Disruptive Innovation
(Christensen)

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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  -


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Innovation Pitfalls

 
 
 

Challenging the Existing Strategic Logic

 
 
 

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Recent Innovation Trends | New Innovation Types

 
 
 

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How to Design Experiments to Support Decision-making on Strategic Innovations

 
 
 

Classes of Innovation | Sources of Innovation

 
 
 

Why Large Firms are Having Difficulties to Deal with Disruptive Innovations

 
 
 

Big-Bang Disruption

 
 
 

What Makes a Company Innovative?

 
 
 

Three Critical Capabilities in Developing a Strategic Corporate Disruptive Innovation Competence

 
 
 

Predecessor of Christensen

 
 
 

How BOP Countries Can Disrupt Western Markets

 
 
 

Designing Complex Products or Systems Through Iterative Rapid-cycle Prototyping

 
 
 

Misunderstandings on the Concept of Disruptive Innovations

 
 
 

Why Some Technology Revolutions Take Off and Others Don't

 
 
 

Geographic Dimension to Explain Disruptive Innovation in Emerging Countries

 
 



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Resources - Disruptive Innovation

Asymmetric Innovation

 

Disruptive Technologies

 

Introduction to Innovation and Disruptive Technologies

 

Explained: How can Innovative Players Beat Large, Established Firms?

 

Prof. Clay Christensen Explains Disruptive Innovation

 

Design Thinking for Innovation

 

Disruptive Innovation: Why Market Leaders Fail

 

Strategic Innovation Leadership

 

Distinctive vs. Dynamic Capabilities

 

The Importance of Noncustomers

 

Disruptive Innovation Diagram

 
 

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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


Return to Management Hub: Change & Organization  |  Marketing  |  Strategy


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