In business theory, disruptive innovation is innovation that creates a new market and value network or enters at the bottom of an existing market and eventually displaces established market-leading firms, products, and alliances. In theory, disruptive innovation makes it hard for leading firms to stay at the top of their industry. The term, "disruptive innovation" was popularized by the American academic Clayton Christensen and his collaborators beginning in 1995.
Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation, because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. However, the mass-produced automobile was a disruptive innovation, because it changed the transportation market, whereas the first thirty years of automobiles did not.
Disruptive innovations tend to be produced by outsiders and entrepreneurs in startups, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition). Small teams are more likely to create disruptive innovations than large teams. A disruptive process can take longer to develop than by the conventional approach and the risk associated with it is higher than the other more incremental, architectural or evolutionary forms of innovations, but once it is deployed in the market, it achieves a much faster penetration and higher degree of impact on the established markets.
Usage history Christensen's types of innovation. Christensen describes as "revolutionary" innovations as "discontinuous" "sustaining innovations" Sustaining An innovation that does not significantly affect existing markets. It may be either: Evolutionary An innovation that improves a product in an existing market in ways that customers are expecting (e.g., fuel injection for gasoline engines, which displaced carburetors.) Revolutionary (discontinuous but sustaining) An innovation that is unexpected, but nevertheless does not affect existing markets (e.g., the first automobiles in the late 19th century, which were expensive luxury items, and as such very few were sold and did not displace any existing product or service.) Disruptive An innovation that creates a new market or enters at the bottom of an existing market by providing a different set of values, which ultimately (and unexpectedly) overtakes incumbents (e.g., the lower-priced, affordable Ford Model T, which displaced horse-drawn carriages)
The term disruptive technologies was coined by Clayton M. Christensen and introduced in his 1995 article Disruptive Technologies: Catching the Wave,Bower, Joseph L. & Christensen, Clayton M. (1995). The concept of new technologies leading to wholesale economic change is an older idea; Joseph Schumpeter adapted the idea of creative destruction from Karl Marx. Schumpeter (1949) in one of his examples used "the railroadization of the Middle West as it was initiated by the Illinois Central". He wrote, "The Illinois Central not only meant very good business whilst it was built and whilst new cities were built around it and land was cultivated, but it spelled the death sentence for the [old] agriculture of the West."Disruptive Technologies: Catching the Wave" Harvard Business Review, January–February 1995 which he cowrote with Joseph Bower. Similar ideas had previously been described in Richard N. Foster's book Innovation: The Attacker's Advantage and in the paper "Strategic responses to technological threats", as well as by Joseph Schumpeter in the book Capitalism, Socialism and Democracy (as creative destruction).
The article is aimed at both management executives who make the funding or purchasing decisions in companies, as well as the research community, which is largely responsible for introducing the disruptive vector to the consumer market. He describes the term further in his book The Innovator's Dilemma. Innovator's Dilemma explored the case of the disk drive industry (the disk drive and memory industry, with its rapid technological evolution, is to the study of technology what fruit flies are to the study of genetics, as Christensen was told in the 1990s) and the excavating and Earth-moving industry (where hydraulic actuation slowly, yet eventually, displaced cable-actuated machinery). In his sequel with Michael E. Raynor, The Innovator's Solution, Christensen replaced the term disruptive technology with disruptive innovation because he recognized that most technologies are not intrinsically disruptive or sustaining in character; rather, it is the business model that identifies the crucial idea that potentiates profound market success and subsequently serves as the disruptive vector. Comprehending Christensen's business model, which takes the disruptive vector from the idea borne from the mind of the innovator to a marketable product, is central to understanding how novel technology facilitates the rapid destruction of established technologies and markets by the disruptor. Christensen and Mark W. Johnson, who cofounded the management consulting firm Innosight, described the dynamics of "business model innovation" in the 2008 Harvard Business Review article "Reinventing Your Business Model".Johnson, Mark, Christensen, Clayton, et al., 2008, "Reinventing Your Business Model, Harvard Business Review, December 2008. The concept of disruptive technology continues a long tradition of identifying radical technological change in the study of innovation by economists, and its implementation and execution by its management at a corporate or policy level.
According to Christensen, "the term 'disruptive innovation' is misleading when it is used to refer to the derivative, or 'instantaneous value', of the market behavior of the product or service, rather than the integral, or 'sum over histories', of the product's market behavior."
In the late 1990s, the automotive sector began to embrace a perspective of "constructive disruptive technology" by working with the consultant David E. O'Ryan, whereby the use of current off-the-shelf technology was integrated with newer innovation to create what he called "an unfair advantage". The process or technology change as a whole had to be "constructive" in improving the current method of manufacturing, yet disruptively impact the whole of the business case model, resulting in a significant reduction of waste, energy, materials, labor, or legacy costs to the user.
In keeping with the insight that a persuasive advertising campaign can be just as effective as technological sophistication at bringing a successful product to market, Christensen's theory explains why many disruptive innovations are not advanced or useful technologies, rather combinations of existing off-the-shelf components, applied shrewdly to a fledgling value network.
Online news site TechRepublic proposes an end using the term, and similar related terms, suggesting that, as of 2014, it is overused jargon.Conner Forrest, May 1, 2014, 5:52 AM PST, https://www.techrepublic.com/article/startup-jargon-10-terms-to-stop-using/
Definition
Disruption is a process, not a product or service, that occurs from the nascent to the mainstream Originates in low-end (less demanding customers) or new market (where none existed) footholds New firms do not catch on with mainstream customers until quality catches up with their standards Success is not a requirement and some business can be disruptive but fail New firm's business model differs significantly from incumbent
Christensen continues to develop and refine the theory and has accepted that not all examples of disruptive innovation perfectly fit into his theory. For example, he conceded that originating in the low end of the market is not always a cause of disruptive innovation, but rather it fosters competitive business models, using Uber as an example. In an interview with Forbes magazine he stated:
Entrepreneur Chris Dixon cited the theory for the idea that "the next big thing always starts out being dismissed as a 'toy.
Theory The current theoretical understanding of disruptive innovation is different from what might be expected by default, an idea that Clayton M. Christensen called the "technology mudslide hypothesis". This is the simplistic idea that an established firm fails because it doesn't "keep up technologically" with other firms. In this hypothesis, firms are like climbers scrambling upward on crumbling footing, where it takes constant upward-climbing effort just to stay still, and any break from the effort (such as complacency born of profitability) causes a rapid downhill slide. Christensen and colleagues have shown that this simplistic hypothesis is wrong; it doesn't model reality. What they have shown is that good firms are usually aware of the innovations, but their business environment does not allow them to pursue them when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from that of sustaining innovations (which are needed to compete against current competition). In Christensen's terms, a firm's existing value networks place insufficient value on the disruptive innovation to allow its pursuit by that firm. Meanwhile, start-up firms inhabit different value networks, at least until the day that their disruptive innovation is able to invade the older value network. At that time, the established firm in that network can at best only fend off the market share attack with a me-too entry, for which survival (not thriving) is the only reward.
In the technology mudslide hypothesis, Christensen differentiated disruptive innovation from sustaining innovation, whose goal is to improve existing product performance. On the other hand, he defines a disruptive innovation as a product or service designed for a new set of customers.
Christensen also noted that products considered as disruptive innovations tend to skip stages in the traditional product design and development process to quickly gain market traction and competitive advantage. He argued that disruptive innovations can hurt successful, well-managed companies that are responsive to their customers and have excellent research and development. These companies tend to ignore the markets most susceptible to disruptive innovations, because the markets have very tight profit margins and are too small to provide a good growth rate to an established (sizable) firm. Thus, disruptive technology provides an example of an instance when the common business-world advice to "focus on the customer" (or "stay close to the customer", or "listen to the customer") can be strategically counterproductive.
While Christensen argued that disruptive innovations can hurt successful, well-managed companies, O'Ryan countered that "constructive" integration of existing, new, and forward-thinking innovation could improve the economic benefits of these same well-managed companies, once decision-making management understood the systemic benefits as a whole.
Christensen distinguishes between "low-end disruption", which targets customers who do not need the full performance valued by customers at the high end of the market, and "new-market disruption", which targets customers who have needs that were previously unserved by existing incumbents.
Low-end disruption