Disruptive Innovation
(Christensen)

Impact of new technologies (revolutionary change) on a firm's existence. Explanation of Disruptive Innovation of Clayton Christensen. ('97)

Contributed by: Neusa Hirota

Clayton Christensen disruptive innovation

What is Disruptive Innovation? Description

The Disruptive Innovation model from Clayton Christensen is a theory that can be used for describing the impact of new technologies (revolutionary change) on a firm's existence. Clayton Christensen first coined the phrase "disruptive technologies" in 1997, in his book "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail".
He showed that time and again almost all the organizations that have "died" or been displaced from their industries (because of a new paradigm of customer offering) could see the disruption coming, but did nothing until it was too late.

 

By doing what good companies are supposed to do - cater to their most profitable customers and focus investments where profit margins are most attractive - established industry leaders are on a path of Sustaining Innovations and leave themselves open for disruptive technologies to bury them. This happens because the resource allocation processes of established companies are designed to maximize profits through sustaining innovations, which essentially involve designing better and better mousetraps for existing customers or proven market segments. When Disruptive Innovations (typically cheaper, simpler to use versions of existing products that target low-end or entirely new customers) emerge, established companies are paralyzed. They are almost always motivated to go up-market rather than to defend these new or low-end markets, and ultimately the disruptive innovation improves, steals more market share, and replaces the reigning product.

 

Types of Innovation

Companies have two basic options when they seek to build new-growth businesses. They can try to take an existing market from an entrenched competitor with sustaining innovations. Or they can try to take on a competitor with Disruptive Innovations that either create new markets or take root among an incumbent's worst customers.

There are two distinct types of Disruptive Innovations. The first type creates a new market by targeting non-consumers. The second competes in the low end of an established market.
 

Origin of the Disruptive Innovation model. History

Christensen's research and studies at Harvard.

 

Usage of the Disruptive Innovation method. Applications

  • All kinds of companies - as they can be impacted by technology innovation/change.

Steps in Disruptive Innovation. Process

  • The model shows that, as the performance demanded by the customers of an existing market increases over time, so does the performance provided within a technological paradigm. Often the performance improvement provided has a different trajectory to the trajectory of performance improvement demanded by the customers (see figure). When the trajectory slopes differ, and the performance provided exceeds performance demanded, new technologies that were only performance competitive in remote market niches may migrate into other customer networks. This provides innovators with a vehicle to new customers, who would have previously viewed their offerings as substandard; and enables them to offer established mainstream markets a new set of performance value attributes that are now more relevant than the current paradigm.
  • Disruption and commoditization actually go hand in hand. A company that overshoots, simply can't win (a firm that improves a product to the point that it is more than good enough for customers to use and pay a premium for). Either disruption will steal its markets, or commoditization will steal its profits. While new waves of disruption wash over an industry, the place where the money will be will shift across the value chain over time. While this happens, companies that position themselves at a spot in the value chain where performance is not yet good enough will capture the profit.

Limitations of Disruptive Innovation. Disadvantages

  • Disruptive Innovation requires a separate strategy process. This process must be emergent and focused on unanticipated opportunities, problems and successes, rather than intended and focused on improved understanding of what works and what doesn't.
  • Instead of designing products and services that address current behavior of current customers, the underlying aims of people should inform the design of innovations. Understanding what people really need is however far from easy.
  • Disruptive businesses can't achieve big profits very fast, due to their nature (addressing new markets, or addressing low end of existing markets). Venture capitalists are increasingly impatient for businesses to deliver profits.

Assumptions of Disruptive Innovation. Conditions

Companies risk death with decisions to ignore technologies that do not appear to address their customers' needs, as they become fatal when two paradigmatic trajectories of progress interact.

 

Book: Clayton M. Christensen - The Innovator's Dilemma -

Book: Clayton M. Christensen - The Innovator's Solution -

Book: Clayton M. Christensen - Seeing What's Next  -

 

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Recent User Comments
Samuel Nduati Mbugua - Kenya Disruptive Change and HR "Innovation is necessary and mandatory for a firm to be competitive in the current operating business environment. However, when introducing new ideas of doing business, new technology to support the operations, new processes and new approaches to customer service, the human resource development is also disrupted as the staff is required to be constantly trained to acquire the knowledge which will enable them to apply and adopt the innovations for the changes to be successful.
The mismatch between the competences of human resources and the innovations may make the changes fail and not produce the intended results."		    0
Anwar Adari - Jordan Is Value Innovation Disruptive Innovation? "Should value innovation, the corner stone of Blue Ocean Strategy be considered disruptive innovation?"    1
 - Norway Business Model Innovation "Dear all fans of Clay!
IPTV is probably and most likely a disruptive technology, but more important, is it feasible to follow a disruptive strategy? Well, I think it's important to look at the business model innovation. Then it will be related to who is behind the IPTV techology, and how they are bringing it to market. Tip: Read the book "The innovators guide to growth", issued now in July. Written by Mark and the others fab. persons at Innosight!"		    4
 - UK Practical application "I have set up a new company specifically to apply Christensen's theories to the £750m a year qualifications sector in the UK. If you want to check out the strategy it is outlined briefly at theingots.org/community/node/5504 "    0
Carlos - Spain Disruptive Innovation "Is IPTV a disruptive innovation? We need to wait for the financial results in order to assess the case. It is disruptive from a technological point of view. It only need to prove the feasibility in financial terms"    0
Best User Comments
Chris Wu - China Asymmetric Innovation "Asymmetric Innovation = Asymmetric Situation + Customer Value. Asymmetric Situation is a resulting none-direct-competitive situation in favor of challengers who take a series of strategic actions by exploiting powerful competitors' critical weaknesses inherent within their status quo. Asymmetric Situation Model consists of 5 types of asymmetric situations: asymmetric information, asymmetric perception, asymmetric priority, asymmetric willingness and asymmetric capability. Asymmetric Situation and Asymmetric Innovation are the key concepts of Asymmetric Innovation Strategy theory put forward by me in my new book "Asymmetric Innovation: Pathway to Success for Callengers". Find a short presentation in the Expert Tips section below (Premium only)."    5
Sylvia - Kenya Disruptive Innovation "Well, I'm huggling with the idea of relating the disruptive innovation theory to online marketing. Emarketing has emerged and especially in developing nations companies just create a websites for the hype of being online with little regard that emarketing has many aspects to it. I bet we will see many companies especially in my country facing distinction."    -3
Anthony - US Blue/Innovate and Red/Disrupt "An interesting exercise is to work through a product's feature set using both the Strategy Map of "Blue Ocean Strategy" (Kim & Mauborgne) and the disruputive thinking of Christensen. Blue Innovation creates a new product feature and then makes a market out of it to focus on a new capability -- portable cleaning with the Tide-to-go-Stick, portable computers with smaller drives/better batteries, etc. Red Disruption challenges the assumptions that 'customer knows' best. Entrants re-order an existing feature set to satisfy part of an existing market that is less than satisfied with current offerings -- Nucor steel made its initial mark by making cheap & fast more important than quality and custom specs, analytic databases trade transaction processsing for user response time, and many packaging innovations in consumer products. A killer app probably does both -- iPod + iTunes."    -4

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Compare with:  Product Life Cycle  |  Twelve Principles of the Network Economy  |  Bass Diffusion Model  |  Ten Schools of Thought  |  Blue Ocean Strategy  |  Positioning  |  Innovation Adoption Curve  |  Marketing Mix  |  Forget Borrow Learn  |  Four Trajectories of Industry Change  |  Co-Creation  |  Three Dimensional Business Definition

 

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Copyright 2009 12manage - The Executive Fast Track. V10.3 - Last updated: 7/4/2009. All names tm by their owners.


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  ● Pete (USA) Value Innovation "In this era of internet and technology breakthroughs, value innovation is often - but necessarily - based on disruptive innovation."
  ● Brendan Dunphy (France) Value Innovation "Only if it disrupts! The point about disruptive innovation is that it requires a change to the way resources are allocated, challenges existing values and processes etc etc. If this is not the case then maybe it is not disruptive, but so what? The goal of innovation is to create new value, regardless of the theory that underlies it or the name we use to describe it."
  ● Charlie (USA) Value & Disruptive Innovation "In my experience the results of an innovation strategy are to create competitive advantage and differentiate a product, service or company from its competition. In this context, finding Blue Oceans is the ultimate goal but developing a sustainable plan that generates value (& profit) is of equal importance."
  ● nilakantan (India) Disruptive Innovation "As far as I understand, disruptive innovation occurs through continuous over development of product improvements by which the direction of new product development will be altered by disruption. Value innovation perhaps refers to innovations primarily occurring at the cost and value level. However, some product innovations of disruptive nature may ultimately bring about value increments."
  ●  (India) Value Innovation by Disruption "Well of course yes. In this competitive world every firm wants its share. And for this innovation is the way out. Instead of competing in existing market space, create and capture a new market. It's cheaper, simpler and most importantly makes a new customer base, which is fundamental in the blue ocean strategy."
  ● Dr. Uditha Liyanage (Sri Lanka) Value Innovation must fill a need-gap "Value Innovation becomes disruptive when, in its wake, existing value propositions become obsolete or superfluous. The point that is often missed is that value innovation can be be disruptive or sustained only if the new value fills a need-gap of the customer."
  ● Benjamine Vo Vinh (France) Creating new Needs ? "Is disruptive innovation "understand what people really need" or rather "propose new needs to people"? Was post-it really needed? We could have lived without it, surely. But what made it a disruptive innovation?
A researcher's personal need to singing at church, a strong willingness to defend his project within the company and an unexpected market for the company which decided to cross industrial borders and explore new markets. Big companies fail by defending their territories, they succeed when taking risk in new environments."

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