What is disruptive innovation?

The term ‘disruptive technologies’ was first coined by Harvard’s Clayton Christensen and Joseph Bowers in 1995 to distinguish ‘disruptive’ from sustaining or steady-state innovation. They drew upon WWII Austrian economist Josef Schumpeter’s theories of ‘discontinuities’ which create a new game – whereas disruption is more about destroying the old game.  The theory was expanded in Christensen’s iconic book ‘The Innovator’s Dilemma’ (Collins Business, 1997).  Christensen’s consultancy firm Innosight define it as:

“Disruptive innovations trade off pure performance in favour of simplicity, convenience or affordability. Disruptors target customers who find existing solutions too expensive or too complicated. They offer ‘good enough’ solutions at a lower price.”

Innovation matters.  Virtually all of the economic growth since the eighteenth century can be attributed to innovation, though implementing innovation successfully today is as much about survival as growth.  Those who stand still, or only moving incrementally forward within the same business context (continuous or steady state innovation), often find their novelty and delight of yesterday becomes the sailing ship drifting towards the oncoming revolution of the steamboat.

This is the disruption, the spark and distance rumble which soon crescendos into a tipping point for change.  Disruptive innovation is a paradox: you can’t see it coming but you know it will come, but not from where or when. History teaches us the danger of ignoring the disruptive force: The North East American ice cutting industry in the 1880s was thawed out by the invention of the refrigerator. The iPod has ushered in digital distribution like a tsunami, drowning the traditional music industry and rendering it obsolete – from record shops to the business model of labels and distributors.

Sustaining innovation (‘do what we do but better’) is all well and good, but often delivers ‘overshoot’ – more features and complexity than the average consumer requires. Disruptive innovation sits within a volatile, fluid state of shifts in markets, technologies and regulators where the rules of the game are thrown out or have not yet been invented.  When this happens all bets are off and there are opportunities for new things to happen – and importantly, for new players to move in.

Disruption isn’t new – it’s been happening since history began.  Gutenberg and Caxton revolutionised the world of publishing – and with it the world of ideas, religion and politics – with their invention of the printing press.  Xerox’s photocopier enabled DIY publishing in the punk era through to web publishing when new players like Yahoo! slowly eroded the monolithic newspaper domination of the publishing industry through a business model which focused on a larger volume of smaller micro-advertisers.

Triggers for disruption can come from many directions when someone – often a person outside of the day-to-day business – sees and frames the problem in new ways, which leads to innovation in the business model.  Arguably, the success stories of the new economy have combined technical innovation with business model innovation, like: Ebay, an open marketplace whose auction technologies encourage honest dealings; Zara, with its ‘fast fashion’ from catwalk to high street replica in 15 days; and Amazon, who were as successful in innovating their credit control management as their ‘1-click’ and ‘recommendation engine’ technologies. The low-cost airline revolution isn’t about new planes or airports but the same business of flying redefined through a different lens.

Disruptive innovation: four lessons in how to be a successful disruptor

Simply spotting the discontinuity and having an idea on how to exploit it isn’t enough – others will be thinking the same so there is a need to experiment and learn.  Start with these four key lessons:

Lesson 1: Observe the dominant design

Disruption is an integral part of the innovation life cycle.  It sits within the first fluid stage when anything is possible before a dominant design takes force – in the case of the bicycle the Bone Shaker and Penny Farthing giving way to the A-frame – before sustaining innovation makes incremental improvements and variants allowing for new products like the mountain bike or BMX.  Through time, the original ‘disruption’ greatly reduces the size of the existing market.  Once the dominant design begins to set into its mould it is ripe for a radical disruption.

Lesson 2: Know your enemy

Established players may sometimes be driven off-road by discontinuities and risk having their cosy worlds disrupted.  But they also have a good track record in riding out the waves of change or spotting opportunities, making the disruption competence enhancing rather than competence destroying, where buy-outs can strengthen their hand.  Large firms are not stupid, so we need to understand where their strengths and weaknesses lie in relation to disruptive innovation.  Partnering up with big players in schemes like Channel 4’s 4ip makes sense for a new entrant – there is a good match to be made in linking their resources and experience with new entrant ideas and perspectives.

Lesson 3: Experiment in the lab

Discovering disruption is all about experiments and learning – which inevitably involves making mistakes.  So working with customers who expect perfection and reliability may not be the best starting place.  Instead find a niche – a group of people on the demand side who are prepared to learn with you, tolerate some of the early mistakes and participate in the experiments.  This is the pattern of successful disruptors – they begin at the fringes of a mainstream market and then, as they learn and get better and clearer about their innovation, they migrate to the mainstream.

Lesson 4: Have patience

Another lesson from Clayton Christensen is that disruption doesn’t happen overnight so there is a need for patience.  Small niche markets won’t satisfy the big growth needs of mainstream players which is why they often ignore them.  But starting small and being patient can bring rich rewards.

Developing your potential in disruptive innovation

Disruptive innovation is the adventure playground of the startup and small business: they have the flexibility, inspiration and insanity to try – and less to lose if they fail. Changing the rules of the game puts a premium on entrepreneurial behaviour: being able to spot an emerging opportunity and exploit it.  Disruption is the classic entrepreneur’s challenge – managing growth from a bright but high-risk idea but doing it from a weak asset base. To develop your potential, focus on:

Being just good enough - The disruption impetus is to democratize, de-centralise and simplify the process, channelling to the ‘bottom of pyramid’ low-end consumer demographic.  Do not always listen to your ‘best’ or most persistent customers – the real activity is happening on the horizon with those who don’t yet care for what you’re selling.

Don’t focus solely on core competencies - Many small business solely focus on their ‘core competencies’ (unique selling point strengths), yet these can become captive rigidities; keeping your eye off the horizon can mean missing out on opportunities for growth.  You must focus on your customer’s needs then work out how to deliver. For small businesses, this often means developing ‘complimentary assets’ or strategic partnerships; find others do the ‘heavy lifting’ which you can’t do – and probably do it better or cheaper.  The creative industries rely heavily on their wider supply chains through collaboration but businesses often lack the scale and asset base to succeed.  Disruptive innovation benefits from weak ties and new relationships more than long-term fixed relationships.

This executive summary is taken from the forthcoming publication ‘Disruptive Innovation for the Creative Industries’, text copyright Susi O’Neill and Professor John Bessant 2008, produced for Inspiral and Creative Sheffield.