Disruptive innovation in video conferencing market; Case study of Zoom.
Sangay Phuntsho1, Tashi Chezom2, B. N. Hansika Abeywardena3
sphuntshok99@gmail.com 1, st122545@ait.asia 2, st122208@ait.asia 3.
Abstract.
Video conferencing has gained more popularity after the pandemic in 2019. The demand for
contact less meetings, online classes and online webinars kept growing as restrictions are imposed
in and around the globe. Owing to this, people have opted for wide range of tools for overcoming
and fulfilling their need. Zoom has therefore evolved as a huge disruptive innovation owing to
outbreak of covid-19. Thanks to its video-first unified approach, with modern and easy to use
application. It has not only overtaken the pioneers in the video conferencing segment but also
disrupted thy physical activities such as meetings, webinars and classes. Although zoom is not a
first mover, it has gained competitive advantage through incremental innovation having had the
advantage of being the first follower who has seen the potential solution to the existing problems.
Zoom has been growing steadily amid pandemic, and it has gained popularity among many
businesses and enterprises.
Owing to its steady growth, Zoom is now reaching its maturity stage after which it might decline
depending on people’s choice to carry on with the in person meetings. But it is still likely that
zoom and video conferencing will be employed post-covid as well as it not only saves resources,
but also makes it convenient for the users. Business travels for this matter are predicted to be
reduced and airline industries of all is predicted to be affected with no bouncing back of business
customers to its pre-pandemic level. But with more innovation, and more people choosing to work
from their own comfort zone, zoom’s further innovation could make them boom in the video
conferencing industry.
Keywords: Disruptive innovation, video conferencing, Technology.
Introduction.
Zoom’s mission is to “make video communication frictionless and secure”. The mistakes of lots
of its competitors made is that, they did not focus on the primary function of providing seamless
video communication while zoom focused on video-first approach. This has helped zoom to
establish its position in the market and more to add on already growing application, covid-19
outbreak has caused the surge in need of virtual meetings, online classes and gatherings. But covid19 is not the only reason for zoom’s growth. Zoom has been growing rapidly even before the
pandemic as per Forbes, and it has already overtaken its competitors before that. As per 2020
business @ work report, zoom was the number one fastest growing app among the video
conferencing segment since 2016 which grew even faster since then.
The company made the zoom application user friendly and easier to use. The set up was easy,
changing of backgrounds were relatively simple. And they focused on the concept of providing
“Maximum simplicity with minimum effort”
Reasons for zoom’s steady growth.
Following are the design features that made zoom dominate the Video conferencing industry. The
user-friendliness, quality, reliability and the wide range of in built interactive systems helped zoom
establish its position over the other market competitors as the demand for video-conferencing
surged.
1. Seamless connectivity
The connectivity is quick and immediate irrespective of whether you are using mobile phone or
laptop. You can use zoom on any device as long as you have an app installed on your computer
without any interruption and delays with proper internet connection.
2. Multipurpose tool
It not only allows video conferencing but also allows personal texting within the app, screen
sharing, creating breakout rooms for separate group discussion within that zoom room, changing
of hosts, and sharing of files. It also has additional
features such as whiteboards, closed captioning and emoji
which makes user experience better.
3. HD video quality, high quality sound
Uninterrupted and high sound quality and high definition
video is an added advantage and it also allows you to
record the video on your computer.
4. Frictionless communication
The key feature of the zoom is that anyone can use it as it
is easier to download, easier to use and of all, one need
not have any knowledge on technology to use the
platform. This simplicity and the concept of frictionless
communication has helped zoom take over the most popular application called Skype.
Innovation strategy.
Zoom’s innovation strategy falls under reactive strategy. The features such as breakout rooms,
zoom white boards, zoom waiting room, and zoom background features, avatars and emoji are
introduced based on the need and demand of the customers, as well as based on the understanding
of the problem they see in the pioneers of the web and video conferencing industry. The concept
of video conferencing wasn’t innovated by zoom, but has been existing long before. Therefore
zoom is an imitator or first follower, but they have developed better application, added reliable
features and user friendly application through incremental innovation. Zoom also follows a
defensive strategy by collaborating and integrating with other applications such as skype, google
meet, and slack in order to improve its performance.
Increasing returns to adoption through incremental innovation:
The idea of zoom came from a problem that Yuan (founder of zoom) had known when he was
working at WebX which is a video conferencing platform of Cisco. As the vice president of the
corporate engineering division, he has come across plausible problems such as lagging video,
unstable connections and difficult setups. Based on this knowledge he requested the webX
company to fix the issues to which he faced several objections. That made him leave the job and
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launch Zoom, where he could provide solution to the problems that are not taken care of at CiscoWebX. Yuan just did not launch zoom because of the problem he wanted to fix at webX. Zoom
has been an idea which existed already but was improved gradually, in an incremental approach.
Based on the knowledge of the weaknesses of the competitors, he was able to build on his idea
that helped him establish its position in the market as well as increase the return to adoption though
various process of incremental innovation.
Zoom after launching in 2013 has evolved until now with added features while sticking to the
primary focus on video-first approach. Based on the needs of customers, he added the virtual
features on its platform that replicates real life conferences and meetings that is not only interesting
but also convenient and cost saving for a lot of customers. The added features and values helped
him build loyal customer base which kept on increasing over the years and it is also likely to be
growing even in post-covid era. Some of the features such as live transcriptions in the application
will not only help in audio interpretation but also in better understanding of the speeches through
text and closed captions which has even more advantages than the face to face meetings. The
breakout rooms allow the interaction of the groups in a separate room within that main zoom room
and the background option allows creative group presentations. The more zoom is used, the more
improvement is brought in.
Competitive advantage.
Zoom has gained its competitive advantage over its competitors due to its unified video-first
approach and ease of use. It has not only gained advantage from being the first follower advantage
but also from having the differentiated features in its application or product.
First follower advantage.
The first movers have a better advantage as they tend to gain high initial profit and success, but
most of them do not sustain it as the technology requires continuous innovation. Most first movers
who fail to introduce continuous innovation therefore have their advantage short lived. In video
conferencing technology, the first mover is skype founded in 2003. It succeeded and was able to
gain a good market as a first mover in the video chat market as a first mover for a number of years
undisrupted by any other platforms that came. However, skype has lost itself to Zoom which was
founded much later because while redesigning the application, it forgot to improve the key function
of making the video call quality superior. An April 2020 survey of 1,110 US companies by
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Creative Strategies showed that 27 per cent of businesses primarily used Zoom for video calls and
meetings, compared to 18 per cent that used Teams, and 15 per cent that used Skype. Many
companies slowly switched to zoom because the added features and improved design of skype
deviated from the core functionality of the application.
The preferences and popularity has created a quality branding for zoom and it is being widely
adopted. Switching to another platform from zoom will not only be inconvenient as it has all the
simplicity and superior functionality, but also be a waste of resources for the customers as it is
hard to find the features that zoom has, in any other platform. Zoom does not have any network
effects. In absence of this effect, they have built the defensibility by integrating the applications
from third parties like the other competitors such as Slack. Zoom users can integrate Calendy to
generate the meeting details for the meetings that are scheduled. Customers who already use
multiple zoom integration will not be able to easily switch to other video conferencing as it will
require them to set up the integrations all over again. This creates customer lock in.
Zoom was launched in 2013 with the concept of video first approach much later than the first
movers such as skype. It first focused on exponential growth and not on making it perfect. After it
is being adopted around the globe, it changed its approach to increase the security and convenience
of the users through incremental innovation. The late mover advantage of the zoom is because of
the following reasons.



The first movers or pioneers underestimated the demand for video conferencing.
There was a distinctive market segment that has created a new demand for the development
of better and reliable service.
And the evolution of market and change of technology gave zoom the chance to leapfrog
the idea of first movers with additional benefits and improved versions.
Product differentiation.
The market zoom operates is highly competitive with a lot of new upcoming as well as already
established applications. Cisco-webX and Go-to are the major competitors for zoom and they have
the following strategy to gain competitive advantage over their competitors through product
differentiation. The product differentiation includes video first strategy which focuses on visual as
well as audio conferencing while others focused only on audio as the main selling point. It also
uses cloud native architecture utilizing cloud services to build, run and update software through
the cloud based micro services. This helps in easy deployment, easy upgradation and also increases
the functionality and scaling opportunity as required. The application is easy to use as compared
to other applications and it is the most reliable and adopted application that has been exponentially
growing over three years creating brand awareness and preferences. It also offers low cost of
ownership.
Initially before the launch of zoom, group video calls were expensive. Zoom was the first platform
to offer the service free of cost although a paid plan was existent. Later the competitors also tried
to offer their service for free, but by then, Zoom had already dominated the market and attracted a
loyal customer base which gave them a huge advantage over others. Their marketing strategy
included the visual features such as screen sharing, be it on phone or computer, making it user
friendly than any other competitors. The features that initially did not support on mobile phones
were gradually made available later that added more user friendliness. Users invested in zoom
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because it has a better product, better function and a lot of extra features which is a product
advantage. This advantage helped zoom differentiate themselves from the competitors and paved
their way forward in establishing themselves as an innovative market for video conferences. This
uniqueness made them simultaneously better.
Zoom 'network externalities'
Zoom has no network effect. The foundation of Zoom’s core value proposition is to provide easy
communication with users by preventing cross-organizational network effects. Since the Zoom
functionality paid plans are from the meeting host and not the attendee, the value of Zoom’s
product remains constant. Zoom is attempting to build defensibility by integrating third-party apps.
A free or paid user of Zoom can avail the video conferencing services by simply sharing the link
without creating an account or downloading the app at the other end. Unlike Google and Facebook,
Zoom users find it convenient and helpful for users, and there is no need to disclose personal
information.
Zoom as a disruptive innovation in the video conferencing market.
Among many video conferencing software, zoom has come out as a disruptive technology, with
its growth taking off due to the covid-19 pandemic. It has emerged owing to reliability, modern
features, and easy, video first approach it has taken into the market. Due to the dominant design,
late mover advantage, and competitive advantage it has as described in the previous sections, it
has taken over the video conferencing markets which initially focused only on audio conferencing
as a primary function. The unique feature of the video-first approach has helped zoom disrupt other
technologies as more customers prefer zoom over any other platform due to ease of use, mobile
friendly approach and seamless high quality video. Zoom has gained substantial market share over
recent years and it now has over 50% of market share which is increasing each day. It has also
established a large customer base already as compared to the other applications and with further
improvement through incremental approach with added features, it is attracting even more
customers, dominating the video conferencing platform.
Disruption on other businesses and enterprises and markets.
Airlines industry.
Airline industry will be most affected due to this technology adoption by the customers. Virtual
meetings are now being popular and adopted by most of the enterprises and business entities that
help them cut costs of traveling and logistics making it convenient while being able to obtain the
same values and interaction. The travel industry and in turn the airline industry will see a
significant drop of passengers who travel for business meetings and official purposes. In many
cases, participants find online meetings work better than the real thing because it’s easier to
exchange and modify information on the fly. Further, everything is conveniently backed up and
stored in one digital file.” (Forbes, 2020). A survey done by Bloomberg on 45 businesses across
the globe has discovered that almost 84% of the companies plan to reduce their spending on
business travel after the pandemic is over. Michelin, LG electronics, Akzo, and Pfizer are among
the companies who are reporting the reduction in travel due to availability of new tools for
communication such as zoom which could mean that there will be an end to large scale meetings
and in person conventions along with other networking activities. The IATA told Bloomberg that
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business travel will be the last sector in travel industries to recover. Therefore Zoom as a leader in
the videoconferencing market will be a huge disruption to the airline and in turn tourism and
hospitality business.
Education.
Zoom video conferencing has gained popularity and there has been a high rate of adoption with
zooms market share increasing each year. With the availability of reliable, user-friendly and cost
effective options of online learning, a single teacher can deliver lessons to a number of campuses,
and many more users around the globe with ease. Unlike physical classes, the videos can also be
recorded for later review which is an extra advantage for students. Furthermore universities can
now bring in the guest lecturers who can be anywhere across the globe who, otherwise will not be
able to participate due to time and travel constraints. Therefore this can be a huge disruption to the
education sector as students can virtually attend the universities from their home at reduced costs
while being able to attend the lectures of most prestigious universities. With this, it might disrupt
the smaller universities leading to disruption of the education sector in that area. Teachers might
lose jobs and universities will have fewer students attending the classes as they can attend classes
from their home within their own comfort zone.
Porter’s five forces analysis of Zoom.
Any technology that we find to be dominant today may not remain the same. The entry of lots of
innovative high-tech companies are likely to bring in creative destruction of existing technologies
as we never know what lies ahead of us. Five force analysis of zoom is done therefore, in order to
understand the main competitive force in the video conferencing industry and in turn understand
the risks associated with those forces. Each of the five forces are explained in the following lists.
Rivalry among the industry: There is high
rivalry among the industries as there is a wide
range of featured platforms like GoToMeeting,
Skype, WhatsApp, WebEx, Google Meets, etc.
There is a high probability of shifting the
demand from one platform to another. Social
networking is prone to innovation, and
technology is changing fast with the change in
consumer behavior.
Threats of new entrants: A new company can easily enter the market and there are no restrictions.
Creating the new site and application becomes relatively easy, and the introduction of innovative
ideas from other social networking platforms becomes a threat to Zoom.
High bargaining power of buyer (customer): The bargaining power of buyers is relatively high as
consumers have a large scale of other social networking platforms to choose from based on their
requirements if Zoom cannot serve their purposes.
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Bargaining power of suppliers: The bargaining power of suppliers can be moderate as there are
more hardware and software providers. However, fewer suppliers may lead to higher power
suppliers and may result in a high cost for Zoom.
Threats of substitutes: The substitution of other products is high for Zoom as consumers can easily
switch to new social networks and mobile applications. The emerging innovating other platforms
may dominate the Zoom.
Value proposition of Zoom
The value for the customers are created
in three ways by Zoom which are
accessibility, performance, and brand.
Zoom became superior to the
competitors as Zoom provides a wide
variety of services to the customers in a
convenient way. It performs better than
competitors by providing premium
quality services, more reliable, and easy
to use. Furthermore, Zoom has strong
brand recognition in the market. The
brand awareness or brand name has high impact in attracting a wide range of customers which
enhance market penetration.
S-curve
The S-curve is a representation of the rate at
which a population adopts a new technology
or product. Video conferencing or Zoom in
particular has already passed the chasm
during the peak stages of the pandemic and
has already been adopted by the Early
Majority. The market share as of 2021 is
48.7% and this could grow further and
become a dominant design, capturing more
than 51% of the market depending on the
continuation of the pandemic.
Technology Adoption and Diffusion
With the pandemic forcing people to adapt to work from home, within the span of several months,
people had to find alternative ways to attend meetings and keep the work going smoothly. With
the market filled with a variety of options for video conferencing, it didn’t take long to figure out
the leader of video conferencing. It was fascinating to see how a new entrant like zoom was able
to capture a majority of the video conferencing market while other giants like google meet, skype
and microsoft teams failed to do so. The availability of third-party connectors and integrations
allowed users to associate Zoom with other business apps to access Zoom data from any tool.
Collaborations with platforms like Lucidspark, which is a visual collaboration platform that
provides users with a digital whiteboard for asynchronous collaboration made it possible for Zoom
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to capture not just one but a variety of market segments, which helped to diffuse the technology
among users quickly and efficiently.
Product Life Cycle
Zoom app was first launched in January 2013 and by May 2013, it had gained 1 million users
which made it a mature video conferencing product. Zoom experienced slow growth for a span of
three years, from 2013 to 2016. But in 2019,
thanks to the Pandemic and the “New normal”
way of life, Zoom experienced significant
growth. Today, Zoom is at the beginning of the
maturity phase of the product life cycle but it’s
unclear as to how long it will remain at this stage.
The maturity phase is where the sales growth
starts to slow down as the product reaches
widespread acceptance in the market. According
to Matthew Niknam, an analyst at Deutsche Bank
who had mentioned that “The bear case is that
anybody who needs Zoom has it already,” (Ford,
2022). This can be considered true given the fact that most everyday users and small businesses
(which make up about 50% of Zoom sales) have already adopted Zoom and will remain stagnant.
So what can Zoom do to stay on top? Will their strategies be effective? According to Eric Yuan,
Zoom will focus on the corporate market and this way, they will be able to stay in the maturity
phase for quite some time. Given that Zoom is at the maturity phase, they will have to focus more
on diversification and look into new target market segments (Yatsenko, 2021).
Conclusion
Zoom in the videoconferencing segment has grown rapidly owing to its differentiated features
which of all is the simplicity and ease of use. With high demand over online classes and online
meetings which peaked during pandemic, zooms market share shot up from 20% to now almost
50% dominating the market in the video conferencing segment. It has no network effects, but in
absence of network effect, they have built the defensibility by integrating the applications from
third parties like the other competitors such as Slack. Zoom users can integrate Calendy to generate
the meeting details for the meetings that are scheduled. Although zoom has huge market share
compared to the competitors, and had huge advantage owing to its simplified and reliable modern
features, we cannot say what lies ahead of pandemic form zoom and online video conferencing
applications as a whole. While we predict that there will be customers using zoom post-covid, we
also predict that the users will decrease as people begin to communicate freely. But the usage of
zoom will still be common as it has already gained popularity and established its brand in the
market.
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