The Importance of Understanding Disruptive Innovation

Published on September 21, 2009

The $2000 Nano Reaches New Buyers in India

The term “disruptive innovation” is starting to become more commonly used, especially in the tech sector. However, I am finding that many people I talk to don’t understand it well and few have incorporated it into their corporate culture or product development lexicon. Given the state of the economy and the rapidly changing business landscape, this will change. In fact, it is imperative for business survival and economic growth that disruptive innovation becomes not only well understood, but a key component of any prudent strategy.

Harvard professor Dr. Clayton Christensen first used the term “disruptive innovation” in his book “The Innovator’s Dilemma”. He describes disruptive innovation on his website as follows:

“Disruptive Innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market’, eventually displacing established competitors. An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.”

At first, Dr. Christensen’s definition may seem to apply only to the broad consumer markets, but in actuality his “whole new population of consumers” can refer to any market a business happens to be in. While major disruptions are easier to spot such as the Nintendo Wii, Pure Digitals Flip Video Camera and Apple’s iPod, every market is disrupted on a regular basis and most often by a new entrant. And this is where the following imperatives comes in for almost every business owner:

Get to know disruptive innovation. I recommend either one of Dr. Clayton’s books “The Innovators Dilemma” or “The Innovators Solution” and more recently Scott Anthony’s “The Silver Lining“.
Incorporate processes that allow your entire workforce to help you identify opportunities for disruption in your existing market and beyond. A third party facilitated event is recommended as this will help guide thinking beyond the walls of your organization and help limit hierarchical control of the creative thought processes. This is precisely why we have developed Disruptathon, a course on disruptive innovation combined with a bar camp style event that leverages entire organizations to help identify and prioritize possibilities for disruption. (sorry for the shameless plug)
Scott Anthony summed up a recent lecture in DC with this advice: Adaption is most critical. Try new things. Look for non consumers. Seek out ambiguity. Find intersections with industries you are not currently in. Go to the periphery where it’s uncomfortable and see what might come of it. Ask yourself if you are overshooting the market. Do it differently and make it better.

Scott’s advice makes me want to go out and buy a bunch of magazine’s I’ve never read before and perhaps visit a few of the hundreds of unique trade events that come through DC. How might an obscure design magazine help a medical device company or large mobile carrier? What can a software company learn by attending a conference of commercial building architects? I don’t know, but the process of exploration is probably where the answer is.

While many today may not understand disruptive innovation or have yet to incorporate it into their processes, this will change soon enough. As the economy recovers, new companies with more meaningful products will rise up from the ashes to replace incumbents who chose to slow down innovation spending during the down economy. This will force big companies to react by building disruptive innovation practices and trying as hard as they can to catch up with the speed of innovation. It’ll be fun to follow.