This article is an effort to capture the basic disruptive innovation definition. In order to do that, people must know the basic tenets of disruptive innovation. During the examination process, the common pitfalls in the application of disruptive innovation, and how these develop will be a part of this article.
An explanation why using disruptive innovation correctly matters will also be part of the article. The turning points in the disruptive theory will also be part of this process. You can also read on the evolution of thinking and tips on the topic. Disruptive innovation gives capitalism a tool that helps predict which businesses will grow. But first let’s read more.
What Is the Disruptive Innovation Definition?
The disruptive innovation definition describes a process whereby a small company that may have limited resources challenges a bigger, incumbent business. Incumbent businesses tend to focus on products and services that cater to their most demanding and loyal customers. So they ignore the needs of other customers. In many cases, an incumbent will exceed the needs of some segments of their customer base and will walk away from other segments. Smaller businesses begin to target the customers that want to be big company customers.
The small companies gain a foothold in the market by delivering a more suitable product or service, and they frequently do that at a lower price. Incumbent businesses may not respond because they are chasing higher profits in the more demanding segments of their market. The smaller businesses move upmarket, and they start delivering the performance that the mainstream incumbent market wants. But small businesses still keep the advantages that were the catalyst for their early success. When the mainstream market starts buying and using the products and services of the small business in volume, a disruption occurs. That process is disruptive innovation.
Where Does the Term Disruptive Innovation Come From?
The disruptive innovation definition is the brainchild of Harvard professor, Clayton Christensen. Christensen is the Kim B. Clark Professor of Business Administration at the Harvard Business School. He is also an author, entrepreneur, and missionary. The disruptive theory is a proven way of thinking about innovation-driven growth in the marketplace. The theory is a guiding light in the business world and in well-established corporations like Intel and Salesforce.com.
Professor Christensen was able to identify the characteristics of disruptive businesses in the beginning stage of his theory. Those characteristics include smaller target markets, simpler products and services, and lower gross margins. The simpler products and services may not look as attractive as the existing models. But as the smaller businesses gain traction in the marketplace, they become disruptive innovators.
How Do Disruptive Innovators Get Started?
The disruptive innovation definition its start in two types of markets. Those markets are not priorities in the incumbent’s profit projections. Less-demanding customers don’t get the attention they deserve. They become irritated and frustrated by the incumbents who ignore them. This opens the door for disruptive innovators.
They provide the frustrated customers with a good enough product at a low-end price, and the process of disruption begins. The other market where disruptors thrive is in new markets. They create a market where none exists. Disruptors can turn non-consumers into consumers.
Which Are the Pitfalls Of Disruptive Innovation?
- One of the main pitfalls of any disruptive innovation definition is, innovations don’t catch on with an incumbent’s mainstream customers until the quality of the innovator’s products and services catch up to the incumbent’s standards.
- Another pitfall is, sustaining innovations may look like disruptive innovations. Sustaining innovators make good products better for the incumbent’s existing customers. Some examples of sustaining innovators are, better phone reception, the fifth blade on a razor, and a clearer and better TV picture. These upgrades help businesses sell more products to their best customers.
- A third pitfall and a common mistake is, disruptive innovators focus on the successful results they achieve from a product or service, but success is not always a product of disruption. Not every disruptive innovator’s business method is successful, and not every new business is a disruptive innovator.
- The other pitfall is essential refinements in the disruptive innovation theory since its inception in 1995 are not as popular as the original theory. As a result, the disruptive innovation theory has shortcomings in the eyes of some business people.
3 Reasons Why Disruptive Innovation Matters
1. Good Perspectives
Disruptive innovation gives the market a tool that helps predict which businesses will grow. But that is not the only reason why the theory of disruptive innovation matters in the marketplace. Personal computers, cellular phones, discount retailers, community colleges, and retail medical clinics are all examples of why disruptive innovation matters. So without disruptive innovators, new business models would not exist. Consequently, without new business models, capitalism breaks down.
Companies like Apple, Netflix, and Uber confirm the need for disruptive innovators in a capitalistic society. Capitalism is always changing, so it maintains dominance, and disruptive innovation is a major tool in that maintenance process.
2. There Is a Risk
One of the tips to know about disruptive innovation is that it is a process, and it takes time to materialize. Not all innovators succeed. And not all incumbents respond to disruptors. Other incumbents defend their business by offering better products. That process helps consumers.
The smart disruptors improve products and that also help consumers. But the disruptive theory does not, and never will, explain everything to know about innovation or business success.
3. Supporting Economy
The need to expand and refine disruptive innovation definition is an important element in capitalism. But effective responses to disruptors still remain elusive. The current belief is businesses should create a separate division that explores and exploits a new disruptive innovator.
Sometimes this idea works, and sometimes it fails. A failed response to a disruptive threat is not the work of insufficient executive leadership or a lack of financial investment. But there are other issues to consider.
The challenges that exist for an incumbent and a disruptor are not always the same. They change frequently, and the ways to address challenges are still being tested.
Some incumbents want to eliminate disruptive innovators. But what they may not realize is they are chipping away at one of the fundamental tools of capitalism.
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