What Is Disruptive Innovation?

Suppliers such as Swift and Armour discounted boxed beef because the meat was frozen, and they had previously failed in their own attempts at frozen beef. Clayton M. Christensen is best known for his theory of disruptive innovation, in which he warns large, established companies of the danger of becoming too good at what they do best. To grow profit margins and revenue, he observes, such companies tend to develop https://1investing.in/ products to satisfy the demands of their most sophisticated customers. As successful as this strategy may be, it means that those companies also tend to ignore opportunities to meet the needs of less sophisticated customers — who may eventually form much larger markets. An upstart can therefore introduce a simpler product that is cheaper and thus becomes more widely adopted (a “disruptive innovation”).

  1. But instead of telling him what to think, I [told him the story of the minimills and] taught him how to think.” Christensen’s articles do the same for readers.
  2. In the late 1990s, the automotive sector began to embrace a perspective of “constructive disruptive technology” by working with the consultant David E. O’Ryan, whereby the use of current off-the-shelf technology was integrated with newer innovation to create what he called “an unfair advantage”.
  3. Disruptive innovation as a theory of change is meant to serve both as a chronicle of the past (this has happened) and as a model for the future (it will keep happening).
  4. Our first discovery was that, despite the theory’s widespread use and appeal, its essential validity and generalizability have been seldom tested in the academic literature.
  5. The internet has become so ingrained in the modern world that the companies that failed to integrate disruptive innovation into their business models have been pushed aside.

The majority preferred to answer the questionnaire over the phone (85%) or in person (4%). Following live surveys, we informed people of the topic of our study and engaged in open discussions about how the case matched the theory. A nonprofit, nonpartisan think tank dedicated to improving the world through disruptive innovation. The factor that sets new-market disruption apart from low-end disruption is its focus on an audience that doesn’t yet exist in the market. Offering a more cost-effective, simple, or accessible product effectively creates a new segment. As knowledge surpasses capital, labor, and raw materials as the dominant economic resource, technologies are also starting to reflect this shift.

For example, an expert in a top-rated technical school told us that his research on the disk drive industry suggested that the case of one disk drive company, Seagate Technology Inc., indeed matched the theory of disruption. Seagate does seem to have overlooked the value of emerging 3.5-inch disk drives, and as a result, it was temporarily displaced from leadership in the industry. Yet most of the time, Seagate and other companies responded effectively to presumably disruptive threats.83 Thus, the theory provides a good reminder of potential pitfalls, he argued, but in no way does it predict what most companies will do. Our first discovery was that, despite the theory’s widespread use and appeal, its essential validity and generalizability have been seldom tested in the academic literature.

Innovation Management: the theory explained

High technology is a technology core that changes the very architecture (structure and organization) of the components of the technology support net. High technology therefore transforms the qualitative nature of the TSN’s tasks and their relations, as well as their requisite physical, energy, and information flows. It also affects the skills required, the roles played, and the styles of management and coordination—the organizational culture itself.

Types of Innovation (Henderson and Clark)

This disruption is because the new product offers value that no other product or technology has. This is often accompanied by lower costs and greater convenience for the user. Christensen posited that there are two types of technologies businesses deal with. Sustainable technologies allow a business to incrementally improve its operations in a predictable timeframe.

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The theory of disruptive innovation, also known as the disruption theory, was introduced by the same Clayton Christensen. Disruptive innovation therefore has a major impact on the way businesses organize their day-to-day activities. From logistics to the pharmaceutical industry and marketing, it is likely that many more innovations will be introduced in the future that will cause market disruptions. Disruptive innovation refers to the process of transforming an expensive or highly sophisticated product, offering, or service into one that is simpler, more affordable, and accessible to a broader population. It explains the process of how innovation and technology can change markets by presenting affordable, simple, and accessible solutions and after doing so, disrupts the market from which its predecessors were born. The internet was disruptive because it was not an iteration of previous technology.

Understanding disruption is also helpful if you are looking for opportunities to start or scale your business. An understanding of disruption, coupled with Christensen’s other theory of “jobs to be done” can help you create products and services that will be desired by customers, and if you play your cards right, will be left alone by incumbents. Professor Clayton Christensen’s research proved that established companies often fail to see the value of these disruptive innovations because they are too focused on their own customers and market share. Much of that picture comes from the case studies embedded in each article. Christensen was a deliberate storyteller, and his business examples serve as parables; compelling and memorable, they give readers the context to apply his ideas to their own industries. Those who know Christensen’s work are familiar with the success of steel minimills (disrupters!) and the fate of Digital Equipment Corporation (disrupted!); they know what goes into the creation of the best milk shake (a product with a job to do) and why the iPod was the MP3 player that really took off (an innovative business model).

As he clarifies, disruption is “what happens when the incumbents are so focused on pleasing their most profitable customers that they neglect or misjudge the needs of their other segments.” It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Another strategy is to partner with the company bringing a disruptive innovation to market to ensure there is no need to compete. This includes investing in a startup, or developing a joint venture to enter a new market. Critics argue that some organizations do respond successfully to disruptive innovations and that the disruptive party itself loses to the new competitors.

The Model T car is an example of something not considered to be disruptive innovation because it was an improvement on existing technology and it wasn’t widely adopted upon its release. The auto industry didn’t take off until mass production reduced prices, moving the entire transportation system from hooves to wheels. In that sense, the system of mass production does meet the criteria for disruptive innovation. It requires an investor to focus on how companies will adapt to disruptive technology instead of focusing on the development of the technology itself. Sometimes incumbents are simply outnumbered by the sheer quantity of new competitors.

Business Insights

Fujifilm survived not because it developed a new line of digital cameras but because it used its capabilities in chemicals and information technology to develop successful products and services in coatings, cosmetics, and document processing. Fujifilm continues to make a few cameras, but it barely recoups its operating costs.89 It is prospering not because it defended its position in imaging, but because it expanded into other areas. Harvard Business School professor Willy C. Shih has studied the challenges that businesses with analog technologies faced in responding to new digital technologies. As a result, Shih argues, companies should evaluate the potential for profits in a new market before they jump in. However, by doing so, companies unwittingly open the door to “disruptive innovations” at the bottom of the market.

He published his research in the book ‘The Innovator’s Dilemma’ in 1997. Next to disruptive innovation, there are also other types of innovation. A network in which suppliers, partners, distributors, and customers are each better off when the disruptive technology prospers. This sample of disruptive disruptive innovation theory innovations corresponds to the 75 cases listed in The Innovator’s Solution and two cases discussed at length in The Innovator’s Dilemma. As time went on, the quality of portable radios drastically increased with the birth of the Sony Walkman, MP3 players, the Apple iPod, and smartphones.

Baljir Baatartogtokh is a graduate student at the University of British Columbia in Vancouver, British Columbia. The radio console boasted quality, but the transistor radio promised accessibility and freedom, creating a new segment in the radio market. As a result, along with the convenience of location and waiting times, many people with low-grade injuries and illnesses opt to visit a retail medical clinic, such as CVS’s MinuteClinic, instead of going to their doctor’s office or a medical center.

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