Disruptive Innovation
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Definition
Disruptive Innovation refers to a product or service which differs in some substantial way from another product or service that currently dominates the market. This occurs through the creation of a cheaper product or service (usually at the expense of functionality or performance to cut costs) or through an upgrade in service, design, or performance of the original technology.
Overview
Innovation has always been the key to engineering new products and attracting customers. Though it was generally thought that only a combination of random variables would eventually lead to increased profits, success through innovation has more recently been defined as a theory of fundamental steps to be taken in order to better position businesses to reap the benefits of incorporating disruptive innovations into their strategy. Bypassing traditional strategies of establishing and maintaining sustainable innovations, companies must plan for and incorporate research and development of disrupting innovations by ensuring that enough resources are available for success and that losses are allowed to mount without projects being shut down, as is the case in most developing technologies. Many do this by budgeting for the expectation of losses, or even creating a sub-company within an organization called Spin-Outs. Processes must also be re-organized to encourage success as well as a revision of company ideals, and effort must be made to disrupt only the competitors and not the consumers. These type of innovations attract Long-Tail consumers to the market, and eventually convert users of the sustaining technology to the new disruptive one.
History
The theory of Disruptive Innovation is the brainchild of author Clayton Christensen described in his book The Innovator's Dillema, and his 2002 web article The Rules of Innovation. It is also based on Everett Roger's 1962: Diffusion of Innovation, in which Rogers describes the Five Stages of Innovation:
1. Awareness: Individual is exposed to the innovation but lacks complete information
2. Interest: Individual becomes interested in the new idea and seeks additional information
3. Evaluation: Individual mentally applies the innovation to his present and anticipated future situation, and then decides whether or not to try it
4. Trial: Individual makes full use of the innovation
5. Adoption: Individual decides to continue the full use of the innovation
Examples
The cell phone is an example of a performance improvement acting as the disruptive innovation that displaces the dominant product. The initial technology was the pager which had the ability to receive pages when you are away from your home or office phone, and needed to be contacted. An individual would send a page or message to a pager and he would then have to find a phone to be able to contact that person. With the invention of the cell phone, individuals could be contacted with a brief message in the form of a text message or they could be called directly at and from any location. This disruptive innovation eventually dominated the market forcing pagers out.
A continuing model of disruptive innovation would be the Walkman giving way to the Portable CD Player, and eventually succumbing to MP3 Players.
Other examples of disruptive innovation:
- Desktop computers versus mainframe computing (an innovation of decreased expense and greater functionality)
- Debit/credit cards versus checks
- Flash memory versus floppy disks
- Digital photography versus traditional photography
- E-mail versus handwritten letters
- Wireless versus wired (networking, game controllers, headsets, etc)
- GPS devices versus maps
Future Disruptions
MP3's appear to have the momentum necessary to catapult it into dominance, completely replacing physical CDs. Its ease of use, distribution, and purchase combined with the dominance of MP3 players, give it the edge to make the leap from disruptive innovation to sustaining innovation.
Blu-Ray technology including players and media are on the horizon of becoming a disruptive technology. Standard TV broadcasting will be phased out in the near future to be replaced with HD broadcasting, which will only help introduce more consumers to the superior picture and sound that high definition Blu-Ray technology can offer.
References
Christensen, Clayton M. (June 1992).The Rules of Innovation
Christensen, Clayton M. (1997). The Innovator's Dilemma. Harvard Business School Press.
Christensen, Clayton M., Raynor, Michael E., Anthony Scott D. (March 2003).Six Keys to Building New Markets by Unleashing Disruptive Innovation
Rogers, Everett M. (2003). Diffusion of Innovations, Fifth Edition. New York, NY: Free Press.