Brighter business / Disruptive innovation: Why changing the game leads to success

Disruptive innovation: Why changing the game leads to success

25th August 2017

‘Disruptive’ is probably the biggest business buzzword of the moment. But what does it mean?

It’s used to describe almost any business which takes a new and unusual approach to its market, or one which very quickly makes a reputation for itself by challenging the status quo.

But the terms ‘disruptive’ and ‘disruptive innovation’ mean something a little bit more specific.

They refer to those businesses which radically alter the landscape of their industry in a short space of time with a unique product which appeals to a very specific band of the target market.

These businesses are called ‘disruptors’ and their products or strategies are called ‘disruptive innovations’.

Theses phrases were coined by Clayton M. Christensen in 1997, but the Harvard Business Review describes disruption neatly as

“a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.”

Disruption: A process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Disruption has become a popular catch-all term when talking about any successful product or business venture, but this doesn’t fully capture the meaning.

Disruptive innovation begins at the lower end of a market, progressing very quickly to the top while displacing established competitors. It’s a fairly unique process.

What’s an example of a disruptor company?

Netflix is one example of disruption – the Netflix business model was so successful that it saw their main competitor Blockbuster go out of business. Airbnb is another which presents a serious threat to the established hotel industry.

While Uber is not really considered to be a disruptor, the company rose to prominence as a result of its business model, through classically disruptive strategies without a specific disruptive innovation.

Similarly, Tesla is a disruptive company, but is working in reverse; instead of working from the bottom up, the company is changing the system from the top down.

Uber and Airbnb very quickly rose to the top of their respective industries, both of them powered by a strong concept and advances in technology. Tesla and Netflix have been slow-burners, but are no worse off for it.

The most important thing to take away from these examples is that disruptive behaviours can lead to huge success for your business. In some cases, it can happen very quickly.

So how do you recreate that success in your own business?

How can a business become a disruptor?

There are two different approaches to take when it comes to your disruption strategy.

The classical approach – the one most closely associated with Christensen’s phrase – is called low-end disruption.

This involves new businesses entering their market at the low-end, providing a service which is simpler, cheaper or more convenient to the target audience whose needs are not being met.

This is how smaller companies with fewer resources can challenge established industry leaders, by picking up under-serviced customers while undercutting the competition; this is how Airbnb, Netflix and Uber rose to popularity.

The alternative is called new market disruption. This means opening up a whole new customer segment that was previously not serviced by giving them access to your product. This is the Tesla model; a pioneering attempt at top-down disruption which introduces a new product in an attempt to completely change the automotive industry.

Whichever strategy you opt for, you need to identify the market that you want to disrupt as well as knowing how you can achieve that goal. All industries are vulnerable to the disruptive model – it’s a matter of identifying weaknesses in the strategies of your competitors, then exploiting them.

Once you enter the market and capture a customer segment, the focus should be on rapidly expanding. By improving your product and offering a more diverse range of products or services, you can attract more custom away from the incumbent businesses.

However, disruption works both ways – as your business moves towards the top, you need to be aware of potential disruptors and disruptions which could affect your success. Keeping an eye on innovations in other industries can give you an idea of how technology can force change.

By trying to keep one step ahead of technology, and by continuing to offer products and services which are relevant to the whole of your customer base, you can hold on to your position at the top.