3 Indicators of Disruptive Innovation
Disruptive Innovation – a theory introduced more than two decades ago, is oftentimes used too loosely. The architect of disruption theory, Clayton M. Christensen, recently partnered with a team to release an article in the Harvard Business Review setting the record straight and redefining disruptive innovation. Here are three takeaways from the article on how to properly define the popular theory:
1. Disruptive innovation must start with a smaller company
Notice we said “smaller” company, not small. The original definition of the disruption theory describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.
Here’s how it works: larger, more established companies begin to focus on improving their products and services for their most demanding customers. This leads them to overlook customers who may not be able to afford their high-quality services. In this situation, a smaller, disruptive innovator swoops in and offers a product to those overlooked corporations, which brings us to our next point.
2. Disruptive innovation may originate in a low-end foothold
There are two types of markets incumbents overlook, according to the article in the Harvard Business Review; the first is the low-end foothold. These exist because companies are so focused on providing the most high-end products to their top-paying clients that they tend to neglect those clients who don’t require as much. This opens the door for disruptive innovators to offer “good enough” products to those clients.
The established companies often disregard the disruptive innovators at first because they are so focused on their higher paying clients. This gives the disruptive innovators time to grow and expand and eventually capture a greater client base. By the time the established company discovers what is happening, it is too late to counter. Thus, the disruption theory takes place.
3. Disruptive innovation may originate in a new-market foothold
The other group often overlooked by incumbents is the new-market foothold; this foothold exists when disrupters create a market where there was not one before. According the Harvard Business Review, they turn nonconsumers into consumers. New markets typically do not attract well-established businesses because of the strategic work required to get their attention. Disruptive innovators are willing to put in the time and effort to creatively reach out to these new markets and capture the fresh audience.
By definition, for an innovation to be genuinely disruptive, it must have these characteristics. It is vital that we understand this in order to manage innovation effectively and respond to it appropriately.