Disruptive innovation, sounds almost like an oxymoron. How can innovation, something that brings together design, problem-solving and futuristic ideas together be disruptive? Is this disruption good or bad?
The theory of disruptive innovation has been developing steadily in the business world over the past two decades, and has been used as a tool to foresee new trends in the business world- whether or not they will survive.
What is disruptive innovation?
In its most fundamental definition, disruptive innovation is the use of an idea or a technology to disrupt long-existing structures. Usually, it is a smaller company with fewer resources challenging the hegemony of a larger corporation and its customer base by introducing a product that is more affordable and caters to a wider consumer base. The product is usually better and cheaper and appeals to the overlooked sections.
A befitting example is that of inbuilt camera in cell phones. Until these phones hit the market, cameras were affordable only by a selected section of the society. The rest would either rent cameras for special occasions or visit a photo-studio. The inbuilt camera in cell-phones was a disruptive innovation to the camera industry as people’s everyday needs of a camera was being fulfilled by their smartphones instead. Now, cameras are bought only for professional use or by photography enthusiasts. Similarly, amazon bookstore was disruptive to millions of bookstores across the world as people could order any book online without having to hunt for its availability across town.
Scope for misunderstandings:
The very broad contours of the term make it highly misunderstood and misinterpreted. It has hence been used in contexts where it is not applicable. Here are the two parameters to measure whether an emerging business model or start-up fits into the category of disruptive innovation or not:
- Disruptive innovations emerge in low-end markets or entirely new markets altogether. Low-end markets are the customer base that had been ignored by the mega-giants which it capitalised on by the disruptors. Secondly, they create a market of their own, one that never existed with their products.
- They do not sell to the high-end customers until they establish their name, reliability and credibility in the market. Initially, their products are looked down upon by the high-end customers who are used to buying branded products. These customers only come into the fold once a name has been made and the product start competing with mainstream brands in terms of quality and standards.
A tool for the entrepreneurs:
While a threat for the major corporations, disruptive innovation is the holy grail for entrepreneurs aiming to enter and conquer the market. They provide an immeasurable scope for entrepreneurs as disruptive innovations are not better than existing products, rather cheaper and more accessible to a larger section of people. Here, you basically take a high-end product and use innovation to deliver the same services in cheaper forms and build a customer base that never existed. This is especially true in the case of China-based smart phone companies like MI that delivered smartphones to the lowest of the low.
In our efforts to create an equitable world, disruptive innovation can act as the catalyst to make things affordable, sustainable and attain global prosperity. The most important sectors that can benefit and are in dire need of this are healthcare and education. An incredibly positive force, disruptive innovation is the way to lead into the future.