Definition
Understanding Disruptive Innovation
Disruptive Innovation is a concept in the field of business administration. It refers to an innovation that creates a new market and value network, eventually disrupting an existing market and value network. This displacement often leads to established market-leading companies, products, or alliances being displaced.
Characteristics of Disruptive Innovation
- Starts in a niche market and gradually gains popularity
- Typically cheaper, simpler, smaller, and more convenient to use
- Often ignored by established companies until it’s too late
Impact of Disruptive Innovation
Disruptive Innovation can have a profound impact on industries and consumer behavior. It can create new business models, transform markets, and even change society. It’s a powerful tool for businesses looking to break into new markets or reshape existing ones.
Usage Examples
1. Netflix was a disruptive innovation in the video rental industry, moving from mail-order service to streaming, effectively pushing out traditional brick-and-mortar rental stores.
2. Uber disrupted the taxi industry by offering a more convenient and often cheaper ride-hailing service.
3. Digital cameras disrupted the film photography industry, leading to the decline of companies like Kodak.
Historical Context
The term ‘Disruptive Innovation’ was coined by Clayton M. Christensen in his 1997 book ‘The Innovator’s Dilemma’. It has since become a popular term in business and technology circles, often used to describe innovations that change markets or industries in significant ways.
Misconceptions
- Disruptive Innovation is not just about technology or digital advancements.
- It doesn’t always lead to the demise of established companies.
- Not all innovations are disruptive.
Comparisons
- Disruptive vs Sustaining Innovation: While sustaining innovation improves existing products, disruptive innovation creates new markets and value networks.
- Disruptive vs Radical Innovation: While both can have significant impacts, radical innovation refers to a major breakthrough that changes or creates whole industries, while disruptive innovation refers to a product or service that starts small and eventually disrupts an existing market.
Related Concepts
- Radical Innovation
- Incremental Innovation
- Sustaining Innovation
- Blue Ocean Strategy
