Disruptive Innovation

What is Disruptive Innovation?

 

So what exactly is Disruptive Innovation? A much asked question for sure. As we see it, Disruptive Innovation is both a process, and a result; the result being whatever product or service emerges from the actual process. In effect therefore, Disruptive Innovation could be thought of as being a result of itself. In the name of clarity then, let's use the word example instead of result; but before we consider examples let's first look more closely at the process.

 

 

The Process Of Disruptive Innovation

 

 

In terms of the process: A new product or service enters a market, initially with limited exposure and sales. Over the course of time however the new offering is adopted by more and more consumers as a preferred alternative to that which was previously available. Eventually the adoption of the new product or service is so great that it creates a new market and leaves the original market greatly reduced in volume. 

 

Further, the impact created by the introduction of products and services involved is totally different to that  resulting from standard, everyday innovation.  The new disruptive products and services each represent a focal point in effect. Where the needs or desires of the consumer are met in such an ideal way, usually at a lower price point, so as to make the decision to purchase almost inevitable. That then is a winning formula when scaled. Yet it isn't all about the actual innovation- it is to a very large degree about the mindset of the Consumer. 

 

 

 

What Drives Disruptive Innovation?

 

 

The main driver of disruptive innovation is advances in technology. New technology acts as a base or enabler for the idea.. but also new technology to actually create the idea itself. As an example just look at 5G networks (the base)  and self-driving cars (the idea). Another key driver of innovation is the accessibility of the Internet. Use of the Internet has grown exponentially, opening up economies and societies worldwide. 

 

Changing demographics is also playing a big part, in that there is wide base of younger people willing to use or try out the next cool thing for instance. Consider the fact too that the World is seeing a continual growth in consumers with greater spending power than ever before. 

 

Once we as consumers, become more used to the ways in which these new innovations can save us time or generally make things easier, why wouldn't we want more of the same? Actually, not the same of course..better!  There is an ever increasing appetite for new and innovative approaches that challenge the status quo. Some might say, why fix what isn't broken? The simple answer to that question is because the demand is there.

 

All said and done, Disruptive Innovation is largely driven by the disruptive forces acting on a market. These disruptive forces in effect provide both the opportunity for new innovation to take place, and also a constantly evolving landscape of challenges that must be managed by all companies operating in the market.

  

How Does Disruptive Innovation Occur?

 

 

In terms of how Disruptive Innovation occurs, actually occurs might be the wrong choice of words. Unless we are talking about something that could be described as a 'light-bulb' moment i.e, the original disruptive idea.  The Innovation itself would have been planned and involved investment and market research.  The idea, would be shaped to a viable concept, then likely onto to incubation and testing if justified. It would then likely require much more investment and more ongoing research and testing through development and production. 

 

 

 

The Pace Of Disruptive Innovation Is Increasing

 

 

 

Disruptive Innovation may be one answer to the question: "How can we better ensure successful growth for our business, in light of an increasingly dynamic competitive landscape, serving an ever more demanding marketplace of consumers?" Ironically, one of the key reasons why so many organisations are developing more disruptive innovation strategies, is because most everyone else is doing the same.  It's no good thinking that people will always need 'X, Y or Z' for instance.. because even simple advances in technology,  knowledge and consumer demand will ensure that this is not the case. Yet, increases in Innovation and new product development- will also mean increases in investment and of course increased risk.

The Impact Of Disruptive Innovation

 

The extent to which certain Disruptive Innovation can impact the dynamics of an existing market cannot be overstated. In fact the changes that follow significant innovation can go well beyond the actual market itself. Indeed, overtime it can easily change the way we live our lives. Consider for a moment where we would be now without advances in Payment Systems, Artificial Intelligence, and Electric Vehicles for instance. What would be the impact on our lives and potentially even the Planet if these advances had not happened? 

 

We'll look in more detail at some of the disruptive ideas that emerge on the back of new technologies and how in each case, these successful ideas turned into products and services that each created new markets.

 

Many of what were these newly created markets are also likely to find themselves disrupted; albeit over a considerable period of time. Many would argue that the frequency with which this cycle occurs is increasing.  Consider another good example, that of Bitcoin and Ethereum for instance. In this case, Bitcoin came along first as a crypto currency utilising the Blockchain- then Ethereum appeared on the scene some years later as a blockchain platform with its own crypto currency.  So, innovation on the back of innovation.. leading to the creation of new markets.   

 

The fact that disruptive innovation is accelerating, and also has such a transformational effect on a market can present new risks. This is because the disruption concerned is different from general market disruption, and its effects are likely to be more consequential to an organization's success. Yet, at the end of the day, it is all just disruption of course.

 

Classifying and accounting for various types of disruption, and hence potential impact is not impossible, though it is far from an exact science. This being especially true in respect of forecasting the source of future disruption- I.e of course how can we know what has not yet happened? 

 

For businesses already established in a market, Disruptive Innovation creates a Management headache. As in business there is always the temptation not to fix what isn't broken- or perhaps apparently isn't broken. It is clear however, that success in todays' markets necessitates a very close watch is kept on the competitive landscape. Enabling the organization to be as responsive, and proactive as possible to new developments; in terms of opportunities and threats.

 

One of the most concerning effects of Disruptive Innovation is the fact that the market will gradually lose its consumers; as they adopt the Disruptors' new product or service. This is a big issue for any incumbent obviously- yet it is an issue that is difficult to quantify in finite terms. However, in terms of generalities, a shrinking market of consumers means too that the number of companies serving the market will also drop over time.

 

Whether this is worse news for the larger organizations, compared to those of lesser size, is up for debate. Bearing in mind that whilst the bigger companies are perhaps better resourced, they may be less able to adapt to new market conditions. Smaller companies are liable to be less well resourced, yet more agile and adaptive.  Allowing them to respond more quickly to new opportunities, or to explore untapped markets.

 

Disruptive Innovation Shrinks Markets

 

So the market shrinks over time..and more companies compete for the remaining consumers. Visibility of a company or its brands becomes even more important. A company spending more on marketing perhaps could expect an increase in its' sales revenue; or more likely a continuation bearing in mind the smaller market volume. Alternatively of course, the benefit gained may just be that the company experiences less of a downturn than its competitors.

 

It sounds like an easy fix; yet of course the cost of acquisition to achieve these new sales has increased. Meaning by default that profitability is reduced. Taken to the extreme, it is clear that at some point, the money needed to attract the consumer would be greater than the benefit of actually making the sale in the first place. In reality, the situation as described above would be unlikely ever to exist of course. Yet it is perhaps a question of degree, rather than principle, as in any company, costs of acquisition can creep higher. This could be especially problematic for a company in a market that is also experiencing an exponential reduction in volume; resulting from disruptive innovation. 

 

Ultimately however, whatever strategies the established companies adopt to best manage disruption in their markets..they will first and foremost need to adapt. 

 

Adapting To Survive

 

 

It can be difficult to fully appreciate the reach and extent of the challenges that disruptive innovation can bring to other businesses already operating in the market concerned. So businesses, however well established, must adapt to survive. Organizations must continue to consider the growing prevalence of disruptive innovation and how it impacts their market.

 

Success or failure will likely be dictated by how well a business can manage the disruption, adapt its processes, procedures and even its culture; in responding to the new and ever changing demands placed upon it.  The stakes will increase as the level of investment in new innovation increases, as will the organizations' exposure to risk going forward.

 

The opportunity for transformational growth awaits organizations able to harness and exploit, the potential of successful Disruptive Innovation. 

 

For further reading on Disruptive Innovation visit Clayton Christensen. Christensen, A Professor Business Administration at the Harvard Business School, has written extensively on the subject and also was first  well known for his work in this area. In fact he was the person originally responsible for coming up with, and defining the actual term itself.

 

 

Disruptive Ideas

 

 

What are Disruptive Ideas?

 

What are Disruptive Ideas? Essentially they are the result of Disruptive Innovation. They are ideas so innovative and insightful of the needs or desires of the Consumer, that once introduced to a market begin to transform it; over time creating a new market. There are many Disruptive Ideas that in addition to their market impact also greatly affected society as a whole- leaving it forever changed; in a good way of course. This helping to foster a world full of customers willing to be pulled along by new products and services created from ideas specifically designed to make their lives easier and more enjoyable.

 

 

What Are Some Examples Of Disruptive Ideas?

 

Many of our modern advances have turned out to be highly disruptive ideas:  Computers, medical robots, printers, smartphones, CDs, DVDs, Microwave ovens ,synthesisers, transistors, image sensors and a long list of many more of course.

These are all product centered examples of disruptive ideas we can immediately relate to. But ideas of this nature are not limited solely to products. Processes, systems and services can also be disrupted. Take for example iTunes, Digital Wallets, Wikipedia, Skype, Netflix , AirBnB or Bitcoin and many others; all great ideas as well and in each case an existing market was disrupted. Look at the IOT, or Internet Of Things, itself a disruption of what had come before. 

 

 

Where Do Disruptive Ideas Come From?

 

 

Disruptive ideas are more liable to originate from Start-up businesses or those new to a market as opposed to organizations that have been serving the market for an extended period. This is because new entrants to the market enjoy certain advantages over the incumbent businesses. One such advantage is the financial backing they are able to generate. Not that the overall R&D budgets in the established companies would  necessarily  be less than those of the new entrant; but based on a per idea basis it is very likely of course. 

  

Other Advantages for market Newcomers 

 

Additionally, the newcomers didn't start out as a business already doing something.. that then found a great idea. They approached things from the other way round. Which means they have a big head start on the incumbents. Additionally it means they are 100% focused on customer and market needs (the vitally important piece); without the worry of constraints facing existing businesses.

 

 

These could be constraints in terms of the impact of the new idea on the companys' existing customer base; and hence existing brands, products or services. Or whether it is possible to sustain the funding level, and resource allocation required going forward. In contrast, new ventures don't have to worry about people being pulled off projects and reallocated; or different teams competing with one another for available budget.

Can established companies level the playing field? 

 

The simple answer is no, at least in terms of creating truly disruptive ideas. Yet despite this,  businesses that are already operating in a particular market do have some advantages over the new entrants. For instance, the incumbent already has an existing base of consumers, brand loyalty, and name recognition for instance the new entrant does not. 

 

Additionally, it is likely that the existing businesses have adopted new management approaches in an effort to compete more effectively with market disruptors. This has often involved a company changing its internal structure, in an effort to make itself more agile and responsive to both the needs of its customers and external threats; from the disruptive activities of new market entrants. These changes offering the organization a better platform on which to innovate going forward.

 

Much of what is written on the subject of how an established business can best counter and manage disruption in their markets- is centered on continuous innovation; as opposed to disruptive innovation. I.e taking what is done well currently and innovating by adding enhancements that create new value for the user.

 

 

Gaps in existing logic can lead to disruptive ideas 

 

 

Rather than looking through the lens of a binary outcome to what is afterall, a highly complex paradigm; it makes sense to also explore other possibilities. For instance- a new venture or a more established organization may discover a gap of some kind in the logic within an existing system of process; that can be exploited. Imagine if this discovery turned out to present far reaching opportunities for all in the value chain-including the consumer?

 

Yet- since the discovery was largely a matter of logic, perhaps it follows that resources, investment and disruption needed to then create/implement any potential solution may be significantly reduced. More of a tweak or add-on for instance- rather than needing to recreate the wheel as it were. 

 

It's a given that change can only be applied to variables within our control. This doesn't mean by default that companies incumbent in a market cannot create truly disruptive ideas, it just means that the odds are stacked against them doing so. Whether this is ultimately of real significance is perhaps best left an open question; as established organizations will always innovate, and do so based on their inherent strengths.

 

Other factors that can lead to the creation of disruptive ideas

 Disruptive Ideas Or Just Innovative Ideas?

 

In our opinion truly Disruptive Ideas are those ideas that have made it through the process of Disruptive Innovation, entered a market as leading edge new products or services, that have had a transformational impact on the market. So to clarify, we don't consider ideas to be disruptive, just because they might sound really innovative. Technically we would see those as potentially disruptive ideas. Some may ask why this actually even matters.. yet words matter and clarity matters; in a world where Disruption reigns supreme over all businesses,  bringing with it uncertainties and risks that must be minimized.

 

Disruptive Ideas Alone Are Not Enough

 

Yes it is of course true; ideas alone are never enough. In order for disruptive ideas to be taken seriously they have to know their place as it were. If they are too 'out there' then that is likely where they would stay. There is a degree of irony here of course, as disruptive ideas wouldn't be much use if they were just like regular everyday ideas. Yet if any idea, no matter the flavor,  is to have a chance of finding investment- or being adopted or developed it needs to change itself into a well thought through potentially lucrative or important concept.  The likely benefits of the concept should be easy to demonstrate or verify.  This is essential of course, if the idea is ultimately to actually enter the innovation phase.  

 

Our Latest Disruptive Idea /Concept

 

 

Our latest disruptive concept is perhaps also good to use for example purposes.

 

In order to understand the value of disruptive ideas generally, it is first necessary to be able to picture the existing markets they relate to. This is to see how things are currently done. Only then is it possible to see if there might be a better way to perform a certain operation, that had the potential to dramatically improve the status quo. Meaning potentially that a new, or better service could be delivered to users. What if this could be achieved by simply changing a part of a process or system- not recreating the wheel in its entirety? 

 

We looked at the Digital Video Advertising market and discovered a way to incentivise users not to skip, or at least skip less,  on video ads that appeared ahead of or within downloaded video content, online games or any other environment where content is monetized. This includes video advertising for Connected TV and Streaming.

 

To explain, this doesn't mean all users- it is all a question of how we group the users. It has the potential to disrupt major parts of the existing Digital Advertising market whilst also creating a brand new market for advertisers, and content publishers alike.