Disruptive Innovation

Disruptive Innovation

1. Process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.

   • When new technology arises, disruption theory can guide strategic choices.
     • Disruption theory does not, and never will, explain everything about innovation specifically or business success generally

2. Originate in low-end or new-market footholds.

   • Low end
     • Exist because incumbents typically try to provide their most profitable and demanding customers with ever-improving products and services, and they pay less attention to less-demanding customers
   • New Market
     • Disrupters create a market where none existed

3. Disruptive innovations don’t catch on with mainstream customers until quality catches up to their standards.

   • Typically, customers are not willing to switch to the new offering merely because it is less expensive
     • Instead, they wait until its quality rises enough to satisfy them.
       • Once that’s happened, they adopt the new product and happily accept its lower price.
         • This is how disruption drives prices down in a market

4. Disruption is a process.

   • Disrupters tend to focus on getting the business model, rather than merely the product, just right
     • When they succeed, their movement from the fringe to the mainstream erodes first the incumbents’ market share and then their profitability.

5. Disrupters often build business models that are very different from those of incumbents.

   • One high-profile example of using an innovative business model to effect a disruption is Apple’s iPhone.

6. Some disruptive innovations succeed; some don’t