apps in regards to their purchasing decisions will likely increase. Below is chart showing e-commerce growth within the United States. Notice the dramatic increases from 2001.

Xerox, in the future can utilize this trend to innovate in two very distinct ways. First on the expense side, it will be cheaper for Xerox to utilize a mobile platform in order to take, receive and distribute orders. It can provide email receipts thus reducing overhead costs. Xerox can also send emails directly to the phone thus reducing advertising expense which has now become ineffective in regards to response rates. The second innovation can occur on the revenue side as Xerox can instantly expand its global footprint by allowing international orders to be fulfilled in the United States. The company can also innovate with online apps that allow for similar services that the company offers within its stores. This last trend with mobile apps will become more profound as internet users around the world become more proficient with its use. Below is a chart depicted internet users around the world.