Disruptive Innovation Guide
What Is Disruptive Innovation?
Disruptive innovation is a technology whose application greatly affects the functioning of a market or industry.
The internet is an example of a modern disruptive innovation that has, in a big way, altered how companies did business and negatively affected companies that were reluctant to adapt to it.
Disruptive innovation refers to the new developments that cause dramatic changes in the structure of organizations and industry functions.
It causes a disturbance in the structure as opposed to a disruptive technology that is used to refer to the actual technology.
Why Do You Need the Disruptive Innovation Guide?
Investing in disruptive innovation is a complicated endeavour. It requires you as an investor to focus on comprehending how companies will adapt to disruptive technology and not on the actual development of the technology.
The internet has been used heavily as a disruptive technology by many companies such as Amazon, Facebook, and Google. Internet use has become so embedded in the modern world that it has forced companies to integrate their business models in the disruptive innovation or be pushed out of business.
We want to help you sail through the waters. Avoid the problems associated with conflating a disruptive innovation with any breakthrough that causes changes in an industry’s competitive patterns and trends. Different types of innovation must be given different strategic approaches. Not everything you hear about succeeding as a disruptive innovator will hold water, or the techniques to defend yourself against a disruptive challenger. Not all factors are constant for different companies, especially in a shifting market.
Using this guide, you will be prepared to be apt and up to the task. You cannot afford to get sloppy with your labels or fail to incorporate insights from subsequent research and findings into the original theory.
It is the surest way to ensure your managers do not end up using the wrong tools for their context. Through this thorough guide, you and your management are guaranteed higher chances of success. Remain on track and let the theory’s value be fully utilized.
1. Make your Origination Point Count
Most disruptive innovations emerge in new-market footholds or the low-ends. Disruptive innovations succeed because they start in these two types of markets that are overlooked by the incumbents.
Take advantage of the low-end footholds. They are mostly left unattended because the incumbents are primarily focused on meeting the most profitable and demanding customers’ needs.
The attention is kept on providing ever-improving products and services for the demanding customers, and little or no attention is paid to the less-demanding customers. Making the most of the opportunity for you as a disrupter to provide the low-end customers with “good enough” products is your winning blow.
Your other option is the new-market, and this is where you create a market that initially did not exist as a disrupter. The secret lies in finding a particular way through which you can turn non-consumers into customers.
For instance, in the early days, photocopying technology was highly valued, and the Xerox Company targeted the large corporations to provide them with the performance they needed as customers at high prices.
Small customers, such as librarians, could not afford the prices. In the 1970s, personal copiers were introduced by new challengers at prices affordable to individuals and small organizations. This is how a new market was created from an affordable solution.
From the modest beginning of personal photocopiers, the makers gradually established a major position in the mainstream photocopier market that was valuable to Xerox. Disruptive innovation is defined as one that emerges from one of these two footholds: the low-ends or the new market.
2. Let the quality catch up with the mainstream customers
Some disrupting innovations go wrong in chasing after the mainstream customers too early before they build up-on the quality of their service or product. Work at developing the quality of your standards till they level up to those of the mainstream customers.
First, it is better to develop a winning product or service first rather than concentrate on getting the mainstream customers, only to realize your standards cannot sustain them.
Your focus must be on disruptive innovations and not on sustaining innovations. The latter is all about making good products even better for the incumbent’s existing customers. Such innovations include the fifth blade in a razor, a screen with a higher resolution, and a mobile phone with a better camera.
Such improvements can be gradual advancements or done as major breakthroughs. However, their primary role is to help the companies sell more of their products to their most profitable customers.
On the contrary, disruptive innovations are viewed as inferior by most of the incumbent customers. In most circumstances, customers do not just switch to the new offer just because it is less expensive.
They are likely to wait for your quality to rise to a level high enough to satisfy their needs. Once you get to this level, the mainstream customers will readily accept the new product and happily embrace its lower price. In this way, disruption drives prices down in a given market.
3. Get it Right from the Go
It is not enough that your new product or service just throws the industry into disarray. Disruptive innovations do more than just causing disruptions. You need to apply the theory correctly for you to enjoy the maximum benefits.
You should only ignore the small competitors that bite at the side-lines of your business. However, you should be on the lookout for the competitors that take up a disruptive trajectory no matter their size. They pose a grievous risk and are a mortal threat to your business.
Disruptive innovation examples show that the challenges are essentially from the efforts made by your competitors to woo your all-time favourite customers. It takes more than a few similarities or borrowed concepts to keep up with all the disruptive innovation theory requirements.
Identifying and establishing disruptive innovation is a tricky balance. You must ensure that your executives, those that seem to have a good understanding of the disruption theory, do not forget some of its subtler aspects, especially in making strategic decisions.
4. Exercise Patience
Disruptive innovation is misleading as a term that is used to refer to a product or service at any given point in time. The best description captures the evolution of that product or service over time since disruption is a process and not a one-off happening.
Take the first minicomputers. For example, they were not just disruptive because they were low-end start-ups or because they were later used to pave the way for superior mainframes in the market.
They were disruptive mainly because of the entire process they went through from the fringe to the mainstream.
Regardless of whether or not an innovation is disruptive, it kicks off as a small-scale experiment.
As a disrupter, you must focus on getting not only the product right but also the business model. When you hit the successful notch, you will have moved from the side-line either through the low end of the market or through a new market.
You will erode first the mainstream of the incumbents’ market share and then swiftly move in on their level of profits. Doing all this will take time, and you must be patient and relentless.
The incumbents will fight back in creative ways in a bid to defend their already established area of monopoly. Complete substitution of the existing market products or services may take decades.
This is mainly because the incremental profits yielded from staying with the old model do not just die off suddenly.
It takes time. For instance, it took 50 years for the departmental discount stores to dominate the market once ruled by the incumbent mainstream retail companies.
You must use the time factor for your advantage. The fact that it takes pretty much time for disruption to happen makes most incumbents ignore disrupters. With this knowledge, you must keep at your product or service build up until you are ready to hit the road running.
Always remember that incumbents frequently overlook disrupters because disruption is a process that can take time.
5. Differentiate your service
Disrupters are always building business models that are distinct and very different from those of the incumbents. Apple’s iPhone is one good example of how to innovate.
In 2007, the product that was debuted by Apple was a sustaining innovation in the Smartphone industry. Its primary target audience was the same customers that were coveted by the incumbents in the market.
The initial success was mainly associated with the superiority of the product. Subsequent growth of the product resulted from the disruption process of the laptop as the primary access point to the internet rather than the Smartphone.
The greatest success did not come from just simple product improvements but by introducing a new business model. The new model incorporated a facilitated network that connected application developers with phone users, and this was a game-changer!
Apple created a new market through the iPhone in which internet access was in high demand.
Eventually, the product challenged laptops as the mainstream users’ device of choice for going online. Similarly, there must be some clear distinction that results from your disruptive innovation.
6. Weigh Your Results on the Right scales
Not all disruptive innovations succeed, some do, and some just don’t. So you must be on the lookout for this common mistake made by disrupters. Do not weigh the effectiveness and the results achieved from your disruptive efforts against the success obtained.
Success is not built into the definition of disruption since not every disruptive effort leads to victory, and it is also not every successful newcomer in a market or industry that follows a disruptive path.
Do not confuse every business success story with disruptive innovation. It is the surest way to avoid the common mistake of perceiving all the companies that rise to the top in many ways as sources of insight into one common strategy that leads to success.
It is dangerous because your management team could mix and match what is unrelated and is least likely to be consistent with one another.
Such combinations significantly reduce the chances for your business to achieve the desired results.
7. Do Not Be Misguided by the Tune
Most business owners believe that they are to disrupt the industry or they will be disrupted and faced out. This is not always the case.
Incumbent companies may need to respond to disruption when it is occurring, but it does not call for a dismantling of a profitable business venture.
What you need to do is to continue to deliberately strengthen your relationship with core customers by investing in sustaining innovations.
Additionally, you can also create a new division whose sole focus is on the growth opportunities springing from the disruption. Treat this new division as a separate enterprise independent of the main business.
This means that as an incumbent facing disruption, you may manage two very different business operations.
As the disruptive stand-alone business continues to grow, a day may come when it eventually starts to steal customers from the main business.
As a corporate leader, you must ensure you do not start trying to solve this challenge before it is an actual problem.
So much knowledge and information concerning the theory of disruptive innovation continues to unfold.
The disruption theory does not explain innovation in totality, especially the general success of business endeavors.
However, through these seven steps, you are better placed to cause some disruptive change and make some great profits in the process.
Do not dance to the rhythm and waves based on assumptions. Remember, disruption is a process, and you must be patient. It matters where you start and whether or not you get all the facts right.
Your product or service needs to be different from the incumbents’; all you need to do is to consistently build-up to the level of the mainstream customers.
Success does not define a disruptive innovation; the key is in the resulting change.
Start Improving Your Business Today!
Need our help in accelerating your business growth?