Innovation drives the markets and creates cycles of consumer demand. No business can stay alive without competitive innovation, but it takes more than just a new player in town to disrupt a market.
We hear a lot about disruptive innovation—the phrase has gone mainstream. While it’s now a buzzworthy-term, most of us use it without knowing what exactly it means. What makes innovation disruptive? Here’s why you’ve probably been using the term wrong.
Know What Disruption Isn’t
Writers, marketers, and businesses toss the term “disruption” around, often erroneously using it as a synonym for innovation. True disruption, however, is rare. We often fall into the trap of using the word “disruption” to describe any movement that shakes up an industry, but this definition is far too broad. This presents a compelling problem, since different types of innovation require varying strategic approaches.
Let me put it another way. Every time there is a disruption in the marketplace, we learn unique lessons. Whether we’re the disruptive innovator, or we’re defending our turf in a shifting market, what applies to one company may not make much sense for another. When we broadly affix labels like “disruptive innovation” to every shift in the marketplace, we may fail to integrate applicable insights or research, which leaves us vulnerable and undermines the very essence of the theory.
In short, disruption and innovation aren’t the same, though we often see them this way.
Learn What Disruption Is
The Harvard Business Review describes disruptive innovation as a process by which a smaller company, one with fewer resources, manages to overtake or successfully compete with incumbent enterprises. It relies on the idea that veteran businesses focus on improving products and services for their most profitable (and often most demanding) customers, while ignoring the needs of their fringe customers. Smaller companies target those neglected segments, and eventually mainstream customers follow suit. When an incumbent’s most profitable segments start using an entrant’s product or service, we say that disruption has occurred.
It can be easier to think of this in terms of trajectories. A typical market trajectory eventually reaches the most profitable corner of the market, where it remains. A disruptive trajectory, by contrast, gains traction on the lower footholds and, over time, challenges an incumbent’s spot on the most profitable echelon.
We often say Uber is an example of a disruptive innovator, but in reality, it’s not. To be a disruptor, a company must either create a new market threshold or tend to an ignored segment of the population—Uber did neither. While the company certainly transformed the taxi business, they didn’t disrupt it.
I’ve also seen articles that describe such phenomena as mobile technology, the Internet of Things, and big data as disruptors. While these are all things that have reinvented the way we work and play, they’re not companies that create disruption. On the other hand, if a company leveraged big data to create smart home technology for low-income customers, that would have the potential to be disruptive.
See How The Difference Matters
In my line of work, I often hear, “What’s the difference? I’m aware a competitor is shaking up my territory; that’s enough, right?” Unfortunately, no. When we assume everyone who innovates is a disruptor, we’re treading on dangerous ground, because it fundamentally changes our “lessons learned.”
Here’s an example. Say your company notices a smaller competitor taking chunks of your less demanding customers. Usually, it’s best to ignore them, since they’re not taking a huge hit on your bottom line—unless they’re on a disruptive course. If you fail to recognize a truly disruptive course, your company will be the one that suffers.
Recognize disruption in your industry by knowing its basic tenets:
• Disruption doesn’t happen overnight. Netflix is a good example of a disruptor, and they didn’t overtake Blockbuster in a matter of weeks or months—it took years to become the original content and media streaming powerhouse it is today.
• Business models are radically different. Disruptors don’t succeed by simply twisting the status quo; they introduce a completely different model to a neglected population.
• It’s not all about disruption. We still operate under the misguided notion we should all be disruptors. Know how to recognize a potential disruptor, but continue to do what your company does well.
Disruption may be buzzworthy, but it’s still a misused concept. Don’t fall into the “disrupt or be disrupted” trap, but be sure to recognize true potential disruptive innovators in your industry.
Additional Resources On This Topic:
6 Disruptive Trends In Technology For 2017
The Role of Failure in Rapid Innovation
Top 10 Disruptive Technology Trends For 2017 That You Need To Know
