MIT Sloan Management Review:
Disruptive innovation in an industry always creates new markets and new net growth.
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But the real story behind disruptive innovation is not one of destruction, but of its opposite: In every industry changed by disruption, the net effect has been total market growth.
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Disruption creates net growth in the form of new markets and customers long before it directly encroaches on an established business. Examples from many industries, both recent and decades old, show how new entrants did not start out as competition to the established players; they were serving customers who could find nothing acceptable in the established market. Only as the newcomers moved upmarket did they create problems for the incumbent companies.
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Disruption actually develops in three distinct phases. In the first, the innovation creates a new, noncompetitive market independent of the established business. In the second, the new market expands and slows the growth of the established business. In the third phase, the disruptive innovation, having improved greatly over time, significantly reduces the size of the old market.
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Disruption actually develops in three distinct phases. In the first, the innovation creates a new, noncompetitive market independent of the established business. In the second, the new market expands and slows the growth of the established business. In the third phase, the disruptive innovation, having improved greatly over time, significantly reduces the size of the old market.
Second, new customers must be found outside the established market. Disruptive innovations serve those who are currently nonconsuming but want to move upmarket and accomplish things they can't with available products or services. By definition, existing customers don't match that description.
Third, disruptive technology is never disruptive to the customers who buy it. Balloon angioplasty was viewed as a poor solution to heart disease by cardiac surgeons but as a breakthrough by cardiologists. Part of the key to successful disruptive innovation is finding customers who will more than welcome it, even if it delivers less than the standard in the established market.
Fourth, the new customer will make the disruptive path clear. In other words, the needs of the new customer should dictate the new business model. Products should be built according to the outcomes demanded by the new market, and the legacy costs and undervalued features associated with the established products should be abandoned.
Finally, a disruptive new business should start small and not be forced to grow quickly. Starting small enables managers to figure out what the new customers require and don't require, adjusting business models and product architectures early before huge resources are poured into the new business. It also eases pressures to make the disruption conform to the established market.
found through the [OSG Blog]
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