Disruptive innovations describe a theory, strategy, or product that either invades an existing market or creates new markets. In practice, disruptive innovation occurs when traditional key value drivers in an established market are substantially altered. These values include quality, service, speed, and size. In addition, they have often been affected by external factors such as economic downturns and shifts in the competitive landscape.
These factors have prompted many firms to reexamine their strategies and models. In recent years, these models and theories have been tested with remarkable success.
In business theory, a disruptive innovation refers to an innovative innovation that creates a brand new marketplace and new value network in place of an old marketplace and value network and eventually displaces established market-leading products, technologies, and relationships. Disruptive innovation can come about through several means, ranging from natural or gradual process changes, disruptive technological change and organizational initiatives.
The key to harnessing disruptive innovation‘s power is understanding what it is, how it can help, and why it is important.
Disruptive Innovation Creates Disruptive Markets
In business theory, a disruptive innovation refers to an innovation that creates a new market/value network and displaces an existing market/value network, displacing current market-leading companies, products, and strategies. The primary drivers of such displacements are the speed and magnitude of technology adoption and changes in consumer spending behavior. However, it can also result from changes in financial structure, corporate governance practices, or state policies. While these processes often happen over time, companies have identified rapid and extreme events as the catalysts for sudden and disruptive innovations in many cases.
It is difficult to identify when an innovative new idea or disruptive technology is important enough to disrupt a market in terms of business practice. As a result, some businesses wait for a long time before effectively incorporating new technologies into their operations. Others try to apply sustaining technologies first. Sustaining innovations are less expensive, do not require large research budgets, do not take a long time to implement, and can be quickly implemented. As a result, sustaining innovations will ultimately become a necessary part of most businesses. But if a company cannot quickly and effectively incorporate a disruptive technology, it may eventually suffer a severe financial loss.
Some different theories explain how and why disruptive innovation occurs. One school of thought in the disruption theory suggests that some ideas are important enough to be worth the investment costs and should be embraced as a strategy. The second school of thought, referred to as the disruptive capital theory, maintains that advanced technology should build more capital-intensive businesses than short-term innovation. Finally, another school of thought, referred to as the value-extraction theory, maintains that companies should extract value from the markets that they serve instead of throwing money at customers to maintain them.
What Makes a Successful Disruptive Innovation Strategy?
The simple answer is: It’s the new disruptive innovation. That’s what sets companies apart and builds the distinction between the winners and losers in today’s economy. While many are quick to point out the differences between Microsoft and Apple, perhaps less eye-catching are the differences between Apple and Google (or Amazon and eBay). Both are leaders in their respective markets but are they innovators? And just what does it take to become an innovator?
Simply put, an innovator is someone who takes risks and executes a disruptive innovation. As Henry Ford once asked, an innovator is “not afraid to do what’s new.” If you don’t fear doing what’s new, you will probably never truly be an innovator – you will be another company trying to stay relevant by doing what everyone else is doing. But if you are willing to go against the grain and try something different, you are setting the stage for true success. This article will discuss the characteristics of a disruptive innovator and the innovation strategy that can help make your company stand out.
What makes a disruptive innovator? There are a few defining characteristics that define successful disruptors. Disruptive innovation is about innovation at the speed of light. In other words, disruptive ideas strike before competitors, and industry norms have a chance to develop. It is also about changing an entire business model and developing a brand new marketplace. Just as the term suggests, there is no substitute for disruption when it comes to innovation.
Another characteristic is the ability to think creatively in a highly competitive niche. Remember that competition doesn’t respect niches or deadlines; it only respects reputation. Think about all of the patent applications that came out of the iPhone in 2021. Not only did Apple invent the smartphone, but they also perfected the first effective disruptive innovation strategy – the “kill switch.”
Finally, a disruptive innovation strategy requires an unconventional thinking process. Disruptive innovation isn’t just throwing together any old idea; it’s about throwing out all of the rules of conventional thinking and doing something fresh and unique. For instance, Apple’s revolutionary App Store was originally designed as a free product that allowed customers to take advantage of the store’s” Apps for Free” feature. As a result, the App Store changed how people purchased physical products and services. Today, the App Store allows consumers to purchase apps individually or with a credit card and has become one of the largest franchises in the world.
The three characteristics listed above are the hallmarks of a successful disrupter. They require originality and creativity, and they require a high level of flexibility and willingness to change. While all three of these traits can be found in large companies, none of them will be a true success without the right entrepreneur to implement and manage them. There are many talented people out there who can successfully implement disruptive innovation. However, the best ones are rare and far between, and those that come from great ideas are in short supply.
The Evolution of Disruptive Theory
The Evolution Of Disruption Theory is very useful for business owners and managers that need to create a strategy to cope with a new disruptive element in the marketplace. But, unfortunately, it is often difficult for entrepreneurs to determine their firm’s path to deal with the issue. Fortunately, this article offers some important insights into how disruptive forces come to play a major role in today’s business environment.
In many cases, the key to dealing successfully with disruptive elements in business is simply identifying what they are and how they impact your company. This involves defining what the word ‘disruptive’ means in your particular industry. The following are several examples of common disruptive elements that have been identified in different industries:
Innovations and new ideas are always disruptive in one way or another. There are many different ways that innovative ideas can be disruptive to a business. A disruptive idea can be a new product, new technology, a new method of delivery, or a combination of any of these elements. Disruptive elements often originate in the technology itself. For example, the discovery of the Internet and its impact on various industries has resulted in a whole new set of dynamics that affect how they operate and what they sell.
Another example comes from how changing consumer preferences have changed the face of retail shopping. Many people now shop online. As a result, brick-and-mortar retailers have to change their strategies and develop methods for attracting and retaining customers. How online shopping and its impact on marketing strategies can be considered a disruptive force in business. The analysis here goes beyond simple demographics and focuses on the broader questions of whether the changes online have changed the nature of the relationship between businesses and customers and whether such a change has affected market share and profitability.
Some scholars argue that change and its resulting disruption are natural consequences of organizational structure. However, as organizations grow and become complex, they encounter barriers to growth that can create a disrupter, a phenomenon called “structural change.” According to the disruption theory, large-scale organizational change is characterized by profound internal disruption and a simultaneous external disruption that make it difficult to move the organization in a single direction. In this way, disruptive elements in business theory provide a framework for analyzing business change and the evolution of disruptive elements.
The disruptor theory can also be used to explain why some business activities become seemingly inevitable. For example, when a business needs to make major technological changes, it may seem like the only course of action is to innovate new software, develop new technologies, and deal with the regulatory issues that will inevitably arise.
However, some experts argue that it is often easier and less costly to do things in incremental ways. This approach allows small companies to make more investments in technology without making big structural changes that could lead to significant organizational change. As a result, some business owners have avoided dealing with significant disruption using this strategy while continuing to profit from their core business models.
The Role of Sustaining Innovation in Generating Growth in Small Growing Businesses
Innovation is the key to sustaining innovations in a business. Innovation is the process of coming up with something new or different and then exploiting that thing to make it better. Creating something different or coming up with a better way of doing things and exploiting some of the other things existing to make the new better. The concept of sustaining innovation can help business owners develop a better idea and then move to exploit it to grow their business. A business that is not able to sustain its innovations is a business that will surely fail.
There are two sides to every coin. On the one hand, large companies spend millions of dollars per year hiring large teams of people to develop ideas. On the other hand, small companies spend thousands of dollars hiring people to develop an idea for a product or service. So, the big companies can spend millions on research and development, while the small companies can put up a website and market the product or service.
So, how do these companies separate their idea from the others? The answer is simple. They invest in sustaining innovations. For example, a company might invest in researching if a certain product works. The company then implements the research, finds out whether it works, implements another idea that works even better, etc.
Small companies can’t do this first because most innovations don’t work out second. After all, it takes a lot of money to invest in researching and developing new ideas; third, it may take several years before the business can finally implement the idea because it doesn’t pay to be innovative in a business that is already growing.
Most of the time, when a new idea for a business is being presented, the original business will hesitate. The new idea might not be good enough. The original business will have to spend many resources gathering more information and testing the product before implementing it. Small, growing businesses can’t afford to do this because it doesn’t make economic sense. They need to focus on implementing and executing new ideas to generate growth.
The role of sustaining innovation in generating growth can be played by small growing businesses, too, but they need to be creative and consider the process. A good idea isn’t going to grow in the same way if it hasn’t been tested. Some innovations may work, and other innovations may not. Either way, it’s important for small businesses to continuously look for ways to implement innovative ideas in their business. This will help them differentiate themselves from the rest and keep the business growing at a steady pace.
Disruptive Innovation and Organizations
In business theory, disruptive technology is an invention that creates value in the market and dislodges an existing dominant market-leading product, brands, and relationships. The new product or technology is often described as “disruptive” because it invades and bypasses an earlier technology, device, or practice. Examples of disruptive innovations include the internet, digital music, digital video, air transport, online publishing, cellular communication, handheld devices, GPS systems, the telephone, cable television, personal electronics, etc. disruption generally refers to the tendency for something new to displace previously established practices and products or services. By changing how things are done, disruptive technology can create a radical shift in how things are done and force an entire industry or business system to reevaluate and refocus its resources on new strategies and tactics.
Milan Zeleny, author of disruptive innovation: Creating and Sustaining Market Advantage, defines disruption as: “the arrival of a technology whose adoption and deployment lead to the displacement of an older technology or model, in turn leading to changes that affect the marketplace.” For example, when internet users were looking for ways to access the MySpace music site, they turned to search engines like Google instead of using their normal browsing tools. Soon, they found that MySpace provided them with access to a huge database of music and other media files.
That shift was not only disruptive in the sense that it disrupted the music industry – it was also likely to have broad implications for other industries. For example, the shift could cause online music retailers to shift from providing CDs and records to selling MP3s or other high technology audio files. Thus, disruptive innovation has become a phrase that is frequently used to describe new or emerging technologies.
Disruptive innovations are not always considered to be disruptive. For instance, computer networking has become a high-speed travel service over the last decade. Once the primary method of communication for businesses and professionals, email has overtaken postal mail and faxes. Likewise, new high-tech telephone services like VoIP have replaced traditional telephone services. In both cases, the disruption has occurred because innovations have made previously available services more accessible and efficient.
These innovations do not happen in a vacuum but rather in the context of existing trends. The disruption brought about by disruptive technology often requires an overhaul of conventional thinking about how things work. Disruptive innovations are often necessary because established markets and institutions are changing to match new demands. Even if established markets and institutions can handle these changes, they may not support net enlargement and additional demands for services because of their organizational culture and structure. In this scenario, an innovation may be necessary to change the organization’s organizational structure to support net enlargement and further demands.
This kind of innovation will often require an entrepreneur to take on a different mindset, which is different from the one they normally possess. Typically, entrepreneurs with disruptive innovation backgrounds are unsuccessful in organizational changes and maintaining growth in well-managed companies. The key here is to understand the nature of your own organization and its internal processes well enough to know what disruptive innovations are likely to occur and what kind of organizational culture and structure would be best suited to support such change. A well-managed company should have an understanding of its own organization well enough to be able to anticipate problems and deal with them before they occur. Still, if a company is not well-managed or has a very mixed organizational structure, it may not anticipate these problems and manage them as well.
The second type of disruption innovation occurs when an entrepreneur decides to pursue an off-the-shelf innovation instead of building something from scratch or customizing an already available solution. Often, this occurs after an established platform and supply chain are no longer sufficient to provide the competitive advantage enjoyed previously. Often, this means that an entrepreneur will have to re-implement key elements of the organization to bring it up to par with what it once offered.
When this happens, many times, the original innovation is quickly re-engineered to fit the new mold, and it becomes clear to all that something was wrong from the start. Of course, entrepreneurs must be careful not to re-invent the wheel, but when an off-the-shelf solution is not enough, an entrepreneur can customize it to make it more useful to the customer. In many cases, the custom innovation will pay for itself because the more customized and useful a product or service is, the more likely consumers will use it. As a result, the company will grow in size and revenue.
Innovation – The Dilemmas of Innovation
“When New Technologies causes Great Firms to Fail, that is, when new technologies actually create irreparable damage for an enterprise that has been in business for some time,” according to the classic article, “The Innovator’s dilemma.” In his famous article, Christensen explained that when new technology becomes a market disruption, it usually does so by changing how the firm conducts business and engages customers. If, for instance, a new digital camera makes a good camera, and a new microprocessor makes a computer chip that’s faster than the one that made the old chip, the firm that manufactures the new microprocessor is in great danger of going out of business. This seems like a self-evident reality. There’s no denying it. But perhaps it isn’t as clear-cut as it seems on the surface.
New technologies aren’t all bad or even necessarily unappealing; after all, many new technologies have created great advances in all areas of life. However, what makes a new technology “disruptive” in Christensen’s sense isn’t the mere fact that it changes how something else works but that the change makes existing businesses less efficient and less profitable. As Christensen states: “When a new technology becomes a disruption, its effects on a firm depend on its capacity to compensate for the losses it incurs as a result of those losses. Those firms that can do so successfully can weather the storm, both through increased sales and income and higher gross margin.”
Is it possible, then, to create new technologies that do not threaten existing firms? For example, many people have argued that certain kinds of innovations, like software applications that perform functions traditionally handled by employees, make businesses less productive. The concern is that because these kinds of innovations don’t add value to the firm in terms of increased profits, they take away jobs. However, this argument ignores the value added by these innovations in increased efficiency and reduced costs. In other words, by allowing workers to perform certain tasks once done by machines, these innovations allow them to do so more efficiently, leading to increased productivity.
What makes a disruption unique? Christensen uses the example of a newly invented chemical; when that chemical is released into the market, it causes a price increase for something else already being produced. As a result, something else becomes more expensive. The original product is no longer relevant in the market because its price has risen. In the disruptor’s dilemma, the new technologies that come along are viewed as potential disruptors because they change things from the inside out.
One thing to watch out for with new technologies is whether they will change the environment enough to change how things work in general. For instance, certain new fuel cars are disruptive because they emit fewer emissions than older models. However, some governments have passed laws requiring car manufacturers to sell only clean cars. If everyone is required to use this type of car, it may not be long before power plants burn most of their fuel resources, and cars will become the only reliable form of transportation. Changes like this are always risks when altering the balance of what is already known or imagined.
As always, when there is business disruption, it is incumbent upon businesses to figure out how to deal with it. The key is figuring out how to create a situation where businesses can adapt quickly enough to stay ahead of competitors who have access to new technologies. When a business is not prepared to think about a new technological breakthrough, it often falls victim to this sort of change and has difficulty adapting to changes. For a business to be prepared for new technology, it must be willing to look at all of its options and think about each scenario realistically. Innovation is risky, but not when a business has thought through all of its possible outcomes. Businesses need to understand their options and make the choices that best suit them in their particular fields.
Disruptive Innovation examples
What types of disruptive innovations have been most common in recent years? The most common are the disruptive elements of information technology, particularly information technology-related innovations, such as the introduction of the internet, mobile phones, and the growth of e-commerce. Other forms of disruptive innovation are new delivery vehicles for goods, such as trucking technology, or new modes of transport, such as air freight. In some cases, new industries have been developed around established markets. Still, others have come about as a result of changes in the economy.
One example is the development of the portable disk drive. A relatively new type of hard disk drive has already affected many aspects of our everyday lives. In 1998, the disk drive was invented by a group of scientists. Although it was introduced into the manufacturing industry later that year, it was much heralded in early reviews because it had many advantages over more traditional data storage methods. The key advantage of the disk drive was that it was extremely compact, storing enormous amounts of information.
Another example of a disruptive innovation occurs when new technologies, such as those associated with the internet are brought to market. When new technologies come to market, there are many winners and losers. One of the obvious winners is the innovated company, but many lose money because they did not have an appropriate technology core.
Some of the more well-known disruptive innovation examples include the invention of the cellular telephone, the internet, automobiles, cellular phone service, the digital camera, satellite communications, and DVD players. The theory behind these inventions is that technology, product, or process was either invented first or became useful and was later uninstalled or changed by other means. In theory, this process of change creates an opening for competitive innovation.
What about disruptive innovation in the low-end market? Low-end markets are not widely recognized as having unique markets with unique needs. These markets include everything from baby clothing to watches, from video games to MP3 players, and from tattoos to perfume. As a result, products in this low-end market are not usually thought of as being particularly disruptive.
It is not uncommon for a disruptive innovation example to be invented, get patented, get used, and withdrawn. Examples in this low-end market include the remote control toys, watches, and games. Additionally, some examples of disruptive innovation have been noted in the entertainment industry, such as the iPod, game consoles, and DVDs.
Disruptive Innovation Theories
Now let’s consider what a disruptive innovation can do to threaten the existence of existing markets. Two schools of thought on what forms of new market disruption will occur: disruptive innovation and disruptive innovation.
The disruptive innovation theory holds that new products that can solve a problem will create a sense of urgency in the market, which will drive consumers to buy the product even if it isn’t the best one available at the time. The paradigm suggests that a business needs to create a unique service or product or foster expertise in a particular niche to sustain and thrive in a new market.
The theory of disruptive innovation suggests that innovation should respond to a demand, which consumers sometimes give consumers, but which is often generated by a small number of companies. Usually, there is an established supply chain before a product makes it to the consumer, ensuring that competition remains low.
Just what causes these new, innovative systems to emerge? One school of thought is that they appear suddenly, out of nowhere, but this is not always the case. Several factors can cause disruptive innovations, including; changing consumer preferences, adopting new information technology, or simply creating new technological processes, methods, or products. Some economists believe that creating new disruptive innovations is primarily the result of changes in the economy. Still, they also point out that certain countries have been known to see major shocks to their economy due to disruptive innovations.
Impact of Disruptive Technology in Business
How does disruptive innovation impact the enterprise? The process of re-engineering or restructuring a process is disruptive innovation. The primary benefit to this is that it brings about greater efficiency and better customer value. It is also known to add significant value to the business through increased profitability, better control, and greater competitive advantage. Since most businesses cannot easily adjust to changing business models, disruption adds a new dimension to their operation.
What if your business needs to remain competitive, but you have some high-end customer segments in which growth potential is relatively low? In such circumstances, you may face a decision as to whether to adopt disruptive innovation or to reinvent your business model to target the new technology. If your organization has adopted the latter, there is less of a need to change your business model because you already have a product or service whose benefits can be transferred to the new technology.
However, if your organization still manufactures goods that consumers can use in the new technology segment, then it will be necessary for you to change the business model to target these high-end customer segments. You will need to redesign the supply chain so that it is more efficient, and you may also need to adjust your pricing structures to make better use of the new technology.
Who are the main victims of disruptive innovation? The key to defining who gets affected is to look at the nature of disruptive innovation. For instance, suppose that new technology allows consumers to order the same car accessories that their friends have at a fraction of the cost. Still, the new technology also makes it possible for consumers to customize their cars even more. So if this new technology, known as customization, has disrupted the car accessories industry, it will certainly impact the auto parts industry.
How do you prevent disruption, and what types of industries are usually the main victims? Some examples of industries that have been traditionally well-supplied by established distribution channels but are now being hit hard by disruptive innovations include the financial services, consumer products retailing, and the health and beauty retailing industries. There are many others. Besides, many manufacturing industries are also forced to look for alternative sources of raw materials, such as petroleum and coal. The most obvious examples are the automobile manufacturers, but the list is also very long: airlines, rail freight, postal services, computer manufacturers, etc.
Will changing your business model be enough to stave off a disruptive innovation? Some authors have argued that, in the face of a major disruptive innovation like Netflix’s DVD-streaming service, it would be necessary for the dominant companies to undertake something like remodeling or reformulation. They would change their business models and make them more flexible, open, and competitive. Others say it is no longer enough to adapt to innovations, especially when the current system is doing well. These authors suggest that the best way to avoid being taken down by a disruptive innovation is to adopt a disruptive business model yourself.
As a strategic consulting partner, we have found that adopting an innovation strategy, developing a new disruptive innovation strategy, and then using specific examples of past and current examples of disruptive innovation to create a tailored business solution from the available set of knowledge and data is one of the most effective ways of preventing the emergence of disruptive innovation.
We have adapted our disruptive consulting practice by looking at what industries have been hit before and today’s specific examples. Our clients call us to implement an integrated solution that focuses on solving these two problems: identifying the current problems and developing a specific solution. We also help our clients develop and implement an information-based, competitive marketing plan to ensure that they can respond quickly and effectively to any disruptive trends.
How to Prepare for Disruptive Innovation
If you’re a manager or business owner, the last thing you want to do is go through the motions with the same old disruption innovation strategies that have failed for so many other companies before. While this may seem like common sense, it’s clear from the big moves in technology and other areas that leaders are willing to go beyond their normal comfort zones when it comes to preparing for and responding to disruptive innovation.
In fact, many large corporations are implementing many different approaches to innovation and transformation, some of which are being implemented for the first time. As you consider how to prepare for disruption innovation, you can take several key steps to ensure you can stay ahead of the curve…
First, consider your existing framework. While it may seem intuitively obvious, the way you approach change will directly impact how you respond to disruptive innovation. For example, if you have an outdated or outmoded structure, you may find yourself struggling to adapt and respond to change and innovation. Therefore, while it might seem like a simple topic, you need to look at all aspects of your business and determine whether you are prepared to embrace a more disruptive innovation strategy.
Next, identify those impediments you face that could derail your efforts to implement a more disruptive innovation strategy. What are the barriers that can keep you from moving forward with your disruptive innovation agenda? For instance, if you face procurement challenges, are you dealing with too much competition, too few customers, or limited product choices? You may need to reevaluate how you approach procuring resources. Are you forced to purchase too many devices from too many suppliers? Can you streamline your supply chain to reduce your risk? When you know the answers to these questions and more, you’ll better answer how to prepare for disruption innovation.
Finally, you need to ask yourself what kind of changes you would be willing to make. Some of the biggest challenges you may face as a company involve changing internal processes, developing new forms of communications, or procuring new sources of power and energy. How well prepared do you think you are to manage these kinds of events, and how will you deal with the aftermath if they occur? How well prepared are you to make the kinds of changes necessary if you decide to adopt a disruptive innovation agenda?
These questions are important because they help you answer the question of how to prepare for disruption innovation. The truth is that not every business can effectively prepare itself for such events, but by thinking through these questions, you can better position your business for a change. In this way, you can ensure that you can adapt to the disruptive innovations that are sure to come. In the end, you’ll be glad that you took the time to consider these issues when you were thinking about how to prepare for disruption.
Now that you know these questions to ask yourself, you’ll likely have more than enough information to implement an effective plan. But there’s one more question that you need to ask yourself before you can answer this one. Will your current organizational culture adapt to the disruptive innovation agenda you’ve set forth? Remember that disruption is not a sudden event. It comes in small steps, often marked by resistance, and then moves on to more easily digestible forms of disruption. If you want to get your business ready for disruption innovation, you have to make sure that your organization’s culture can change.