This theory was introduced more than two decades ago in 1995 by Clayton Christensen, a professor with the Harvard Business School.
Disruptive innovation is the process of a service or product providing service to a low-end market at first and then eventually moving up to overtake an established competitor.
According to this theory, disruptive companies:
1. Start with a second-rate product that is lower in price but work until they develop a product that is better than the competitor’s to eventually replace them.
2. Originate from either a low-end foothold or new-market foothold.
- Low-end footholds are customers of a current market leader who don’t demand as much from a product so won't mind using a similar alternative that might be lower in quality but cheaper.
- New-market footholds are non-consumers who have become consumers. These customers had no idea prior that they needed the product.
A disruptive company exists on the fringes, and at first seems harmless because it can’t compete.
- The products this company sells or service that it provides are of a lower quality to the product or service of the established company.
- So it will appeal initially a customer base that either doesn’t require the highest quality product, or new customers who were originally non-consumers.
Eventually, the disruptor will migrate to the mainstream because its product has improved to the point of also appealing to the incumbent’s mainstream customer base.
As time progresses, the incumbent will be forced to cede its place as leader to the disruptor because their customers are diverting over to the disruptor’s base. The once leading company will then have to figure out how to innovate without dying. “Quick, we need reinforcements!” says the incumbent’s leader.
“What do we do now?” he or she says. “It will be as if we were just a wrinkle in time if we can’t figure out how to survive.”
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Why does the disruptor eventually replace the leading competitor?
The disruptor overtakes the leading company because over time, it provides a better product often times at a more competitive cost. It eventually has a base of low-end or new-market footholds along with competitors’ customers.
It would seem to me that the power of disruptive innovation lies in its ability to become the new and better standard. I think that disruptive innovation is what allows an industry to evolve, or else the industry runs the risk of becoming stagnant. This is ultimately good for consumers, but not for the disrupted company, at least in the short term.
The funny thing is that the “disruptive innovation” needs the existing industry in order to exist, or else there is nothing to disrupt, like a new generation that can define itself relative only to the previous one. But maybe that’s the point, and the irony just comes with the package.
Basically, that's it. It's just me exploring an idea that I think is pretty cool. Here are the sources that I used to do some research on the theory.
Thanks for listening, whoever you are.
- http://businesstheory.com/newipad-disruptive-innovatio/ (I used this article just for examples of disruptive innovation.)