What is Disruptive Innovation?
The term “disruptive innovation,” coined by Harvard Business School professor Clayton Christensen, refers to the process by which an underrated product or service gains popularity and, in doing so, replaces other products or services. Taking root at the bottom of a market, such an innovation relentlessly surges upward until it eventually displaces its competition. This is not the same thing as efficient innovation, which serves to improve a product. Instead, the term applies to innovations that allow products to be more accessible and affordable, increasing their availability to a larger consumer-base. Financial reporter, Alexandra Twin, explains that disruptive innovations make products “easy to use and available to the large, non-targeted market,” citing as an example the way downloading music digitally has largely eclipsed the use of CDs. She goes on to observe that “companies such as Amazon, Google, and Facebook are examples of companies that have heavily focused on the Internet as a disruptive technology,” and warns that artificial intelligence (AI) just might become the next major disruptive innovation, affecting the entire job market in the not-too-distant future. (https://investopedia.com).
In addition, sustaining innovation is the process of invention and modification used by companies in order to remain relevant and to better serve their consumers, in an attempt to keep up with marketing demands. Although this type of innovation can be valuable in its own right, there is a tendency for it to create products and services that become too sophisticated, too inaccessible or too expensive to maintain a significant level of competitive edge. When this occurs, consumers seek out more accessible, less expensive alternatives. What defines disruptive innovation is the quality of allowing lower gross margin percentages, while appealing to smaller target audiences, often representing simpler solutions to meeting consumer needs. Since they appear at lower tiers of the market, these innovations may not appeal to upward-mobile companies, which might then allow more space for the emergence of new disruptive competition.
Clayton Christensen’s Influence
The theory of disruptive innovation, created by Harvard professor Clayton Christensen during his research on the disk-drive industry, became popularized with the 1997 publication of his book, The Innovator’s Dilemma. At the heart of Christensen’s work is the concept that large companies have a tendency to overlook potential customers at the lower end of their markets, opening up the possibility for smaller, and often more efficient companies to step in and overtake the competition. The innovator’s dilemma is the apparent fact that by moving up in the market, companies are preparing the way for their own disruptions. This can indeed be a problem for up-and-coming companies. As author and historian, Jill Lepore has pointed out, “Ever since ‘The Innovator’s Dilemma,’ everyone is either disrupting or being disrupted. There are disruption consultants, disruption conferences, and disruption seminars.” (https://newyorker.com). It has become a reality that companies can no longer afford to ignore.
Although Christensen’s theory originally suggested that innovative disruption was doomed to have catastrophic effects on companies, he later went on to offer this encouragement: “Develop a disruption of your own before it’s too late to reap the rewards of participation in new, high-growth markets—as Proctor and Gamble did with Swiffer, Dow Corning with Xiameter, and Apple with the iPod, iTunes, the iPad, and (most spectacularly) the iPhone.” (https://hbr.org). He theorized that at the heart of the dilemma lies the beginning of the innovator’s solution. According to Christensen, following a strategy of innovative disruption can significantly increase the odds of establishing successful business growth. He outlines what must be done to accomplish this, which starts with exploring the development of products and services that more established companies are likely to downplay, or even to avoid entirely. Although the practice might seem to be a risky endeavor, some of the greatest marketing trajectories have occurred due to disruptive innovation tactics.
Disruptive Innovation in Action
It can be a gamble for a company to go forward with plans to put in place disruptive innovations. It’s impossible to guarantee the outcome of such ventures, since there can be no way of ensuring that a potentially disruptive concept or technology would succeed. A great many promising ideas turn out to be impractical or unsustainable, in the long run. According to entrepreneur, Peter Daisyme, “Disruption is often stealthy: understanding disruption isn’t just about creating better ideas; it’s also about being defensive, and looking out for new competition that might disrupt your industry in the future. If a startup is labeled ‘disruptive,’ you might want to give it notice—but the biggest threats to your business are the ones you won’t see coming.” (https://www.startupgrind.com). Short of consulting a crystal ball, it is unlikely that anyone could have predicted the unprecedented disruption that would be brought about by modern technological advancements. From personal computers to smartphones to the many services providing entertainment that is streaming, the list is extensive.
Perhaps the most successful example of harnessing the disruptive force unleashed by the internet can be seen in the rise of Amazon. By taking advantage of the initial disruption caused by the emergence of an online marketplace, Amazon was able to totally restructure the bookselling industry, causing the demise of several previously successful chains in the process. From a small garage-based company, it went on to become the worldwide provider of just about everything consumers might desire, delivering products promptly to their doors. By studying success stories such as Amazon’s, companies can gain a better understanding of the power of disruptive innovation, more easily identifying areas of potential innovation in their own industries. Even if a company does not end up creating a product or service that compares with the smartphone or the worldwide web, it can come up with creative solutions that will keep it relevant in an ever-changing and highly competitive market.
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