Disruptive innovation is widely misunderstood, for instance Uber is not a disruptive innovation, but Netflix is.
Let me explain, or actually let the creators of the theory explain…
Christensen, Michael Raynor and Rory McDonald describe the theory in an article for Harvard Business Review
The theory explained
The idea is, a smaller business takes down an incumbent through targeting segments of the market that have been neglected by the big business. It’s not to say the larger company isn’t innovating, but typically their focus is on improving for their most demanding customers. The small business gains a foothold at the bottom of the customer rung or they spy a new market the other business has failed to see.
The little guy typically arrives with new or innovative technologies which are better matched to the big businesses overlooked customers, and usually much cheaper!
The disruption happens as the little guy begins to gain traction and climb the ladder towards the bigger/more important customers.
For example, Blockbuster meet Netflix.
And who doesn’t want to produce an idea that eventually wipes out the competition and puts their business at the forefront of technology – most see the status of disruptive innovator as the ‘Holy Grail’.
However, this scenario results in big losers! Not just the company being overtaken, but workers, consumers and the environment can all suffer and more often than not there’s no compensation or thought for how we shift the burdens that we inevitably create.
Whilst we are not suggesting interfering directly with market outcomes certain considerations need to be made if you are the innovator.
Not always as it seems
Let’s say a new innovation adds £50million to the wealth of the inventing business and another £50million to consumer wealth, you could trick yourself into believing that the overall gain is £100million. But, consider that this disruptive innovation eventually makes the competition obsolete; labour of that business becomes unemployed (and typically the new innovation is less labour dependant), products and physical assets of the company become redundant, having a colossal impact on the environment, and consumers suddenly incur costs to stay up-to-date.
This could be interpreted as social Darwinian – the price of progress – but ultimately if we continue to strive for disruptive innovation we are going to have to start considering our impact.
Think a little further
When coming up with your great ideas, take them even further. Think about how you can reduce the wider impact of the innovations you bring to the fore. It may be using a percentage of the sales to put back into helping the environment, it may be how you could use an unemployed labour force and redistribute skills, etc.
Responsible disruptive innovation is something we should all consider, so add this step to the development of your ideas – you may well surprise yourself with what you can come up with, that ultimately means the disruption is even bigger, but for the better!