Since the time Harvard professor Clayton Christensen shared his theory of disruptive innovation to the world, the terms innovation and disruption have been continually mistaken for one another.
As such, understanding the differences between these words has become fundamental for innovators and businesses alike.
In this article, let’s determine what separates disruption from innovation and study some examples for further emphasis.
Let’s start.
What is disruptive innovation?
Disruptive innovation alludes to an idea, item, or service, that either disrupts an existing market or makes an entirely new market segment. Disruptions arise when traditional cost factors in a current market alter significantly.
Innovation comes in many forms, and one of them is disruptive innovation.
The idea of disruptive innovation was first instituted in 1995 by Harvard Professor Christopher Christensen. Its purpose was to depict small-scale organizations that became market pioneers by defeating prominent associations through creating products that have astounded the world.
Traditionally, disruptions occur when a new player enters an existing market with a new technology or a business model (or even a combination thereof). Hence, providing a new type of value that differs from what a traditional operator is offering.
In general, disruptive products have the following qualities:
- Cost lower than its incumbents
- Highly accessible to customers
- Earn lower gross margins than its competitors upon first stages of release
- Penetrate least-demanding markets first before obtaining immense recognition and growth
- Drastically overturn existing businesses or establishes another market segment
- Utilize new technologies and business models
The two types of disruption
Disruption has two kinds:
- Low-end disruption
- New-market disruption
From its given names, you can probably infer its differences. But a thorough study of each will lead you to determine what factor sets them apart.
Low-end disruption
Low-end disruption is when organizations come in at the lower part of the market with a “sufficient” product or service at a lesser cost.
Christensen portrays this type of disruption in describing organizations with fewer tools and assets moving upmarket and gaining the incumbents’ customers who once traditionally embraced the norm.
Bigger organizations sometimes fail to acknowledge modest businesses as a threat rather than develop new ways to defend their current position in the market.
In most cases, established firms develop this mentality for three reasons:
- They have maintained a high reputation in their field. They believe in the quality and superiority of their products against that of their competitors.
- Minuscule enterprises, particularly those whose products and services are new to the market, cannot defeat years of acquired expertise.
- Smaller businesses need a lot of time to prove the viability of their offerings.
Thus, low-end disruption sometimes serves as a way for entrants and small-scale companies to end up as market leaders in their respective industries over time.
For instance, when Airbnb started in 2007, founders Brian Chesky and Joe Gebbia only planned to lease inflatable mattresses to individuals traveling in San Francisco for a design conference.
Normally, this situation is unideal for some. But surprisingly, it was enough for the guests and a lot less expensive than staying in hotels. From then on, the idea of renting personal spaces in place of lodging establishments came.
Now, this online vacation rentals platform has gained 7,000,000 facilities and 800 million guests from around the world.
New-market disruption
New-market disruption is when organizations make new segments in existing markets to respond to underserved clients. They create cheaper and accessible alternatives for a larger portion of their customer base.
Low-end disruption doesn’t make new markets. It simply acquires a new segment of the overall industry. New-market disruption contends with incumbents by addressing new clients that these organizations have overlooked.
Android enthusiasts who cannot afford flagship Samsung phones can now get their hands on Galaxy A. This mid-range mobile device line contains gadgets with heavy-duty specs that are almost comparable to those that belong in their Galaxy S (top-of-the-line).
What are some examples of disruptive innovation?
Organizations that create disruptive products become recognized by providing low-cost solutions that fulfill the demands and preferences of customers, which in effect, distinguishes them from their competitors.
Some examples of disruptive products and services are:
- Streaming Service (Netflix): After realizing the internet’s business capacity and closing a 30 billion dollar deal from an investment company, Netflix, a then DVD-by-mail rental service, decided to switch into streaming, beating its former leading competitor, Blockbuster.
- Digital Maps (Google): Nowadays, Google Maps have replaced traditional maps and atlases, including GPS satellite navigation devices. It locates various places with numerous suggestions, photos, and ETAs that can come in handy for travelers worldwide.
- Video Chatting Platforms (Skype): Video chatting platforms like Skype have given people from different parts of the globe a new and convenient way to communicate. With this app, users can call and video chat for free.
Sustaining innovation vs. Disruptive innovation
No form of innovation is more important than the other. Both sustaining innovation and disruptive innovation are important.
However:
Sustaining innovation focuses on retaining markets by improving current products. In contrast, disruptive innovation seizes new markets by utilizing new technologies and business models.
Disruptive innovation creates new items, markets, and qualities to overthrow existing ones.
This kind of innovation dramatically alters a product or service in ways that the market didn’t anticipate. It happens by uncovering new classifications of clients and bringing down costs by creating alternatives with superior quality in the current market.
It uses new technologies and business models in exploring areas that other companies do not thoroughly delve into.
On the other hand, sustaining innovation aims to work on and refine existing ideas, products, services, and processes. It doesn’t make new markets. But instead, it maintains existing ones by providing better value.
Sustaining innovation occurs gradually due to new requirements and progressive demands. It integrates warranted product upgrades and prioritizes feedback to provide constant improvement and business value.
Simply, sustaining innovation aims to remain competitive and relevant. In contrast, disruptive innovation seeks to provide affordable options.
Most businesses prefer sustaining innovation over disruptive innovation as the latter takes longer to execute successfully.
In one of the examples listed above, Netflix and Blockbuster were once in the same market. But Netflix failed to attract Blockbuster’s customers until it stopped delivering movies via mail and started video streaming.
However, this switch did not automatically signal the dawn of a new age for them.
Believe it or not, it took them eight years to fully conquer the market. Despite their nine thousand branches, Blockbuster ended up filing for bankruptcy because they failed to adapt to the times and respond to Netflix’s disruption.
Even if disruptive business models can create enormous profits, sustaining innovation shouldn’t be neglected.
Sustaining innovation helps businesses grow and maintain their market through developing better versions of products. The best example of this phenomenon is the iPhone. Apple uses the same front-end design, but the company upgrades its specs annually.
Since its release, the iPhone has dominated the smartphone industry. Even if all it does is hold on to its existing market by creating the same yet slightly better device, Apple has maintained its audience. And it eventually gained new customers over time.
At some point, every organization will find it hard to decide whether it’s time to embrace new business models and technologies or sustain its position in the market by enhancing its products and services.
However, change is constant. Trends will change and new markets will emerge in the long run.
Companies would have to achieve cutting-edge innovation while banking on their long-term advantage, so they need to think and prepare for both revolution and evolution at a given period.
Hence, both types of innovation are essential.
However, when faced with the dilemma of choosing between the two, businesses have to identify which matters most.
In consideration of factors like demands, trends, and resources, organizations need to identify which type of innovation is advantageous in the present.
Often, established companies do well with sustaining innovation. They possess all the time, resources, and the current market to implement incremental changes. Start-ups, on the other hand, may find it beneficial to execute disruptive innovation.
It will be a struggle for the latter at first, but once success is within reach, they may find their rightful place in the business and supersede larger firms in the long run.
Can you have innovation without disruption?
Disruption is only one of the many methods of innovation.
You do not have to come up with the next Uber or Spotify to add value to your clients, especially if you lack the resources to do it. What’s important is when you implement changes that will be beneficial for you and your customers.
When the right time comes, you can change your business models and develop the best conditions to support your new way of doing business. On a small scale, you can try doing things differently and study whether these methods are feasible on a larger population.
Because in disruptive innovation, it might take years to achieve enormous returns. But if you are committed to devising a new type of value and have the means to execute it, you can proceed.
However, note that there are many institutions too that succeeded in their fields by applying other types of innovations. The key here is to determine what areas need improvement the most.
So which is better — innovation or disruption? If you’re still confused, download a copy of the free innovation ebook and answer questions related to innovation.
