Disruptive Innovation

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A disruptive innovation is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network, displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market. (Source: WikiPedia)

An 1880 penny-farthing (left), and a 1886 Rover safety bicycle (right) with gearing
Types of Innovation
Sustaining

An innovation that does not significantly affect existing markets. It may be either:

  • Evolutionary
An innovation that improves a product in an existing market in ways that customers are expecting (e.g., fuel injection for gasoline engines, which displaced carburetors.)
  • Revolutionary (discontinuous, radical)
An innovation that is unexpected, but nevertheless does not affect existing markets (e.g., the first automobiles in the late 19th century, which were expensive luxury items, and as such very few were sold)
Disruptive

An innovation that creates a new market by providing a different set of values, which ultimately (and unexpectedly) overtakes an existing market (e.g., the lower-priced, affordable Ford Model T, which displaced horse-drawn carriages)

In business theory, a disruptive innovation is an innovation that creates a new market and value network and eventually displaces established market-leading firms, products, and alliances. The term was defined and first analyzed by Clayton M. Christensen and his collaborators beginning in 1995, and has been called the most influential business idea of the early 21st century. Lingfei Wu, Dashun Wang, and James A. Evans generalized this term to identify disruptive science and technological advances from more than 65 million papers, patents and software products that span the period 1954–2014. Their work was featured as the cover of the February 2019 issue of Nature and was selected as the Altmetric 100 most-discussed work in 2019.

Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation, because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. The market for transportation essentially remained intact until the debut of the lower-priced Ford Model T in 1908. The mass-produced automobile was a disruptive innovation, because it changed the transportation market, whereas the first thirty years of automobiles did not.

Disruptive innovations tend to be produced by outsiders and entrepreneurs in startups, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition). Small teams are more likely to create disruptive innovations than large teams. A disruptive process can take longer to develop than by the conventional approach and the risk associated to it is higher than the other more incremental or evolutionary forms of innovations, but once it is deployed in the market, it achieves a much faster penetration and higher degree of impact on the established markets.

Beyond business and economics disruptive innovations can also be considered to disrupt complex systems, including economic and business-related aspects. Through identifying and analyzing systems for possible points of intervention, one can then design changes focused on disruptive interventions.

About David Rashty

David Rashty, an entrepreneur and one of the early web pioneers, has over twenty years’ experience as a CTO and a CEO. David is the funder and CEO of CreativeMinds which focus on WordPress and Magento products.