What is Disruptive Innovation? Is your business disruptive?
The Art of Disruption
The term Disruptive Innovation was coined by Harvard Professor Clayton Christensen in the 90's. Disruptive innovation is essentially an innovation that enters a high-end or costly market or industry at a lower cost and is more accessible to people who are not current consumers in that market.
Disruptive innovations usually start out low-end and highly accessible, then gradually becomes more sophisticated over time. Their success is typically unexpected and drives current market leaders out of business or forces them to restructure their current business models.
5 Examples of Disruptive Innovation
Streaming Services
Netflix is a classic example of disruptive innovation. They entered the market at a low, affordable cost, made their products available nationwide, and consumers didn't have to leave their homes. As movie streaming services evolved they eventually drove video stores and DVDs out of business. Music streaming services such as YouTube had a similar effect on the music industry and how we listen to our favorite artists.
Photography
Cell phones caused industry leaders like Kodak to file bankruptcy. When cellphones first entered the market the camera quality was very low, however, you didn't have to pay for the camera itself and it already came with the phone, which made it accessible to most people who owned a cellphone. Although it was highly accessible, if you wanted a really good picture you wouldn't use your phone's camera.
Over time the cellphone became more sophisticated and so did it's camera. So much so, people will purchase a phone specifically for the camera. Today you can use most smartphone cameras for weddings, graduations, and many other events where Kodak once reigned supreme. Try pulling out a disposable camera at a wedding today and watch how quick you get laughed at.
Digital Wallets
Who still writes checks to friends? Who still carries cash? Digital wallets like Cash App changed how we spend money. We can go out to eat, put everything on one person's card and get our money back immediately. No more "Oh I know you I owe you money, I just haven't been to the ATM yet". Cash App me!
Digital wallets have changed the way we bank, buy and do business. So long expensive cash registers!
Stock Market
You used to need a really expensive stock broker to help you set up an investing account and buy stocks. Apps like Robinhood and Stash have changed the game and leveled the playing field. Buying stocks is no longer synonymous to Wall Street activity. Anyone with a smart phone can purchase and trade stocks by signing up for one of these investing apps for free or for a low price.
Online/Home School
Online and home education haven't quite disrupted the market yet, but they have the potential to. Affordable and broadly accessible home education platforms are becoming increasingly popular. This market entrant can change the way universities attract and house prospective students. All it will take is for the right external event be the catalyst for change of behavior within large sums of college students and parents of small children. We saw this with the 2020 pandemic and it's likely we'll see more of it in the near future.
Controversy: Is Ridesharing Disruptive?
There is a popular debate among business analysts and economists on whether ride-share services like Uber are considered disruptive. As mentioned previously, disruptive innovations are usually low-cost, widely accessible, attracts new consumers, and becomes more sophisticated over time. Uber however, did the contrary. They started out expensive with limited availability, then became broadly accessible. When Uber launched in San Francisco it was a luxury, black car service. It soon became an affordable and nationwide alternative to taxis and is slowly driving the taxi industry out of business. One can argue that in some ways Uber was indeed low-cost -- to the drivers. Unlike taxi drivers, Uber drivers don't need an expensive chauffeurs license and they can use their personal vehicles. It's undeniable that ride-share companies have disrupted the taxi industry and innovated how people use their cars for financial gain, but the debate on whether they are considered a disruptive innovation continues. What do you think?
Be Disruptive
Is your business disruptive? How do you plan on protecting your business from potential disruptive market entrants?
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