What is Disruptive Innovation?
When a product or service that was previously only available to rich or highly educated people is transformed into one that is more widely available and accessible, this is referred to as disruptive innovation. It disrupts the market by displacing seasoned, well-established competitors. It is the process of transforming expensive products into products that are easily affordable by the general public.
More about Disruptive Innovation
Instead of developing or upgrading items for the same target market, disruptive innovation focuses on the technologies utilized to make them accessible to and used by a larger, untargeted market.
Sustainable technologies were those that gave a company the ability to gradually enhance its operations over time. These technologies, as well as how they were introduced into the industry, were primarily created to help businesses preserve the current system or remain competitive. Disruptive innovations—the disruptive technologies and how they are combined—were more difficult to plan for and might have a greater negative impact on businesses that did not pay enough attention to them.
Investing in disruptive innovation is a very complicated process. The investor has to carefully analyze how it will adjust to disruptive technology rather than concentrating on the development of its technology. Companies like Google, Facebook(now Meta), and Amazon have focused on disruptive technology.
Smartphones are a great example of disruptive innovation as they focused on the customers who found it difficult to carry their laptops and wished for a lighter, smaller, portable option. Because they were cheaper than laptops, the market for smartphones expanded.
However, the Model T car is not a good example of disruptive innovation. It was an improvement to the existing technology but people did not adopt it on a large scale. It was widely adopted when it was mass-produced because it came along with a cheaper price. So, the mass production method does meet the criteria for disruptive innovation.
Disruptive innovation requirements
Access to disregarded or underserved markets and technology that can change a product into one that is more easily available and reasonably priced are necessary for disruptive innovation. The new, disruptive business model must also be advantageous to the network of partners, including suppliers, contractors, and distributors, to be disruptive. Several fundamental conditions include:
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Enabling Technology
It is referred to as technology to improve the process of doing things. The availability and affordability of a product to a broad market depends upon the enabling technology. The speed of disruption of a market depends upon how quickly the technology is improved.
However, do not get confused by the fact that speed is used as a metric to measure the success of the disruption. Speed is not a metric to measure its success.
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Innovative Business Model
Innovative business models target new consumers through their innovations. Since they either could not afford them or the products were too complex for use, these sectors typically do not generate profits for established businesses or purchase their goods. This business model aims to offer simple, affordable solutions—a model that competitors haven’t adopted because of the disruptor’s initial low-profit margins.
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Network of Coherent Values
The upstream and downstream business partners who profit from a successful disruption are members of the cohesive value network.
To conform to the new business model, the distributors, suppliers, and vendors may need to change their processes. To avoid failure, network users must sign up for the new business model. Otherwise, outdated network operations will provide negative outcomes by failing to adhere to the disruption aim.
Examples of Disruptive Innovation
The best way to understand a topic is to look at real-life examples. So, here are some real
Netflix
Netflix is a classical example of disruptive innovation. It disrupted an existing market using its new technology and business model.
Earlier, people used to buy various DVDs from various video stores. They provided customers with the option to browse their DVD inventory, rent without being constrained by another customer’s decision to rent the same selection, and have their choices delivered right to their homes.
Later, they revised their business model by offering online-streamed entertainment. However, several other businesses are providing the same features but Netflix was the first one to disrupt the market.
Airbnb
Airbnb is another great example of disruptive innovation. Airbnb provides the facility of providing travelers an opportunity to live in a house like the local people in that city, or village live. It works as a facilitator between travelers and hosts.
The important factor of its success is the price. People can wash their clothes in the house and can cook their meals in the kitchen, unlike hotels. Also, large groups can share a large house instead of booking many hotel rooms. Guests can choose from a limited number of distinctive listings, such as boats, tents, tree houses, and villas, which offer a variety of different experiences.
Difficulties faced by Innovators
Disruptive Innovation is inferior to the existing products in the market. In the beginning, it serves a small and not very profitable segment of the market because the customers choose the already existing products as they can rely upon them.
For example, when you want to buy a new washing machine, you go for the company whose product you have already used even if the product has fewer features than the newly established one.
Characteristics of disruptive innovation
- Low-profit margins, in the beginning
- High risk
- Mostly involves preparing a new business model or a new technology.
- Develops a new market sector within the current one, or disturbs an existing market.
- Typically, value measures and sales arguments are radically altered.
- Begins slowly before becoming widely accepted, after which it accelerates.
Conclusion
If you don’t have many resources, it is better to start the process by disrupting smaller markets locally and then going on a global level.
The ability to disrupt the current operating system and encourage the formation of a new one is the key to disruptive innovation.
It takes a different approach and a conscious decision to try to alter the prevalent beliefs in the industry to cause disruption. Even if it isn’t the most profitable option right away, you must commit to creating new types of value.
Guest article written by: Aastha Sapra is a commerce student with a yearning to learn. Being an avid language explorer, she is currently pursuing a diploma in German. She has written on varied themes ranging from business, finance, and technology to health and lifestyle. Apart from writing, her interests include reading and touring the world of fiction. She has written for Thrv – Jobs to be done.