A pet peeve of mine is how many people misuse the term Disruptive Innovation. Many of those who do seem not to have read Christensen's books or if they did, had no idea about the significance of the theory and its application to business (i.e. why the definition matters). Or maybe they skimmed and didn't get what the idea was about because of preconceived notions about innovation. Maybe they heard a friend who is usually in the know describe something as disruptive, or they were in a meeting where a product manager proclaimed their product disruptive. Or they read some bad review of the Innovator's Dilemma.
Whatever the issue, they don't get it, and dilute the meaning with their misapplication of the term. Some think all innovation is disruptive by definition (a truly simplistic and moronic viewpoint). Some believe it has to be breakthrough to be disruptive. Some think it only applies to technology. Some use it as a marketing adjective to imply that their product is "better" or "more advanced". Others believe that "disruptive innovation" is a buzz phrase without meaning. Others just think all innovation is over-rated.
All are wrong.
First Principles
When I encounter confusion like this, I find it useful to return to first principles. Without regard to Christensen's theories (we'll consider that in a minute), what do the words mean?
Innovation: something novel; an invention; any improvement to an existing process, good, or service; the act of introducing something new
The thesaurus lists several alternatives including: change, departure, invention, introduction, or novelty (no, they aren't precise definitions, but the sum of synonyms usually captures the general meaning). There is nothing in any of this that implies an invention will disrupt markets or other products. In fact, there is nothing in the definition of innovation that implies any market success, or that the innovation is even useful. Innovation doesn't have to be breakthrough or significant -- it can be very minor. It could just be a different means of manufacture or distribution, and nothing to do with the product at all. Many innovations never even make it to market, so how could they disrupt anything?
Disruptive: characterized by unrest or disorder or insubordination; causing disruption or unrest
and Disruption means: the act of breaking regular flow or continuity of something; disturbance; a disorderly outburst or tumult; dislocation, especially an event resulting in dislocation or discontinuity
Clearly to be disruptive, something has to disrupt. So, let's combine the words and discern what they mean together. Certainly a disruptive innovation should minimally cause a market disturbance. Or market disorder or discontinuity in the success and growth of market incumbents. One would expect a disruptive innovation to be something new that shakes up a market, that is threatening to the existing order of things, that changes the status quo.
Another way to think about this is that to be disruptive, a change has to have more than the potential to disrupt, it needs to succeed at disrupting the market or the incumbent products, or obsoleting a product category altogether.
A disruptive innovation then could be a breakthrough, but it doesn't need to be. It could be an invention like none that has come before, or it could be a small change that makes an existing product good enough to compete in a new product space that it wasn't previously targeted at, and forever change the basis of competition. It does not need to be better than existing products or services, and in fact, often enters a market as an inferior substitute to the dominant market players (at least on the criteria that the category was previously measured on). It could be a change in business model which alters the economic attractiveness of alternative ways of doing business.
How Christensen Intended the Term "Disruptive Innovation" to be Applied
Not surprisingly, just by parsing the definitions of "disruptive" and "innovation" accurately, we come up with something very close to what Clayton Christensen meant when he identified a type of product, service, business model, or other process which over time, completely displaces the incumbent market leaders. It does so because it enjoys an order-of-magnitude cost advantage, or because it changes the ease-of-use or convenience attributes so significantly that it enables a lower level of expertise to successfully use a product, or enables the product to be used away from a centralized inconvenient location and be distributed out to the consumer's location.
Significantly, disruption results from business strategy, even if the innovation's disruptiveness wasn't planned but happened by accident. In other words, it isn't enough to have a product with disruptive potential -- the majority of those fail in the market.
It must also be properly positioned, targeted at appropriate segments, launched properly, priced accordingly, distributed effectively, and even marketing communications programs have to hit the right note and use appropriate tactics for a product to disrupt a market. If a company has a direct sales force, it helps that sales policies and tactics are targeted for disruption.
This fact is missed by many would-be entrepreneurs who believe that if they build a better mousetrap, the world will beat a path to their door. But, disruption doesn't happen that way, except in very rare incidences. And, we aren't interested in accidents when we talk about disruptive innovation, because the idea is to plan for it, and have a reliable, repeatable set of processes based on solid theory that we can use to create disruption.
Why Do We Care?
Disruption is about economic growth. About creation of shareholder value. In fact, almost all real growth comes from disruption -- a fact that I will illustrate in an upcoming post. For now, I will simply refer to a graph that resulted from scoring companies as disruptive or not based on sorting through and analyzing the key attributes that predict market disruption. We used a simple technique of assessing a disruption score based on the current product and market attributes (current at the time of scoring), and then comparing market cap one year later with the valuation on the date of the original scoring.
Significantly, all the disruptors had a minimum gain in shareholder value of over 100% in the course of that year, and all the non-disruptors had a minimum loss in value of over 40%. No exceptions. Black and white results. (I'll be scoring and reporting on many innovators and their "potentially" disruptive innovations in this blog).
It Matters
So clearly, disruption matters. Without it, everything eventually slides into "commodity" status, with minimal to no differentiation. It's what drives the stock market and the reason investors place bets on startups. It creates jobs. It builds wealth. It is the holy grail of business.
So please, get the definition right, and understand what it means if you're going to use the term. It matters.
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