Innovation and disruption are being heard together with the frequency of a bat and a ball. While we could debate what the differences and definitions between them are with some vigour, there might be some more useful ways to think about the two concepts.
Clayton Christensen coined the term ‘disruptive innovation’ in his 1995 Harvard Business Review article ‘Disruptive technologies: Catching the wave’ and 1997 book The Innovator’s Dilemma. His description of disruptive innovation had these attributes:
A disruptive innovation doesn’t initially compete with market incumbents for mainstream customers as it is inferior to those already in the market. These products appeal to a part of the market not being served, at lower price points. Over time the disruptor gains revenue and invests in additional product/offering functionality and begins to appeal to mainstream customers. Thus, disruptive innovation is a process.
Let’s build upon this.
Fast-moving consumer goods and consumer electronics companies, for example, have always needed strong product innovation pipelines to maintain or grow market share. The new breakfast cereal or state-of-the-art TV is designed to take market share from competition or upgrade existing users. These products are designed to be better from the start.
When low-cost airlines entered many markets in the 80s and 90s they had an inferior offering – restrictive tickets, no meals, smaller baggage allowances but, importantly, cheaper prices. While low-cost fares did take share from incumbents they also expanded the size of the market as many travellers switched from driving between capital cities, to flying, because it was affordable.
In the spirit of these two examples, let’s build some insights you could use to influence your own approach to disruption.
Innovation’s target is often increased market share
while disruption’s result is often increased market size.
The key modality for innovation is conversion of existing users.
Disruption is more often about adoption by new users first.
Innovation example: A new razor with seven blades doesn’t increase the number of armpits, legs and faces being shaved.
Disruption example: People switch from buses and trains only when they’re running late or it’s raining, because public transport is more affordable and convenient than getting a taxi.
Innovation’s focus is often a new or improved product.
Disruption starts with an inferior product and gradually improves it over time to attract the mainstream.
Disruption often changes the way an industry operates
Flipping a prevailing norm on its head. Thus, it is a change in the way things are done, often without any new product.
Disruption example: Airbnb derived its name from a couple of inflatable air mattresses in Brian Chesky and Joe Gebbia’s San Francisco apartment, which they used to sell sleeping space to earn a few extra bucks to pay their rent and called Air Bed and Breakfast. No new product in sight, and certainly not a superior offering.
Innovation often comes from the customer.
Feedback or observation provides ideas to address any dissatisfaction or requested new performance. Disruption often comes from rearranging the way a market operates, not from the customer.
Disruption example: If taxi passengers had been surveyed we might have received better service, cleaner vehicles, and even an app that showed their location. It’s less likely we would have ended up using the general public’s cars for booking rides (think Uber).
Disruption is less about the weapon and more about the strategy
One of the challenges in all this, is that we have well-developed processes and tools for innovation and there is no shortage of new products hitting shelves and ecommerce screens, but it’s less clear how an organisation can proactively go about creating some disruption of its own. Sitting down to determine an inferior product offering just sounds silly.
Here are some tips:
- Look for prevailing norms in your market that lead to frustrations and flip them:
- You always wait to see a doctor, and you go to them (the flip: GP2U, online doctor service)
- You need to buy software licence updates, and somehow try to keep track of your product key (the flip: most software on subscription)
- You must visit a bookstore to buy a book (the flip: Amazon)
- You have to wait to watch your favourite TV program at its scheduled time (the flip: Netflix binge watching on demand)
- Bloody Amazon! becomes – how can we embrace online retail?
- I don’t believe social media will lead to sales becomes how can we use social media as core to our business strategy?
- Millennials don’t buy the same way our customers used to becomes a drive for new understanding
Look for market trends that you are resisting and adopt them in a big way:
Gyms use a subscription model
so you can use them as much as you like for a monthly fee – now we can do the same for flying (Surf Air), TV series and movies (Netflix)
- Hitachi used to sell its trains, now it retains ownership and manages their uptime and performance by selling a service – how might that apply to your business? Or if you already sell a service, can you sell it as a product?
Swap a business model in another industry with yours:
So how can you expand your market and increase demand for your product or service by changing the way the industry operates?
Disruption is something you should be doing, not something that is happening to you.