We hear the mainstream media speaking about disruption on a daily basis. However, only a few understand what it actually means or how to create it. At the moment, we are living in a world of endless choices as well as opportunities. Here, new products and services are introduced at an ever-increasing pace. In the age of innovation, novel solutions may be built on top of current technologies faster than ever before.
Where innovation is often focused on developing a new product or service in an existing industry, disruption focuses on changing the way an industry or marketplace operates. The indicator stems from analysing and dissecting customer feedback or behaviour, while disruption often comes from industries or organisations that are rearranging the way their industry or market operates and exists.
What Is Disruptive Innovation?
The term ‘disruptive innovation’ refers to a concept, product, or a service which either disrupts a prevailing market or creates a totally new market segment. In practice, disruption takes place when traditional value drivers, that are present in an existing market, are significantly changed. Typically, a new player enters an existing market with new technology or business model (or a combination of these two) and provides a new kind of value that differs from the incumbent’s offerings.
In the beginning, disruptive innovation is secondary to the existing products and services in the market which are measured by traditional value systems of measurement. When disruptive innovation first penetrates the market, it caters only to a small – and typically not very profitable – customer segment, while established organisations are concentrated on serving more challenging, high-end customers.
As the more demanding customer segment is the one with greater profits, established organisations usually elect to focus on serving the more lucrative customer segment. As an illustration, when buying a new phone rational consumers often buy a brand they are familiar with. Although the new entrant may use significantly more advanced technology in their product, the mainstream and high-end customer segments rely on the recognised provider.
Once the disruptive innovation enters into the mainstream, the established companies typically pick up on the new concept or technology in order to respond to the competition. At that point, however, it is often too late as the new entrant is on an exponential trajectory. Responding to the new competition only with new technology often is not enough as the market entrant has had much time to refine the offering as well as business model.
