Disruptive Innovations

Don't imitate - innovate! What is an innovation? It's the process of translating an idea into an original product or service which satisfies a specific consumer need.

Don’t imitate – innovate! What is an innovation? It’s the process of translating an idea into an original product or service which satisfies a specific consumer need. Basically, there are five types of innovations:

  • Disruptive innovations utilize old technology in new ways, harness the power of modern technology and create new business models → Example: Personal computer
  • Breakthrough innovations employ new technologies, create new (so far unknown) demands and forever change lives as we know it → Example: Electricity
  • Radical innovations bring new benefits to the consumers, create new markets and meet the demands of the current generation → Example: Digital photography
  • Incremental innovations add new features, tweak / improve overall designs and are driven by how consumers desire to use the products → Example: Bicyles and bikes
  • Sustaining innovations do not shift company’s goals, expand existing product lines to offer consumers more choices and keep the business alive by retaining loyal customers → Example: iPhone

Where Does Growth Come From?

Clayton M. Christensen noticed that big, powerful companies at the peak of their power aren’t asleep at the wheel as they are driven out by disrupters. They’re usually innovating away themselves. But these established companies drive what’s called “sustaining innovations” which are modifications and improvements on existing services.

Clayton Christensen | Talks at Google

Disruptive Innovation Explained

Disruptive innovations typically take hold at the bottom of the market, meeting the same needs as high-market solutions in a simple and relatively cheap way. They are usually underrated at first and tend to be seen as “low-class”. But due to their low costs and other advantages, they move quickly up the market and eventually become more appealing than their sophisticated competitors.

Disruptive Innovation Explained | Harvard Business Review
Disruptive Innovations

Innovations are constantly occurring in every industry, but to be truly disruptive an innovation must entirely transform a product or solution that historically was so complicated only a few people with a lot of money and skills had access to it.

A disruptive innovation is often a more simple, low-grade solution that’s more affordable and accessible to a larger population, which opens it to an entirely new market. This often upturns established industries and overthrows existing market leaders.

The Qualities & Criterias

They make their top-tier products better and better to serve their most sophisticated and demanding customers, which can seem like a smart business move considering that serving the top of the market increases their profit margins the most. They aren’t bothered by disrupters taking hold at the bottom of the market, because it appears too low-tier and low-gross-margin to warrant attention. But this oversight creates space for new players to get a foothold at the bottom, eventually creeping their way upmarket to topple the incumbent.

There are four important qualities of disruptive innovations to note:

  • They are low-cost and highly accessible.
  • They have lower gross margins than their contemporaries or the incumbent.
  • They serve a smaller low-end target market at first, before expanding to a vast market due to their accessibility.
  • They’re hard to see coming and aren’t taken seriously. They quietly, slowly “climb the ladder” and can take years or decades to gain traction before they dramatically upend competitors.

Innovations that aren’t disruptive are electrical vehicles and ride sharing.

  • Tesla clearly doesn’t qualify under the traditional definition of a disruptive innovation. In the model described by Clayton Christensen, a new entrant offers substitute products using technology that is cheaper but initially inferior to products offered by mature incumbents. Then the disruptor improves its performance over time, eventually catching the industry either unaware or unable to adapt.
  • Uber on the other hand targets people who already use taxi services and doesn’t create an entirely new market.

Potential future disruptors are 3D printing and online education.

  • 3D printing truly excels in its ability to enable personalization. This ability to economically create a very limited run of widgets or entire devices – down to a single part run – is what makes 3D printing a truly disruptive technology. Add in the sheer speed of the process and you have a technology that will drive change.
  • Perhaps the most promising evidence of online education being a disruptive innovation is the fact that it seems to meet the needs of a different kind of student: The working adult, studying part-time and self-disciplined enough to complete programs through largely independent effort.

Technology will transform how we connect, learn, share and innovate in the future, having broad implications for organizations, workforces, and customers. Whether from great expectations, fears of job security, or uncertainty due to myriad options, technology is challenging leaders to reconsider how they will create and protect value in the future. In the coming decade, access to information will only increase, resulting in constant pressures to drive efficiencies, customize experiences, optimize decision making, and build agile and resilient organizations capable of predicting and delivering value to myriad stakeholders. Successful organizations need to transform their approach to emerging technologies, recognizing that the integration of humans and machines requires investment in both.