What Is Disruptive Innovation?

The first step of my plan to better connect NE Wisconsin disruptive innovators is 2nd steprecruiting more people for a core team to work on this worthwhile goal. The second step is:

Define disruptive innovation and give a broad outline of who a disruptive innovator is.

Definition Of “Disruptive Innovation”

The concept of disruptive innovation was coined by Clayton Christensen in the 1995 book “The Innovator’s Dilemma.”

Disruptive innovation…describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.”

Reason To Be Disruptive Innovatorsdisruptive innovation chart

One of the main reasons I’m promoting disruptive innovation as valuable to NE Wisconsin is shown in the chart to the right. The big picture lesson from this disruptive innovation chart is that for sustaining innovations, incumbents nearly always win. NE Wisconsin has very few incumbents in emerging technology sectors or other industry sectors with high growth and high-paying jobs. Therefore, if we want to “win” when competing in those sectors, the region is most likely to be successful through disruptive innovation.

Christensen further clarifies disruptive innovation as:

“…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. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. 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…”

A slightly different view of disruptive innovation is shown in the chart below. This chart illustrates the concept that disrupters pitch their products to the low end, or least profitable part of the market. Disrupters don’t expect to sell their products to established high end customers because the disruptive product is unproven and, by definition, doesn’t perform as well as competing products from the incumbent market leaders.

disruptive innovation chart 2

That’s one of the reasons shipping early and often is an accepted practice for disruptive innovators. Their sometimes quirky products don’t do everything that products from the incumbents do, but the disruptive products are “good enough” for what low end customers need. If a disrupter develops effective customer relationships with those low end customers, those customers will give them valuable feedback for improving the products.

It can be relatively easy to improve the disruptive product because the customers has made it clear exactly what needs to be fixed, so the innovator who listens well doesn’t waste time working on features or problems the customer doesn’t care about. Another reason it’s easy to improve the product is that the relatively low-volume market for the disruptive product means minimal time and money has been spent on cost reductions for high-volume, high-efficiency manufacturing. Making a product change doesn’t require a large capital investment in a low -volume production process.

Incumbents, on the other hand, can’t quickly change their products because of inventories, marketing campaigns, capital investments in mass production equipment, and other issues inherent in established product lines. Additionally, because they’re not going to frequently change the product, the market leaders tend not to solicit or listen to suggestions for short term improvements.

More Thoroughly Understanding Disruptive Innovation

If you want to understand and be involved in disruptive innovation, read Christensen’s 2015 article “What is Disruptive Innovation?,” then read his book “The Innovator’s innovators dilemmaDilemma.” In the article, Christensen says:

“…Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation. As a result, the theory is sometimes criticized for shortcomings that have already been addressed.

…In our experience, too many people who speak of “disruption” have not read a serious book or article on the subject…Many researchers, writers, and consultants use “disruptive innovation” to describe any situation in which an industry is shaken up and previously successful incumbents stumble. But that’s much too broad a usage…If we get sloppy with our labels or fail to integrate insights from subsequent research and experience into the original theory, then managers may end up using the wrong tools for their context, reducing their chances of success…”

Part of Step 2 for connecting disruptive innovators was “give a broad outline of who a disruptive innovator is.” After writing a first draft of who a disruptive innovator is, I decided the broad outline of a disruptive innovator needs more wordsmithing and feedback from a few people before publishing on this blog. I’ll update this post by adding that outline in the next week or two.

Help Catalyze NE Wisconsin Disruptive Innovation

If you live in NE Wisconsin and are involved in disruptive innovation, or if you want to support it or become involved in this type of innovation, contact Bob Waldron at bwaldron (at) gmail [dott] com.

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