Disruptive innovation is the buzzword of our day and age. It is busied by entrepreneurs and often associated with tech startups that cast out industry giants from the market. But what do we actually mean by it? We delved into the work of Harvard Business School Professor Clayton Christensen, who coined the concept, and are glad to reproduce it for you here.
Disruptive innovation is a concept originally coined by Harvard Business School Professor Clayton Christensen. It describes the process by which a product or service takes root initially in simple applications at the bottom of a market. And then relentlessly moves up the market, eventually displacing established competitors.
At ImpactCity, we adhere to Christensen’s ideas because they’ve had a real impact in the world. It is fair to say that his thinking has influenced a whole generation of managers. “Disruptive innovation creates new markets and reshapes existing ones. To achieve growth in a fast-changing world, you want to be a disruptor,” Christensen advises, “Don’t be disrupted.”
Getting disruptive innovation straight
Yet, the man who invented the theory of disruptive innovation says it is widely misunderstood and commonly applied to businesses that are not genuinely disruptive. In an article in the Harvard Business Review, he sets out to clear up confusion over what disruptive innovation actually is.
“Unfortunately, disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied,” Christensen writes.
What he meant originally
First off, he offers a recap of the original idea. He writes, “‘Disruption’ describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. 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.”
He continues, “Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. (…) Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.”
“Empirical tests show that using disruptive theory makes us measurably and significantly more accurate in our predictions of which fledgling businesses will succeed’ – Clayton Christensen, professor at Harvard Business School
In sum, a disruptive innovation is not a breakthrough innovation that makes good products a lot better. Christensen: “[Disruptive innovation] transforms a product that historically was so expensive and complicated that only a few people with a lot of money and a lot of skill had access to it. A disruptive innovation makes it so much more affordable and accessible that a much larger population have access to it.”
Getting the job done
How can industry giants fight back? By launching their own disruptive innovations. “Our current belief is that companies should create a separate division that operates under the protection of senior leadership to explore and exploit a new disruptive model. Sometimes this works—and sometimes it doesn’t,” Christensen says. “How best to meet those challenges is still to be discovered.”
“We are eager to keep expanding and refining the theory of disruptive innovation, and much work lies ahead,” according to Christensen. “Disruption theory does not, and never will, explain everything about innovation specifically or business success generally. Far too many other forces are in play, each of which will reward further study. Integrating them all into a comprehensive theory of business success is an ambitious goal, one we are unlikely to attain anytime soon.”
Predicting business success
Nonetheless, there is reason for optimism: “Empirical tests show that using disruptive theory makes us measurably and significantly more accurate in our predictions of which fledgling businesses will succeed. As an ever-growing community of researchers and practitioners continues to build on disruption theory and integrate it with other perspectives, we will come to an even better understanding of what helps firms innovate successfully,” Christensen concludes.
Interested to read more? The Harvard Business Review summarizes Christensen’s landmark theory in its video series – in less than two minutes. Have a look.