According to Investopedia’s exploration of the subject, disruptive innovation refers to an innovation that transforms expensive or highly sophisticated products or services—previously accessible to a high-end or more-skilled segment of consumers—to those that are more affordable and accessible to a broader population. It may not be referring necessarily to a disruptive technology, which can be viewed as a separate subject. This innovation transforms and disrupts the market, breaking long-established traditions and competition. Amazon, which launched as an online bookstore in the 1990s, is often pointed to as an example of a disruptive innovation. The introduction of digital music, which replaced compact discs, is another example.
Disruptive innovation primarily revolves around both sustainable and disruptive technologies, according to Investopedia. Sustainable technologies are those that allow a business to incrementally improve its operations on a predictable timeframe, allowing them to remain competitive. On the other hand, disruptive technologies and the way they are integrated—the disruptive innovations—are less easy to plan for and potentially more devastating to companies that did not pay enough attention to them.
Is Disruption Theory In Danger?
In the Harvard Business Review article, “What is Disruptive Innovation?,” one of the architects of the original theory looks back at more than 20 years of what it does, and does not. The co-author and Harvard Business School professor Clayton Christensen writes, “Unfortunately, disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation.”
Christensen and his coauthors go on to make the case that different types of innovation require different types of strategic approaches. For disruptive innovation, he points to four tenets that are often overlooked:
- Disruption is a process. It is an evolution of a product or service over time.
- Disrupters often build business models that are very different from those of incumbents.
- Some disruptive innovations succeed; some don’t.
- The mantra “Disrupt or be disrupted” can misguide us. Incumbent companies do need to respond to disruption if it’s occurring, but they should not overreact by dismantling a still-profitable business. Instead, they should continue to strengthen relationships with core customers by investing in sustaining innovations.
Christensen notes that innovation is rarely sustaining or disruptive. “It is rare that a technology or product is inherently sustaining or disruptive. And when new technology is developed, disruption theory does not dictate what managers should do. Instead, it helps them make a strategic choice between taking a sustaining path and taking a disruptive one.”
While disruptive innovation and breakthrough innovation are often examined under a similar lens, they are not quite the same. Breakthrough innovation is when there is innovation inside a company, which often pushes it to the next level. It can open the company to new markets, and it can often change the way customers interact with the company or industry.
All Things Innovation’s Seth Adler recently discussed “Breakthrough Innovation” with executives at Dominion Energy. While the rest of the industry relies on iterative change, Alex Moyes, Director of Innovation, explains the breakthrough innovation happening at Dominion Energy. “So Dominion Energy…we are a large, multistate utility…we believe in an ‘all of the above’ approach to energy —everything from nuclear to natural gas to utility-scale solar, we’re integrating a lot more stationary storage and batteries. So we are seeing groundbreaking innovations happening almost every day.” Moyes discusses fostering breakthrough innovation and embracing change.
Moyes further states that Dominion’s innovation team is encouraged to foster change and that one key component in that is getting the leadership to recognize that change is a good thing. “It’s the job of our innovation team to not only foster a culture that embraces a lot of these innovations, but we have a big job to do on convincing our current leadership that it’s OK to change and that we need to embrace the change,” he says.
Embrace The Change
So is there a difference between encouraging disruptive innovation as opposed to other types of innovation? It seems that fostering a culture of innovation, regardless of success or failure, is key to the process. We asked ChatGPT for a few tips regarding encouraging disruptive innovation at an organization. An overall theme emerged, that of embracing and adapting to change. It is only in this environment of encouragement that disruptive innovation can survive and, indeed, thrive.
- Encourage failure: Create an environment where employees feel comfortable taking risks and trying new ideas, even if they don’t always work out.
- Promote collaboration: Foster collaboration between different departments to help spark innovative thinking when looking for solutions to problems.
- Embrace change: Adapt quickly to changing market conditions and customer needs in order to stay ahead of the competition with disruptive innovation.
- Set clear goals: Provide employees with clear goals and objectives that are focused on fostering disruptive innovation within the organization and incentivize them accordingly for their efforts in achieving these goals.
- Invest in research and development: Make sure your R&D budget is sufficient enough to foster disruptive innovation by investing into research projects that can bring new products or services to life quickly without sacrificing quality or performance standards.
- Leverage technology: Utilize cutting-edge technology such as artificial intelligence, machine learning, big data analytics, blockchain etc., which can help organizations identify opportunities for disruption more easily and efficiently.
- Listen to customers and employees: Keep a close eye on what customers need from you as well as feedback from your employees about how certain processes could be improved. This will give you insights into potential areas of disruption that could benefit both parties.
Disrupting the Business Model
Disruptive innovation is often something that many companies aspire too, yet few achieve. It must be transformative but which turns a product into a more accessible and affordable version of itself. The very nature of the business model must also be disruptive. There must be an enabling technology which is often behind the change or improvement. An innovative business model targets a customer segment which can benefit from the service or product. According to Investopedia, a coherent value network must also be created — this includes up- and down-stream business partners in the supply chain which also benefit and adapt from the disruption. This value network must also require process changes to adapt and conform to the new business model, thereby truly allowing the disruptive innovation to thrive.
So is disruption innovation theory dead? We don’t think so, but there are many factors at play regarding the competition between an upstart challenger and an incumbent company over a product or service. “Disruption theory does not, and never will, explain everything about innovation specifically or business success generally,” writes Professor Christensen. “Far too many other forces are in play, each of which will reward further study. Integrating them all into a comprehensive theory of business success is an ambitious goal, one we are unlikely to attain anytime soon.”
Video courtesy of Harvard University