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What is Disruptive Innovation? Description
The Disruptive Innovation model from Clayton Christensen is a theory that
can be used for describing the impact of new technologies (revolutionary change)
on a firm's existence. Clayton Christensen first coined the phrase "disruptive
technologies" in 1997, in his book "The Innovator's Dilemma: When New Technologies
Cause Great Firms to Fail".
He showed that time and again almost all the organizations that have "died"
or been displaced from their industries (because of a new paradigm of customer
offering) could see the disruption coming, but did nothing until it was too
late.
By doing what good companies are supposed to do - cater to their most profitable
customers and focus investments where profit margins are most attractive -
established industry leaders are on a path of Sustaining Innovations and leave
themselves open for disruptive technologies to bury them. This happens because
the resource allocation processes of established companies are designed to
maximize profits through sustaining innovations, which essentially involve
designing better and better mousetraps for existing customers or proven market
segments. When Disruptive Innovations (typically cheaper, simpler to
use versions of existing products that target low-end or entirely new customers)
emerge, established companies are paralyzed. They are almost always motivated
to go up-market rather than to defend these new or low-end markets, and ultimately
the disruptive innovation improves, steals more market share, and replaces
the reigning product.
Types of Innovation
Companies have two basic options when they seek to build new-growth businesses.
They can try to take an existing market from an entrenched competitor with
sustaining innovations. Or they can try to take on a competitor with
Disruptive Innovations that either create new markets or take root
among an incumbent's worst customers.
There are two distinct types of Disruptive Innovations. The first type
creates a new market by targeting non-consumers. The second competes
in the low end of an established market.
Origin of the Disruptive Innovation model. History
Christensen's research and studies at Harvard.
Usage of the Disruptive Innovation method. Applications
- All kinds of companies - as they can be impacted by technology innovation/change.
Steps in Disruptive Innovation. Process
- The model shows that, as the performance demanded by the customers of
an existing market increases over time, so does the performance provided
within a technological paradigm. Often the performance improvement provided
has a different trajectory to the trajectory of performance improvement
demanded by the customers (see figure). When the trajectory slopes differ,
and the performance provided exceeds performance demanded, new technologies
that were only performance competitive in remote market niches may migrate
into other customer networks. This provides innovators with a vehicle to
new customers, who would have previously viewed their offerings as substandard;
and enables them to offer established mainstream markets a new set of performance
value attributes that are now more relevant than the current paradigm.
- Disruption and commoditization actually go hand in hand. A company that
overshoots, simply can't win (a firm that improves a product to the point
that it is more than good enough for customers to use and pay a premium
for). Either disruption will steal its markets, or commoditization will
steal its profits. While new waves of disruption wash over an industry,
the place where the money will be will shift across the value chain over
time. While this happens, companies that position themselves at a spot in
the value chain where performance is not yet good enough will capture the
profit.
Limitations of Disruptive Innovation. Disadvantages
- Disruptive Innovation requires a separate strategy process. This process
must be emergent and focused on unanticipated opportunities, problems and
successes, rather than intended and focused on improved understanding of
what works and what doesn't.
- Instead of designing products and services that address current behavior
of current customers, the underlying aims of people should inform the design
of innovations. Understanding what people really need is however far from
easy.
- Disruptive businesses can't achieve big profits very fast, due to their
nature (addressing new markets, or addressing low end of existing markets).
Venture capitalists are increasingly impatient for businesses to deliver
profits.
Assumptions of Disruptive Innovation. Conditions
Companies risk death with decisions to ignore technologies that do not
appear to address their customers' needs, as they become fatal when two paradigmatic
trajectories of progress interact.
Book: Clayton M.
Christensen - The Innovator's Dilemma -
Book: Clayton M.
Christensen - The Innovator's Solution -
Book: Clayton M.
Christensen - Seeing What's Next -
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Public - Private Partnerships
"Cooperation between knowledge institutions and companies (valorisation) is key for knowledge creation, innovation and economic growth.
Can I please have your suggestions for requirements for valorisation? Thanks in advance..." |
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Innovation Strategy: The Three Horizons of Growth (McKinsey)
"One of ways of thinking about innovation strategy is to use the 3 Horizons of Growth developed by Steve Coley at McKinsey.
The framework provides a useful mold to formulate an organization’s product and service portfolio strategy. It's a diagnostic tool that allows for evaluating the health of a product/service strategy pipeline and for setting up the alignment of short, medium, and long term (innovation) plans of an organization. The model describes 3 innovation horizons in the following manner:
 - Horizon #1: The Core Business that is most associated with the company in its current state. This typically is an established business that requires most of the attention of the company’s employees and generates the bulk of the sales volume, cash flow and profit. The focus in Horizon #1 is on “Defending and Extending” the core business and on superior execution.
- Horizon #2: Includes all Emerging Opportunities that could be a variety of new business opportunities that the company has developed, licensed or generated from partnerships and strategic alliances. The focus in Horizon #2 is on leveraging “Positional Advantage” and forcing these opportunities to further prove themselves and gain steam, possibly to become part of the core business in the future.
- Horizon #3: Represents Innovative New Ideas for profitable growth in the future. Focus here is on clustering ideas into themes, sorting out the good and great ideas and feeding them so they can emerge from the Horizon #3 incubator to become Emerging Opportunities.
Source: The Alchemy of Growth, Mehrdad Baghai, Stephen Coley, and David White." |
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How to Develop Disruptive Innovation Skills?
"I believe disruptive innovation skills can be mostly taught.
Beyond the associative skills which is cognitive, the other behavioral skills required to be a true innovator are discovery skills - questioning, observing, networking and experimenting.
We need to teach our students as well as people in industry to challenge the status quo and use these behavioral skills to do so. I want to connect with true innovators and create a mentoring program to grow disruptive innovators and improve the skills of people who are already innovative." |
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Disruptive Innovation or Improved Technology?
"Disruptive innovation is only a means of improving existing products as it creates new, better and unexpected sets of values of products. Every modern organization should strive to maneuver by being able to identify trends and disruptors with the ability of acquiring them. Disruptive innovation is evolutionary and always good and better for the end-user." |
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Leadership and Taking Action
"Don't forget the important point of taking action after all the theorising! Sometimes I think it's more down to the leadership of the company.
If you stand on train tracks and see the train coming don't just stand there until it hits you." |
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Impact of the New Technology
"Our countries are not concerned by this issue because not developed. We are only getting negative impacts due to this technology development.
However, I can add that theses negative impacts concern natural resources ( coltan ) in my country which is serving for the production of phones, computers etc." |
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Disruptive Innovation and Public Sector Organisations
"This model appears to describe the potential life cycle of a firm in market economies where profit maximisation is the goal. If public good is the goal as provided by public sector organisations then no need for innovation to be hoarded as no advantage in terms of overall public good. Not certain how to develop this argument. Must have bearing on actions of innovative firm too in market economy." |
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Strategic Options for Old-Technology Firms
"What should be the strategic response of old-technology firms when a promising new technology shows up? Typically firms respond by either
1. Fighting the new technology, or
2. Trying to make a transition to the new technology.
Ron Adner and Daniel C. Snow recommend a third strategic option in their article worth reading "Bold Retreat - A New Strategy for Old Technologies" in the Harvard Business Review of March 2010:
3. Bold retreat. Proactively give most of the established market to the new technology and instead pursue either a:
3a. Retrenchment to a niche of the traditional market (where the old technology has some advantage over the new technology), and/or
3b. Relocation to a new market (where the old technology has some advantage over the new technology).
Main advantages of a bold retreat strategy are that it may allow the firm to continue to make money on a smaller scale. This may give it a later option to invest in another growth opportunity.
Drawbacks are the need for a significant organizational change process and a tough communication job to explain this strategy to current stakeholders." |
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Paradigmatic Changes Require Re-orientation of Ones World Views
"So often there are changes which are semantic. My view is that paradigmatic changes require re-orientation of ones world views. That is very ambitious I know especially in the education field that I work in.
Education in the UK is influenced by the Third Way. Education in South Africa where I live and work is influenced by the Third Way because of the global nature of things but a developmental dimension as well. I am not sure that people in the human resources sector of education take this seriously. What is the history of the Third Way. Where does it come from and how do you advance. What is the paradigmatic change. What are the fundamental assumptions, model, theories, practices and tools? How do they differ? Or am I complicating it?" |
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Disruptive versus Incremental Innovation
"Typically, Incremental Innovation exploits existing forms or technologies... Improves upon something that already exists or reconfigures an existing form or technology to serve some other purpose... It is other wise called marginal or continuous innovation. It primarily serves existing markets.
Radical Innovation is a departure from existing form or technology to a completely new thing in this world. Also called as breakthrough or discontinuous or disruptive innovation. It has the potential to upset industry's business model, standards. Primarily serves emerging markets." |
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Disruptive Change and HR
"Innovation is necessary and mandatory for a firm to be competitive in the current operating business environment.
However, when introducing new ideas of doing business, new technology to support the operations, new processes and new approaches to customer service, the human resource development is also disrupted as the staff is required to be constantly trained to acquire the knowledge which will enable them to apply and adopt the innovations for the changes to be successful.
The mismatch between the competences of human resources and the innovations may make the changes fail and not produce the intended results." |
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Business Model Innovation
"Dear all fans of Clay!
IPTV is probably and most likely a disruptive technology, but more important, is it feasible to follow a disruptive strategy? Well, I think it's important to look at the business model innovation. Then it will be related to who is behind the IPTV techology, and how they are bringing it to market. Tip: Read the book "The innovators guide to growth", issued now in July. Written by Mark and the others fab. persons at Innosight!" |
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Practical application
"I have set up a new company specifically to apply Christensen's theories to the £750m a year qualifications sector in the UK. If you want to check out the strategy it is outlined briefly at theingots.org/community/node/5504
" |
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Blue/Innovate and Red/Disrupt
"An interesting exercise is to work through a product's feature set using both the Strategy Map of "Blue Ocean Strategy" (Kim & Mauborgne) and the disruputive thinking of Christensen.
Blue Innovation creates a new product feature and then makes a market out of it to focus on a new capability -- portable cleaning with the Tide-to-go-Stick, portable computers with smaller drives/better batteries, etc.
Red Disruption challenges the assumptions that 'customer knows' best. Entrants re-order an existing feature set to satisfy part of an existing market that is less than satisfied with current offerings -- Nucor steel made its initial mark by making cheap & fast more important than quality and custom specs, analytic databases trade transaction processsing for user response time, and many packaging innovations in consumer products.
A killer app probably does both -- iPod + iTunes." |
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Asymmetric Innovation
"Asymmetric Innovation = Asymmetric Situation + Customer Value.
Asymmetric Situation is a resulting none-direct-competitive situation in favor of challengers who take a series of strategic actions by exploiting powerful competitors' critical weaknesses inherent within their status quo.
The Asymmetric Situation Model consists of 5 types of asymmetric situations:
1. asymmetric information,
2. asymmetric perception,
3. asymmetric priority,
4. asymmetric willingness and
5. asymmetric capability.
Asymmetric Situations and Asymmetric Innovation are the key concepts put forward by me in my new book "Asymmetric Innovation: Pathway to Success for Callengers".
An introduction presentation can be found in the Expert Tips section below (Premium only)." |
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Disruptive Innovation Special Interest Group
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Disruptive Innovation Education & Events
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Compare with: Product Life
Cycle |
Twelve Principles
of the Network Economy |
Bass Diffusion Model
| Ten Schools
of Thought |
Blue Ocean Strategy
| Positioning |
Innovation Adoption
Curve | Marketing Mix
| Forget Borrow
Learn |
Four Trajectories
of Industry Change |
Co-Creation |
Three Dimensional
Business Definition
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| Strategy
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