How Disruptive Innovation Happens and What It Means for Business
Disruptive innovation occurs when a new technology is introduced that changes the way people live. Usually, innovation is so powerful and valuable that it completely revolutionises how we do things.
If you've heard about disruptive innovation, you've probably wondered how companies like Amazon and Netflix manage to thrive against established players. Or maybe you're looking for ways to take your business in a completely different direction.
What's disruptive innovation got to do with it? And how can you use it to change the way your business operates? In this blog post, you'll learn what disruptive innovation is, what it isn't, and how to apply it to your business and your life.
Innovation has long been a critical driver of success. Companies that innovate, grow. Companies that don't innovate, shrink. But what is disruptive innovation?
Disruptive innovation is a type of innovation that is so different from the norm that it changes everything. It's the kind of innovation that transforms industries and creates new markets. The innovation creates the next Apple, Amazon, or Google.
It's the kind of innovation that, if you don't get it, you're out of business. And yet, it's often overlooked by companies looking to grow.
In this article, I'll explain disruptive innovation and how you can spot it early.
What Is Disruptive Innovation?
Disruptive innovation is breaking the mould and redefining a business model. In the past, large companies typically grew by building more of what they already did, but today, startups disrupt the market by doing something differently, with a different outcome.
Disruptive Innovation Can Lead To New Products, Services, or Business Models
For example, a startup called Airbnb disrupted the hotel industry by providing short-term lodging for people seeking rooms they could rent through a simple online application. Another example is the Netflix model, which disrupts how people view television. In this case, instead of buying movies and television shows, people watch them as they like, whenever they like.
A Startup Model Can Create A New Service Or Product
Startups often build something new or different to solve a problem or meet a need in the market. Consider the difference between the old business model for laundry services and a new company called Washio, which uses innovative technology to provide high-end laundry services. This company has made laundry services much more convenient for people by delivering clothes to their door.
Disruption Can Improve Quality of Life For Consumers And Employees
Startups can disrupt traditional companies in several ways, including:
- Changing the way customers purchase goods or services
- Creating a new type of employee — like the so-called “on-demand” workers at TaskRabbit
- Providing better customer service
- Lowering prices
- Improving efficiency
- Improving safety
Disruptive Innovation Creates More Job Opportunities
According to the Bureau of Labor Statistics, the number of jobs available to U.S. workers is expected to increase by over 8 million by 2031, while the total number of working-age people will increase by just 4%. Disruptive innovation creates new job opportunities for the unemployed or underemployed. Startups like Airbnb and TaskRabbit are changing how people hire and work, creating new job opportunities.
Disruptive Innovation Changes How We Do Things
The term “disruption” describes a situation where an industry or a market is changed by introducing something new or different. It's not just startups that disrupt markets — big companies are getting disrupted too. In the retail industry, for example, Amazon disrupts the traditional supply chain by delivering goods to consumers directly from manufacturers rather than through traditional retailers.
It's also common for startups to create new models for existing businesses. Uber disrupted the taxi industry by offering a convenient, inexpensive alternative to driving taxis. While it took a long time for this idea to catch on, there is no longer any doubt that it has disrupted the taxi industry.
How Does Disruption Impact Companies?
Companies that fail to adapt or disrupt themselves will see their products or services become less relevant and valuable. Companies that fail to innovate can fall behind the competition and miss new opportunities.
When it comes to startups, disruptive innovation doesn't have to be a negative thing. Disruption can be an excellent opportunity to develop new business models. But even if disruptive innovation is a positive thing, it can cause problems in the workplace.
Startups Can Be Unpredictable
Startups are often associated with risk, uncertainty, and instability. But startups can also be exciting and fun. They offer new opportunities for employees who want to develop new skills and grow their careers.
At the same time, startups require time, energy, and creativity. In the past, employers trained employees of traditional companies to perform a specific set of tasks in a highly predictable environment. Today, however, employees are expected to learn and innovate new skills in various situations, making it difficult to predict what will happen.
Startups are Not for Everyone
While startups have many benefits, there are also downsides to this business model. Startup teams tend to be small, so they cannot take advantage of economies of scale. In addition, startups have no money to pay for traditional corporate overhead.
These limitations can lead to high employee turnover and a lack of funding. This can create challenges for the companies since they often lack the stability and resources to grow.
Why disruptive innovation is important
Innovation is essential for business growth. However, disruptive innovation is a double-edged sword because it can disrupt existing businesses and create new markets.
Businesses must constantly innovate to thrive and remain relevant. Yet, some disruptive innovations fail to reach mass market adoption, while others are quickly adopted. How can businesses develop products or services that fit into both markets?
Innovation is the process of creating something previously unknown. For example, the first iPhone was a revolutionary product that created an entirely new market, even though it was not the first phone.
Businesses should look for opportunities to innovate, but they must do so carefully. It's possible that a new idea could harm an established company that is slow to adopt it. So, when evaluating new ideas, companies must consider their potential impact on the competitive landscape.
This is especially important with innovations that rely on digital platforms because anyone can access them anytime.
Disruptive innovation is a valuable way for new companies to gain a foothold in the market and build a loyal customer base, but it can be risky.
Some disruptive innovations take off rapidly and disrupt established markets, while others are quickly adopted and become a regular part of the market.
Why disruptive innovation is necessary
We live in a world that is constantly changing. Today, we rely on the internet to communicate, shop, bank, pay bills, and more.
As a result, innovations are needed to adapt to this constantly shifting landscape. And innovations are typically developed by smaller companies that can't afford to spend years developing and perfecting a product.
As a result, disruptive innovation is critical for new companies to develop products and services.
How disruptive innovation works
Disruptive innovation involves a company creating a new product or service significantly better than before.
A disruptive product or service offers something new and unique to the market.
For example, the iPhone was a disruptive innovation for the smartphone market. It was the first smartphone that allowed users to make calls, send messages, and browse the internet, and it was the first phone to incorporate a touch screen.
However, this innovation only worked in the context of Apple's ecosystem, which gave the company a significant advantage. It created a new market for smartphones that had never been seen before.
Another example of disruptive innovation is Minecraft, initially released in 2009 as an indie game. Since its initial release, it has generated billions of dollars in revenue. The game's success has come from its design as a platform for creating video games and other content.
Because the game is so easy to access, anyone can play it. And because it is free, it's an excellent way for individuals to create games they can share with others.
The bottom line is that the disruptive innovation model is crucial for new companies to create successful products.
Disruptive innovation and the importance of digital platforms
Digital platforms are essential for innovation. They allow us to communicate, shop, bank and pay bills.
They are an excellent way for new companies to gain a foothold in the market and build a loyal customer base. But they can also make the existing market vulnerable if they're not built correctly.
To use digital platforms successfully, companies need to understand how to integrate them with the products and services they already offer.
For example, Uber's digital platform is a way for consumers to order a taxi ride. Because it is a digital platform, Uber doesn't have to deliver the cars physically. Instead, it uses a network of drivers who can be anywhere in the world, to transport passengers to their destinations.
As a result, the company needs to understand how to connect to these drivers and ensure that passengers can get a safe and reliable ride.
Because Uber's platform is based on a digital platform, it can provide an innovative service that is accessible and cost-effective. The company also offers an affordable way for customers to order taxis.
Companies that fail to integrate digital platforms with their existing offerings will find that their innovations aren't widely adopted.
Businesses need to recognise that innovation is essential. However, it's equally important to understand the risks involved when they innovate.
When does disruptive innovation occur?
Disruptive innovation occurs when a product or service is designed to solve a problem that no one else has considered solving before.
Disruptive innovation has occurred for thousands of years, but it has become more frequent and visible over the past 50 years.
The first disruptors were entrepreneurs and companies that invented and marketed products that would become ubiquitous and affordable. For example, we have always used knives for cutting food, but we now have a wide array of products available that are safe, convenient, and easy to use.
But we still haven't seen a new generation of products, services, or entirely new processes.
What is the Difference Between Disruptive Innovation and Classic Innovation?
- Hardcover Book
- Williams, Luke (Author)
- English (Publication Language)
- 272 Pages – 09/28/2015 (Publication Date) – Pearson FT Press (Publisher)
Classic innovation means finding a better way to do something already done. Classic innovation is usually done slowly, through trial and error.
In contrast, disruptive innovation is based on a new idea that solves a problem no one has thought to solve before.
What Are the Benefits of Disruptive Innovation?
Disruptive innovation has many benefits. First, it often eliminates a problem that's existed for a long time.
It's also easier for consumers and businesses to understand and buy because they already know the products and services involved.
Disruptive innovation also helps companies reach new markets and create new products.
Disruptive innovation is becoming more common because we live in a constantly evolving world of products and services. People are always looking for new ways to do things, and there are always people trying to figure out how to improve the status quo.
Disruptive innovation is challenging because it requires inventors, marketers, and other key players to have a vision that goes beyond their self-interests and into the future.
Having a plan and strategy in place for disruptive innovation is essential. A strategy is a guide for your company that helps you take your company in the direction you want.
How Do I Develop a Strategy for Disruptive Innovation?
A strategy outlines your company's goals, values, and priorities. It should also include a list of the obstacles and risks that could threaten your plan.
For example, your company may want to disrupt the traditional way people eat their meals by developing a new kind of oven that cooks food more quickly and efficiently.
A strategy would identify your company's goals for this type of innovation, whether it's cost-effective cooking methods or reducing waste and packaging.
Your strategy should also describe your company's values, which are the beliefs that you and your team hold about what your company is committed to doing.
Your strategy might also list your company's priorities, which are the activities that you are currently focused on.
Finally, your strategy must list the barriers that could hinder your plan.
What Are the Key Components of a Strategy?
A strategy is made up of several parts. These components include:
- A mission statement
What Is the Difference Between a Mission Statement and a Vision?
A mission statement is a short, written message that describes a company's vision and values.
Your vision should be a bit more abstract and longer than a mission statement and include values your organisation believes in.
How Can I Use My Strategy to Achieve a Disruptive Innovation?
Once you have developed your strategy, you'll need to figure out how to turn your strategy into a tangible plan.
You can use your strategy to set a course of action and define the steps you will take to achieve your goals.
For example, suppose you decide to develop a new kind of oven. In that case, your strategy can help you create a detailed roadmap for the project, including research requirements, materials, and manufacturing procedures.
This strategy will also help you determine each team member's role in the project.
Developing a strategy is just the beginning. You will need to execute the strategy once it's in place.
What is the Difference Between Execution and Management?
Execution refers to taking action, while management focuses on the larger picture of leadership.
An effective strategy is only half the battle. You will also need to execute your strategy, but executing a strategy doesn't guarantee results.
To effectively execute your strategy, you need to manage its success.
- Managing the strategy includes:
- Creating a process to monitor the plan
- Ensuring that the right resources are assigned to tasks
- Creating a culture that supports innovation
Tips for Understanding the Theory of Disruptive Innovation
- Hardcover Book
- Satell, Greg (Author)
- English (Publication Language)
- 240 Pages – 05/23/2017 (Publication Date) – McGraw Hill (Publisher)
Innovation is always disruptive. Sometimes disruption is necessary to advance. Other times it's disruptive.
The term “disruptive innovation” was coined by Clayton Christensen, an American management theorist and business consultant who writes extensively on the topic of innovation.
Disruption is the change in an industry that forces existing businesses to innovate to remain competitive. It's the way the market changes. Disruptive innovation occurs when the market shifts, but already established companies continue to operate.
The Theory of Disruptive Innovation
When the market changes, it forces established players to reevaluate their products, services, and markets to remain competitive. This makes it difficult for these companies to continue operating as they have been, so they must adapt to the new environment.
An established business adapts to new market conditions through “product disruption.” Companies that do this are called “disruptors.” They launch a product or service radically different from what is currently available.
Product disruption is also known as “category disruption.” A classic example is the iPad. When it was introduced, tablet computers were bulky, heavy, and not much more than a glorified iPod. Apple, a company dominating the music industry for years, changed everything with the iPad.
With its intuitive interface and full-colour screen, the iPad was a new device category. Initially, it was the only option for consumers, and it quickly displaced competitors that weren't flexible enough to make the change.
There are two types of innovators:
- Disruptors – Innovators who create something new and different, sometimes forcing other businesses to adopt the new technology.
- Converters – Innovators who use existing technologies to develop something new and valuable.
Disruptors Are Inevitable
When the market shifts, it forces established players to adapt or die. Some innovators cannot change the status quo and end up out of business. That's why the disruptive innovator is often vilified.
But that doesn't mean all disruptive innovations are bad. There's a reason why established companies have such a difficult time adopting new ideas. It's because the very nature of the market is to change.
If a new technology is truly disruptive, it may be too far ahead of the market to accept. An example of this is the transition from vinyl records to CDs. When the market shifted, the record labels refused to make the change, so the CD became the standard medium for music. The record companies didn't adapt well to the shift and became virtually extinct.
New Product Innovations
The market can shift instantly, but it can also take years. We don't see substantial technological shifts until a new product is released and adopted.
A new product may be disruptive on the surface but not truly disruptive until it's adopted. The iPhone and iPad are examples of products that are disruptive at first, but they don't have the staying power of the more successful categories they disrupt.
- Hardcover Book
- Baldridge, Joy J. D. (Author)
- English (Publication Language)
- 288 Pages – 01/07/2019 (Publication Date) – Wiley (Publisher)
Innovation Is Good
Innovation is inevitable, so the question isn't if innovation will happen but how disruptive it will be.
Innovation can be good or bad. The only sure thing is that it happens, so we should embrace it and work hard to make it happen in the best way possible.
It's important to remember that the term “innovation” is a bit of a misnomer. Innovation is just new, better ideas. Those are disruptive, but not all innovations are.
The best way to think about disruptive innovation is that it's a new way of doing things that causes people to rethink their assumptions.
For example, when Thomas Edison invented the light bulb, he disrupted the market by creating an entirely new product that was less expensive and more efficient than anything we had done before.
When Steve Jobs created the iPhone, he disrupted the market by creating a brand-new product that was simpler, more elegant, and easier to use.
This disruption happens because it's a new way of doing things. New ideas disrupt the old way of thinking.
That's why disruptive innovation is a powerful tool for changing our world. And it's why I believe that the future of business will be defined by disruptive innovation.
Read this article to learn more about disruptive innovation!
Last update on 2023-09-22 / Affiliate links / Images from Amazon Product Advertising API