What is Disruptive Innovation?
Disruptive Innovation refers to the innovation which helps in creating new market and value network in place of the existing market and value network which leads to the disruption of the market-leading firms, alliances, and products that had already been established earlier. The term ‘Disruptive Innovation’ was given in the year 1995 by Clayton M. Christensen and is regarded as one of the most influential and important innovations of the 21st century.
Each and every innovation cannot be regarded as a disruptive innovation even if they are bringing about change in the existing system. This can be understood well through the means of the automobile example- The innovation of automobiles and its introduction in the market is not regarded as a disruptive innovation because automobiles at that time were expensive luxury items which everyone could not afford, and therefore it was not able to disrupt the needs of the horse-driven vehicles until Ford came up with the lower priced debut of the Ford Model T in the year 1908. The innovation and mass-production of this automobile were considered to be a disruptive innovation of the time as it changed the transportation market of the era which first thirty years of automobile production could not.
The Disruptive Innovation Theory was published for the first time in the Harvard Business Review in 1995. It was given by Clayton M. Christensen. According to him, disruption takes place when the small-scale businesses challenge the already established large-scale businesses by inventing products and services that would be found appealing by the niche part of the market.
This niche of the market can be overlooked by the already existing or the new customers of the market. The products made by the small-business markets aren’t contemplated to be the best or the better product however they continuously work to incorporate developmental changes within their product and end up selling products and services at better functionality at lower costs which the customers find appealing. As a result, the small-business companies begin to have the greater demand for products and services by a large share of mainstream buyers as compared to the initial niche of the customers.
According to the Disruptive Innovation Theory, the companies in power themselves pave the way for the disruption to occur.
These companies begin to make changes in their product and services for satisfying the needs and demands of their biggest and the profitable customers and as a result, end up delivering products in the market that does not match the needs of the small customers. This helps the small-scale business companies in paving their way towards gaining a share in the market and forming a firm place for themselves in the market. From this, Christensen realized that disruption is a process that happens when the product and the services provided by the small-scale business firms becomes the choice of a large number of customers over the products and services provided by the large-scale business firms.
The term innovation is being used by a large number of companies in varied context. However, there have also been disagreements regarding what constitutes disruptive innovation.
Some of the people use the word disruptive technology for the technology only while applying the word disruptive innovation to the use of that technology. Also, there are some people who believe that for the technology to be disruptive it is required that the technology is new and is not an example of simple incremental improvement of an existing technology. Some of the people consider disruptive innovation as a means or method of creating a new value as these products tend to deracinate the existing market with their new and improved products and services which may not have been expected by the incumbent competitors. However, it is important to note the fact as given by Christensen that the disruptive innovation theory has been “widely misunderstood” and that it has been “applied very carelessly by the people anytime a market newcomer comes begins to shake the incumbent businesses.”