Disruptive Innovation

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Impact of new technologies (revolutionary change) on a firm's existence. Explanation of Disruptive Innovation of Clayton Christensen. ('97)

Contributed by: Neusa Hirota


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Clayton Christensen disruptive innovation

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  -

Disruptive Innovation Forum (19 topics) Help
  WHAT is Being Innovated? The 4 Ps of Innovation
There are actually 4 things or objects that one can innovate:
  1. PRODUCT/SERVICE: Product innova...
  12 Disruptive Technologies
It is important that business and policy leaders understand which technologies might matter to them and prepare accordingly. But which technologies could drive truly massive economic transformations and disruptions in the coming years? McKinsey recen...
  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...
  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 an...
  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 abi...
  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....
  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 count...
  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 advanta...
  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 technol...
  Comparison Disruptive Innovation versus Blue Ocean Strategy
Is Disruptive Innovation a liitle more detail of Blue Ocean Strategy??
If not whats the difference between the two?...
  Tips for Innovation Strategy
As a part of corporate success factor development process, we have found a need to build up an "Innovation Strategy". Can anybody give good hints or examples of what to or not to take into consideration?...
  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 ...
  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 continuo...
  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 cu...
  Is Value Innovation Disruptive Innovation?
Should value innovation, the corner stone of Blue Ocean Strategy be considered disruptive innovation?...
  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 t...
  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 ...
  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 ...
  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 weak...

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Expert Tips - Disruptive Innovation Premium
  How Can Incumbents Respond to Disruptors? - 5 Strategic Options in Reaction to Disruptors
  How to Find Good Product Ideas? List of 10 Approaches - Discovering New-Product Ideas, Creative Approaches
  Innovation Pitfalls - Avoiding Innovation Traps
  Challenging the Existing Strategic Logic - Finding New Markets
  The Simple-Cheap-Convenient Approach - Addressing the Unmet Needs of Customers
  Key Challenges of Internet Age for Management and for Product and Service Development - R&D, Product Development, Service Development, Strategy, Marketing, Innovation, Visioning
  Recent Innovation Trends | New Innovation Types - Open innovation, User Innovation, Value Innovation, Bottom-up Innovation
  How to Detect Consumer Needs that are Unmet? - Product Innovation, New Product Development, Innovation Strategy
  Distinguish Disruptive Technology Innovation From Disruptive Marketing Innovation! - 2 Distinct Capabilities...
  How to Think Differently in Innovation? - How to Be Innovative, Innovative Thinking
  How to Lead an Innovation Team - Best Practices, Innovation Team Management
  Classes of Innovation | Sources of Innovation - Innovation, Creativity, Organizational Innovativeness, Lateral Thinking, Out of the Box Thinking, Blue Ocean Strategy
  Innovating by Reconsidering Value Delivery - Fundamental Innovation
  Creating Organizations to Produce Breakthrough Innovations - Best Practices, Critical Factors, Creating an Organization to lead Radical Innovation
  Big-Bang Disruption - Technological Innovation
  Three Critical Capabilities in Developing a Strategic Corporate Disruptive Innovation Competence - (Disruptive) Innovation Competence, Strategic Innovation Capability, Corporate Strategy, Innovation Leadership
  Why Large Firms are Having Difficulties to Deal with Disruptive Innovations - Innovation Management
  What Makes a Company Innovative? - Innovation Best Practices, R&D Best Practices, Corporate Innovation
  Predecessor of Christensen - Technology-driven Change Theory
  Misunderstandings on the Concept of Disruptive Innovations - Technology Innovation
  How BOP Countries Can Disrupt Western Markets - Disruptive Innovation, Bottom of the Pyramid, Country-level Strategy
  Why Some Technology Revolutions Take Off and Others Don't - Adoption of New Technologies
  Geographic Dimension to Explain Disruptive Innovation in Emerging Countries - Disruptive Innovation in Emerging Countries

Resources - Disruptive Innovation Premium
Asymmetric Innovation - Challenger or latecomer firms
Disruptive Technologies - Emergence of Competition
Introduction to Innovation and Disruptive Technologies - Innovation Management, Innovation Strategy
Strategic Innovation Leadership - Leadership, Strategic Leadership, Innovation Management
Distinctive vs. Dynamic Capabilities - Inside-out Business Strategy
The Importance of Noncustomers - Market Research, Customer Strategy, Innovation Strategy, Customer Survey Pitfalls
Disruptive Innovation Diagram - Innovation Management

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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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