In virtually every industry, there are examples of companies that embraced disruptive innovation and, in doing so, created new markets and disrupted traditional industries.
Below, we'll explore disruptive innovation examples from new entrants and established companies.
What is Disruptive Innovation?
At its core, disruptive innovation refers to a process by which new products or services are created that fundamentally change existing markets and industries.
These innovations typically start out catering to a niche market or addressing unmet needs and often have lower functionality or performance than existing solutions. However, over time they can gain traction and eventually overtake established players in their respective industries, often by undercutting prices or offering superior convenience.
Disruptive Innovation in the Manufacturing Process
One way to apply a disruptive strategy is to re-evaluate the production process. Examples of disruptive innovation in manufacturing have occurred throughout history. We'll dive into two below:
The Auto Industry
The Model-T car is a classic example of a successful disruptive innovation that changed the manufacturing process. At the time of its creation, cars were typically luxury items only affordable to the very wealthy. However, Henry Ford's new assembly line mass production techniques enabled him to offer an affordable, reliable car that was accessible to a much wider range of consumers. This ultimately led to a disruption in the auto industry, with many established players forced out of the market as they struggled to compete with Ford's lower-cost and more user-friendly Model-T.
3D Printing
3D printing has become a disruptive technology in the manufacturing sector, allowing manufacturers to rapidly prototype physical products without requiring expensive and time-consuming tooling and assembly.
Additionally, it can reduce material waste, minimize shipping costs, and even allow for the creation of customized products at scale.
Disruptive Technology
Apple: Introducing the iPhone
One of the most notable examples of disruptive innovation is Apple's iPhone, which was introduced in 2007. The iPhone was initially met with scepticism, as it had fewer features than many other smartphones at the time and required a pricey data plan. However, its combination of a sleek design, intuitive interface, and intuitive touchscreen controls allowed Apple to capture a significant market share in the smartphone industry.
These products have changed not only the way that consumers view cell phones but also the way that many industries are run. For example, companies like Uber and Lyft have completely disrupted the taxi industry by offering on-demand rides through a simple application.
Amazon and Existing Technology
One particularly notable example of disruptive innovation is how Amazon functioned as a disruptive innovator in the bookselling industry by taking advantage of the rise of the personal computer to reach online shoppers.
Amazon's rise as an online shopping company would not have been possible without the exponential growth in internet access for its target audience and the enabling technology of personal computers. Amazon discovered that it was much more cost-effective not to maintain a physical store.
Sustaining Innovations
After a disruption occurs, it is not uncommon for established players to attempt to improve their existing products or services in order to retain their position in the market. This process of incremental innovation is known as a sustaining innovation, and while it can help to maintain profitability in the short-term, over time, it can lead to stagnation.
While disruptive innovation can be a challenging concept to understand and apply, understanding the fundamental principles behind it can help businesses make more informed decisions about how to successfully navigate the disruptive landscape.
Digital Disruption and Education
Now, online education is changing the face of education, as new technologies and methods are allowing learners to access educational content in entirely new ways. This has led to a rise in digital disruption, where new online learning platforms and technologies are changing the way that students learn.
Given the rapid pace of change in this area, it is important for businesses and organizations to stay up-to-date on these developments and adapt their business strategies accordingly. By doing so, they can not only stay ahead of competitors but also position themselves to take full advantage of emerging opportunities in the digital landscape.
Adopting a New Business Model
Disruptive innovations think beyond the existing market. It often takes a new business model to capture a new market segment. If the business model of a new entrant is tied to the strategies of established competitors, it is unlikely that they will be able to capture the market.
Netflix's Business Model as Disruptive Innovation
When Netflix launched its video streaming service in 2007, it disrupted the traditional business model of distributing and viewing content. This new business model allowed consumers to bypass many of the traditional suppliers in the entertainment industry, such as cable providers and movie theatres.
Netflix needed to completely rethink the traditional business model to succeed. Eventually, their business model innovation embraced disruptive technologies to reach new market segments through streaming.
Business models can make or break disruptive innovations, so it is important for each company to take a strategic approach when designing its business model. By carefully considering the various aspects of the market and customers' needs, companies can create effective business models that allow them to capitalize on disruptive innovation, even within a wider competitive market.
Disruptive Innovation and Retaining Existing Customers
One major concern for established companies that are undergoing disruptive innovation is how to retain existing customers and prevent them from leaving for competitors.
Strategies
To successfully navigate the disruptive landscape, it is crucial for businesses to continuously evaluate their strategies and adapt to changing market conditions.
- One strategy is toregularly communicate with your customers and ask them what they like or don't like about your products or services.By gathering this feedback, you can adjust to better meet their needs, which can help you to retain existing profitable customers and even attract new ones. Additionally, you can offer incentives to your loyal customers to further incentivize them to stay with your company.
- Another strategy is tofocus on building high-quality customer relationships. By creating meaningful connections with your customers and offering them attentively, personalized service, you can demonstrate your commitment to meeting their needs and establishing trust. This can go a long way in helping retain customers and build loyalty, even during disruptive change.
Sustaining Innovation
Sustaining innovation is often an afterthought, but it is important to note that disruptive innovation does not always lead to the demise of existing players in a particular industry. For example, many established market leaders in the auto industry have been able to effectively compete with newcomers by offering hybrid or electric car models that cater to consumers' growing environmental concerns.
Additionally, companies can also utilize disruptive innovation as a way to enhance established brands and develop higher profit margins. However, to remain competitive in the modern world, a company needs to make sure its revenue model is sustainable. This includes environmental sustainability, the flexibility to incorporate new technology, and more.
Rehab Digital Innovation Agency
At Rehab, we help companies create the next significant disruptive innovation. As a digital innovation agency, we understand the key trends, market demands, and digital technologies in today's digital landscape. Contact us today to learn more about how disruptive innovation works in today's market.
Frequently Asked Questions
How Do You Identify Disruptive Innovation?
Disruptive innovation is often challenging to identify, particularly in its early stages. One distinguishing characteristic of disruptive innovation is lower margins, at least in the beginning. This is partly due to the fact that disruptive innovations require significant investments and are, therefore, high-risk ventures. Additionally, disruptive innovation can either disrupt an existing market or create a new segment within an existing one by offering products or services that cater to customers who were previously underserved or ignored.
In terms of sales arguments and measures of value, they tend to differ drastically from established norms within the industry. And finally, many disruptive innovations involve new technology and/or a new business model compared to more traditional offerings in the marketplace.
Why Do We Need Disruptive Innovation?
Today, businesses large and small are faced with an unprecedented amount of competition in virtually every industry. It means that companies must constantly be on the lookout for new ways to improve their products and services and stay ahead of the changing needs of consumers.
The principles of disruptive innovation can help guide businesses in this process. By breaking down their current offerings into their essential elements and examining how these products or services might be improved, businesses can gain a better understanding of what their consumers truly want and need. They can also identify opportunities for creating new products that fill gaps in the market or offer more innovative solutions than what already exists.
By pioneering these new ideas, businesses can become leaders in shifting consumer expectations and drive future growth for themselves and their customers alike.
Whether you're trying to disrupt your own business or looking to make your next big break in an entirely new sector, disruptive innovation is sure to play a key role in bringing your ideas to life and helping you succeed in today's dynamic marketplace.
What Are Clayton Christensen's Theory and the Five Innovator's Skills?
Clayton Christensen is one of the most well-known and influential business theorists today. His theory of disruptive innovation has long been a staple in business and management education curricula, and his insights have inspired many other thinkers and decision-makers to explore new ways of thinking about the changing landscape of business.
One of the key concepts underlying Christensen's theory is that of innovator's skills. These are five fundamental skills that all innovators should possess:associating, questioning, observing, networking, and experimenting.By developing these skills, individuals can gain a deeper understanding of how markets work, learn to see opportunities where others might not, and continually challenge established practices in order to uncover new possibilities for growth and change.
Whether through deliberate practice or simply by following their instincts, individuals who possess these five essential skills can become true disruptors within their fields--challenging the status quo and paving the way for truly transformative change. And at a time when business models around the world are rapidly evolving, Christensen's theory is as relevant as ever.
What Is Disruption Theory?
The disruption theory is a model that seeks to explain how new entrants can successfully challenge established industries and businesses. Proposed by Harvard professor Clayton Christensen, the theory suggests that if a new competitor or startup comes in with significantly better products or services than those offered by existing players, the disruptor may actually help to push those incumbents to innovate more quickly. This is because the threat of being surpassed by upstart competitors forces established businesses to work harder and invest more resources in areas like product development, marketing, and customer service.
Overall, the disruption theory helps to shed light on how change can happen in any industry or sector, and how even entrenched companies must be prepared to tackle new challenges head-on.
