Disruptive innovation refers to the process of transforming highly sophisticated products, systems, or solutions that were previously accessible to a high-end or more skilled segment of consumers to those that are more accessible and affordable to a broader population. This change disrupts the market by displacing established competitors.
Disruptive innovation does not mean the process of improving products for the same target group; instead, it involves building disruptive technology products, systems, or solutions that are easy to use and available to the larger, non-targeted market audience. The best innovation strategy for business is self-disruption.
Here are some types of disruptive innovations that we have started observing around us already:
- Netflix, Amazon, MX Player, Disney Star are examples of Web-based video disrupting the cable industry.
- Ride-sharing services like Zipcar, Car2go, Uber, Ola have disrupted the taxi industry.
- Virtual Reality has gone beyond gaming and entertainment to disrupt how people do business.
- Augmented Reality targets to disrupt in-car navigation systems and how we use mobile phones.
- Cryptocurrency is fast rising to disrupt banking and payment services systems.
- Recoding cancer by editing genes disrupts cancer treatments.
- Collaborative commerce is disrupting e-commerce and retail.
These aim to affect consumers’ lives today, but they started as disruptive ideas ahead of their time.
Is Netflix a true meaning of disruptive innovation?
Netflix initially offered a DVD-by-mail rental service and later launched its online, subscription-based movie streaming service. When Netflix changed to its subscription-based business model, its competitor, Blockbuster, was still earning billions.
Today, Netflix’s on-demand all-you-can-watch movie platform is used by over 150 million people all over the world. Interestingly, Netflix proves to you that if a company wants to disrupt an industry, it must be willing to disrupt itself.
Types of disruptive innovation
Innovation is not a black and white concept. Different companies can practice disruption in different ways. Two types of disruptive innovation that companies can approach include low-end and new-market.
When a company enters at the bottom of an existing market and claims a segment using a low-cost business model, it is called Low-end Disruption. On the other hand, when a company creates a new segment in an existing market with a low-cost version of a product, it is called New Market Disruption.
The factor that sets new-market disruption apart from low-end disruption is the company’s focus on an audience that doesn’t yet exist in the market, i.e., a long-form view. A vision where offering a more accessible, cost-effective, or simple product effectively creates a new segment.
Why does getting it right matter?
Disruption comes with huge risks because before disrupting a whole industry, a company must disrupt itself. Even an internal disruption has a lot at stake, including the company’s reputation, budgets, human resources, time investments, and the like. If your innovation goes wrong and the new offering in the market doesn’t work, the business could be labelled as a failure. For a company looking to go for disruptive innovation, there is no other option but to be right about it.
How has our thinking about disruption changed?
Firstly, Companies must adapt and evolve to stay relevant. This means finding new ways to disrupt the economy and recapture market share. That’s why even the biggest companies are focused on self-disruption. One can observe that with Apple and Google. To truly thrive, a company must always focus its energies on the customer experience, which includes devoting resources to solving future problems. Otherwise, they will find themselves being the victims of disruption.
We still have a lot to learn and a lot to see!
Lesson 1: If you failed to anticipate and recognize that your historical strengths, the very sources, and drivers of your enormous success would become lethal liabilities, the seeds of your failure, as the technology and marketplace change dynamically. Adopting a long-form view is critical in disruptive innovation processes.
Lesson 2: Don’t underestimate small penetration numbers. In 2006, smartphone penetration was only about 3%, close to where electric vehicles are today. Ten years later, smartphone penetration reached 81%.
Lesson 3: A critical lesson from the past innovation is the resulting ripple effect on your related industries. For example, when people realize they no longer need to own a car, they will not need car insurance. They won’t even need a garage at all. As a result, homes may become more affordable. Airports, sports arenas, and shopping centres will not need as much parking space (they are already shrinking given the growing popularity of rideshare services). That could clear up a tremendous amount of real estate. It will free people from the focused driving time, giving them time, watch videos, read or work instead. All of this might result in positive environmental impacts as well.
Disruption is a great teacher. If you want to be an industry leader, you must keep an eye for disruptive innovation anywhere. Even if a trend is not directly related to your industry, the ripple effect of disruption will catch on and may end up impacting your business down the road. Technology innovation and strategy are essential. Only if the company adheres to technological change will it reap benefits. Digiligo believes that a streamlined relationship between technology transformations and corporate processes can help your organization achieve its strategic business goals.
Our team of experts will help you disrupt processes, systems, strategies and outcomes across your organizational departments and activities. With the help of our strengths in innovation, strategy, and digital-first approaches, your organization can truly disrupt innovation across all stakeholders.
Learn more about why you should disrupt innovation across your organization today!