What Is Disruptive Innovation?

What Is Disruptive Innovation?

Let me explain disruptive innovation directly to you: it's the kind of innovation that takes products or services that were once expensive or highly sophisticated—only available to a high-end or skilled group of consumers—and makes them affordable and accessible to a much broader population. This shift disrupts the entire market, pushing out long-standing competitors who didn't see it coming.

Key Takeaways

You should know that disruptive innovation involves innovations and technologies that broaden access to expensive or complex products and services, making them affordable for more people. Remember, it's about using technology to upset market structures, not just the technology itself— that's why we distinguish it from 'disruptive technology.' Take Amazon, which started as an online bookstore in the mid-1990s, as a prime example of this in action. To pull it off, you need enabling technology, an innovative business model, and a coherent value network. On the flip side, sustaining innovation focuses on improving products and services for your existing customers.

Understanding Disruptive Innovation

Disruptive innovation uses technologies to make products easier to use or access, reaching a larger, non-targeted market. It's not about enhancing products for the same old customers—think of digital music downloads replacing compact discs as a clear case. Clayton Christensen brought this concept to light in his book The Innovator’s Solution, following up on The Innovator’s Dilemma from 1997.

Christensen described two types of technologies businesses handle: sustainable ones that let you incrementally improve operations predictably, keeping you competitive or at status quo. Disruptive technologies, and the innovations from them, are harder to plan for and can devastate companies that ignore them.

Investing in disruptive innovation gets complicated; you have to focus on how companies adapt to it, not just the tech development. Companies like Amazon, Google, and Meta have leaned heavily on the internet as a disruptive force. The internet is so embedded now that firms failing to adapt got sidelined. Artificial intelligence might soon disrupt the job market by learning and performing tasks.

The internet disrupted because it wasn't just an upgrade—it created new money-making models that didn't exist before, causing losses elsewhere. Smartphones replacing laptops for browsing and streaming is another example, thanks to tech like small processors and apps.

Requirements for Disruptive Innovation

For disruptive innovation to work, you need access to ignored markets and technology that turns a product into something more accessible and affordable. Your network of partners—suppliers, contractors, distributors—must benefit from the new model. Key elements include enabling technology, which changes processes or how people do things, making products affordable to a broader market; the speed of development affects disruption pace, but not necessarily its success measure.

Then there's the innovative business model that targets new or low-end customers who couldn't afford or use the old offerings—incumbents often skip this due to low initial margins, but it delivers easy, economical solutions. Finally, a coherent value network means upstream and downstream partners adapt to the new model to avoid failure and support the disruption goal.

Disruptive Innovation vs. Sustaining Innovation

Disruptive innovation simplifies and cheapens products for undesirable or ignored markets, while established companies focus on upgrading for their profitable base, leaving room for newcomers to target those segments with simpler options. Sustaining innovation, however, innovates to better existing products for current customers based on demands, keeping you relevant— like making scratch-resistant CDs with more capacity, versus digital downloads that made CDs obsolete.

Examples of Disruptive Innovation

Disruptive innovation focuses on technology use, not the tech alone—Amazon and Netflix show this well. Amazon disrupted bookselling by offering inventory online without physical stores, shipping directly to buyers, pushing chains like Barnes & Noble and Borders aside. It grew into a full online platform for everything, starting from a garage targeting online book shoppers.

Note that the Model T car wasn't disruptive because it improved existing tech but wasn't widely adopted until mass production lowered prices, shifting transportation—that mass production system qualifies as disruptive.

Netflix entered when video stores rented VHS and DVDs, offering online catalog browsing and mail delivery to overlooked online shoppers. It later shifted to streaming, disrupting itself and the industry, though competitors now challenge it—Blockbuster shrank from over 9,000 stores to one after this.

What Is the Meaning of Disruptive Innovation?

Disruptive innovation means transforming an expensive or sophisticated product into something simpler, affordable, and accessible to more people, changing markets by introducing those solutions and disrupting the originals.

What Are Examples of Disruptive Innovation?

Amazon is a key example, starting in 1995 by using the internet to sell books online, forcing many bookstores out. Netflix disrupted media, reducing Blockbuster from thousands of stores to one.

What Are the Key Requirements for Disruptive Innovation?

Success requires partners benefiting from the new model, plus enabling technology, an innovative business model, and a coherent value network where all parties gain from the disruption.

The Bottom Line

Disruptive innovation transforms products into affordable options for bottom-tier or unmarketable consumers, not improving for current ones. It needs transforming technology, a supporting business model, and a beneficial partner network—Amazon and Netflix started small but disrupted giants.