What is Disruptive Innovation? by the world’s most influential management guru, Harvard Business Review

Disruptive innovation is not a breakthrough that makes good product better, but is a transformation of the product that historically was so expensive and complicated that only few people with a lot of money and a lot of skill had access to. Disruptive Innovation makes this product much more accessible for a large population. Prof. Clayton Christensen, Harvard Business Review

Key Concepts

According to Prof. Christensen the following characteristics of disruptive innovation apply to the product at the initial stage:

(1) lower gross margin

(2) smaller target markets

(3) simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.

Disruptive Innovation Chart

There is specific path to success through disruptive innovation. This path lies through pursuing only ‘sustaining innovations’. The latter perpetuate what has historically helped the product to succeed and opens the door to ‘disruptive innovations’.

The idea of Disruptive Innovation implies the dilemma. It stems from the fact that disruptive innovation forces company to enter new markets and serve the people who are not its customers, selling simple and very affordable product. Consequently, appears a Dilemma: Should we make better product that we can sell for better profits to our best customers or maybe we need to make worse product that none of our customers will not buy and that will ruin our margins?

Below is the latest video interview by Harvard Business Review, where Prof. Christensen elaborates on Disruptive Innovation raising up interesting case studies.

Disruptive Technologies

Christensen listed two types of disruptive technologies:

  1. New-Market Disruptions: disruptions that create a new “value network”
  2. Low-End Disruptions: disruptions that attack the least-profitable and most over-served customers at the low end of the original value network.

A value network is the context within which a firm establishes its cost structure and operating processes. In this network the firm responds profitably to the common needs of a specific market segment. Consequently, the firm can only successfully commercialise their product in that specific market segment. If the firm, however, tries to target their product in a different market segment they may be incapable of successfully commercialising their product (www.provenmodels.com)

 

 

Mis-led Innovation – Innovation Inbreeding

Innovation inbreeding is the opposite to disruptive innovation. According to Scott Anthony, HBR, Innovation Inbreeding is when innovation efforts are consistently led by the same group of people within the company. It might also occur when innovation efforts are contained within individual functions, georgraphies, or product lines. The research showed that breakthrough ideas almost always come from intersections where different disciplines brush up against each other.

Three ways to avoid innovation inbreeding:

(1) Force new internal connections, i.e. bringing together representatives from different functions, geographies, levels, or business units can lead to breakthrough thinking.

(2) Bring in outsiders, i.e. external talent when exploring new business models, markets.

(4) Involve customers or other stakeholders., because they innovate at a faster pace than companies do. (Eric von Hippel).

Below is the list of books on Disruptive Innovation by Clayton Christensen:

disrupting class

– Disrupting Class: How disruptive Innovation will change the way the World learns

– The Innovator’s dilemma: when new technologies cause great firms to fail

– The Innovator’s solution: creating and sustaining successfull growth