Disruptive innovation: Capitalizing on the cutting edge

business strategy

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Every year, electronic gadgets get smaller and more powerful. Cars become more comfortable and efficient. And business software becomes smarter and more user-friendly.

We take innovation like this for granted. Sometimes, however, innovation can truly catch us off-guard. Those unicorn products or services that are introduced to the market and perform so exceptionally well that they surpass competition.

Unfortunately for us, there’s no step-by-step guide to capturing this lightning in a bottle.

Disruptive innovation is not formulaic nor a guarantee. But a better understanding of it is essential in order to use it to your advantage and maximize its potential.

Let’s take a look at the nuances of disruptive innovation, including its definition, examples and guidelines for building a strategy for success.

What is disruptive innovation?

Disruptive innovation is when a new product or service displaces its competitors — for example, by being more powerful, accessible or cheaper. Well-known examples include AirBnB disrupting the centuries-old hotel industry and the introduction of Apple’s iPhone, touted as “the Internet in your pocket.” We go into greater detail about another disruptive innovation further in the blog: Netflix.

Clayton Christensen, a Harvard Business School professor, coined the term “disruptive innovation” in the early 1990s. Today, the phrase is frequently used (and misused) in business circles around the world.

Disruptive innovation is often conflated with “breakthrough technologies that make good products better.” If an innovatively disruptive idea is already in the market, it’s safe to say that it is not an example of disruptive innovation. It might be a sustaining innovation instead.

Disruptive innovation vs. sustaining innovation

Not all innovation is disruptive.

Sustaining innovation

Sustaining innovation is incremental and targets existing customers who were using a previous iteration of the product or service. An example of sustaining innovation is the introduction of laptops in the computing industry. Computers already existed, and laptops offered roughly the same computing power with a twist: Portability.

Speed of innovation: Disruptive vs. sustaining

As we’ve said, disruptive innovation spots emergent trends and can move at lightning speed.

On the other hand, sustaining innovation tends to move at a slow, steady pace.

It’s the incremental improvements that ensure your customers don’t defect in droves to your competitors. This is the type of innovation that helps you sustain business — and is where most businesses allocate a considerable share of organizational processes, budgets and resources.

Types of disruptive innovations

Christensen, the person who coined the disruptive innovation phrase, identified two main types of disruptive innovation: Low-end disruption and new-market disruption.

Low-end disruption

Many market landscapes are so competitive that new products and services often struggle to find immediate success. As a result, disruptive innovators tend to target consumers who aren’t willing or able to adopt mainstream products, whether that’s based on accessibility, affordability or another factor. Often, these tail-end-of-the-market consumers are viewed as less profitable by larger companies.

This targeting paves the way for the disruptor to establish a small gathering of believers. As the user base grows, the disruptor can then move upmarket to target more mainstream customers and increase profit margins.

New-market disruption

New-market disruption occurs when a player new to the industry targets customers who didn’t use the incumbent technology at all.

One strategy is offering a cheaper product, attracting consumers who otherwise wouldn’t be interested in purchasing a product in that market or from an established competitor. This approach effectively broadens the user base by creating a new subset of customers within the existing market.

What is an example of disruptive innovation?

In the age of digital transformation and accessible technology, the list of disruptive innovations is staggering. You might recall this U.S.-based provider of home video rental services. In the 1990s and 2000s, Blockbuster was a household name.

Through the years, the organization had successfully innovated its core business, moving from renting VHS tapes and VCRs to DVDs, Blu-Rays, and even video games. In the early 2000s, Blockbuster became a global leader — the organization had over 9,000 stores worldwide and employed more than 80,000 people. In fact, at that time, Blockbuster opened a new store every 17 hours.

All this changed before the end of the same decade, and in 2010 Blockbuster had to file for bankruptcy protection. Much of this downfall was precipitated by a startup called Netflix.

Netflix didn’t beat Blockbuster at its own game. It changed the game.

Netflix sent DVDs by mail, had no retail stores and did not charge late fees. By the time Netflix added streaming services to its lineup, it was too late for Blockbuster to catch up.

Blockbuster was successful and employed a lot of smart people. But its fatal flaw was focusing on innovating within the constraints of its core business model and failing to recognize the disruptive power of the Netflix model.

Ultimately, a disruptive force that came from outside its innovation strategy is what brought it all down.

Why disruptive innovation is important

Disruptive innovation can come out of nowhere and pass us by in a flash. But there’s no rule that says disruptive innovation has to come from outside the organization. In an alternate universe, Netflix could have been a homegrown division within Blockbuster.

Many organizations have successfully disrupted and re-invented themselves time and time again, proving that it’s possible to be an innovator while remaining a market leader.

Are you equipped to cultivate disruptive innovation? The possibilities and opportunities for your organization’s future are endless.

Hyland content services can help free your team from mundane manual processes to focus on work that delivers transformative value. With more resources committed to innovation, you’re better prepared to face the future and whatever it brings.

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Samantha Perkins is a Content Marketing Specialist at Hyland. She lives in Houston, Texas, with her partner, two dogs and two cats.
Samantha Perkins

Samantha Perkins

Samantha Perkins is a Content Marketing Specialist at Hyland. She lives in Houston, Texas, with her partner, two dogs and two cats.

... read more about: Samantha Perkins