Colin Barry

Tata Nano (BSSE, Friday, Week 1)


Good way to think about designing a disruptive business model: chronologically order sub-steps in the existing activity (investment banking/IPO activity: (1) design an S-1, (2) assess potential/price of offering, etc.).
Then think about how your model can replace or eliminate of one or more steps to drive down price or sell to a new market.

Ratan Tata: Tata can respond to disruption because the corporate umbrella is private, even though some of the component firms are part/fully public. In the US, pressure for ROIC makes management unable to fight disruptive entrants by accepting lower margins or incubating separate low-margin businesses (a la Dayton Hudson incubating Target).

Clay's advice for big established firms: Look at the bottom of your market --- the lowest-margin segment of your business. If you see a new entrant gaining traction, you should quickly buy it and keep it separate from the rest of your business.

Interesting question: Why don't McDonalds or Holiday Inn ever move up-market? And how do we explain why no one has disrupted Gucci? Clay's not sure.
Maybe it's hard to devise innovative business models in the upper end of the market?