All rights reserved. We’ve observed four important points that get overlooked or misunderstood: The term “disruptive innovation” is misleading when it is used to refer to a product or service at one fixed point, rather than to the evolution of that product or service over time. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Over the years—indeed, over more than 100 years—new kinds of institutions with different initial charters have been created to address the needs of various population segments, including nonconsumers. It began with producing a low volume, high-end sports car, then using that money to deliver its luxury Model S sedan and Model X luxury SUV before finally introducing its affordable, mass market high-volume car model. Disruptive Innovation describes a process by which a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors. Once the disruptive innovation enters the mainstream, the established companies typically pick up on the new concept or technology to respond to the competition. The term may be used to describe technologies that are not truly disruptive. 3. The theory of disruption predicts that when an entrant tackles incumbent competitors head-on, offering better products or services, the incumbents will accelerate their innovations to defend their business. 3. Today, its on-demand all-you-can-watch movie platform is used by over 150 million people globally. Empirical findings showed that incumbents outperformed entrants in a sustaining innovation context but underperformed in a disruptive innovation context. Disruptive innovations, on the other hand, are initially considered inferior by most of an incumbent’s customers. According to the theory, the answer is no. Consider the health care industry. © 2020 Viima. As the example of Uber shows, identifying true disruptive innovation is tricky. Market entry and prices are closely controlled in many jurisdictions. At that time, they lived in San Francisco and had heard there was a big conference coming to town, due to which, all of the hotel rooms were sold out. Put simply, they find a way to turn nonconsumers into consumers. It’s a fascinating time for restaurant innovation around the world. Complacency breeds failure. Sometimes this works—and sometimes it doesn’t. According to disruption theory, Uber is an outlier, and we do not have a universal way to account for such atypical outcomes. In her keynote address at the CT Forum conference in April, Michelle Weise, senior research fellow at the Clayton Christensen Institute for Disruptive Innovation, offered an insightful analysis of disruptive innovation — perhaps one of the most-used and least-understood buzzwords in higher education today. Disruptive innovation should be approached in an iterative manner and with patience. The value of disruptive innovation to the mainstream and high-end customer segments is minimal at this point, at the bottom of the S-curve. Responding to the new competition solely with new technology often isn’t enough as the market entrant has had a lot of time to refine the offering and business model. Yet even executives with a good understanding of disruption theory tend to forget some of its subtler aspects when making strategic decisions. Unfortunately, the theory has also been widely misunderstood, and the “disruptive” label has been applied too carelessly anytime a market newcomer shakes up well-established incumbents. The team recognizes that disruptive innovation demands a dynamic and universal approach. Here are two reasons why the label doesn’t fit. In addition to explaining what disruption means and how you can prepare for it, we’ll also introduce some of the most significant examples of disruptive innovation for you to see how disruption works in the real world. Disruptive: It is the technology or the new model of the business that disrupts the entire existing market. Let’s consider Uber, the much-feted transportation company whose mobile application connects consumers who need rides with drivers who are willing to provide them. That means that for some time, incumbents will find themselves managing two very different operations. If Netflix had not eventually begun to serve a broader segment of the market, Blockbuster’s decision to ignore this competitor would not have been a strategic blunder: The two companies filled very different needs for their (different) customers. The company has certainly thrown the taxi industry into disarray: Isn’t that “disruptive” enough? Market disruption doesn’t happen overnight and even the greatest growth opportunities are often discovered through smaller, incremental improvements. The first step towards creating disruptive innovation is to understand what it’s all about. This type of innovation not only requires looking at the new technology curve but also at markets that are typically ignored by the large companies and analysts. 4. Complexity vs. Integrating them all into a comprehensive theory of business success is an ambitious goal, one we are unlikely to attain anytime soon. 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