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The Truth about Disruptive Innovation

Updated: Aug 25, 2021

The word "disruptive innovation" is regularly bandied around in the boardroom, but it's not always clear what it means. With so many misconceptions about the word, we want to clear the air and explain what it really means by looking at its origins, the myths that surround it, and its impact on business. We'll also demonstrate how companies may embrace upheaval and use it to their benefit.

There is no market that is immune to change. In September 2017, PwC conducted a poll of 1,379 chief executives, finding that 60% of them felt their industries had already been transformed or restructured. Seventy-five percent of those polled predicted that their market will be affected by the year 2022.

What is disruptive innovation?

“Disruptive innovation, according to most corporations, occurs when a tiny or new firm, with little resources, effectively confronts established or long-standing enterprises.”

According to leading experts, the term 'disruption' is commonly used by the media to describe a type of breakthrough that occurs in quickly changing markets. It may signify a variety of things to various people, ranging from gradual change to complete transformation. A controversial marketing effort, according to common thinking, might be as "revolutionary" as an affordable-luxury hotel idea with shared bathrooms.

However, the first time that someone combined the two words into a single phrase “disruptive innovation” was almost 20 years ago, and now the term is “widely misunderstood” and commonly applied to businesses that are not “genuinely disruptive.

So, what does a proper definition of disruptive innovation look like? Disruptive innovation, according to experts, happens when a smaller firm with fewer resources overthrows a successful corporation by focusing on market segments that the larger company ignored.

Typically, a tiny, new firm gets a presence in the market by providing an innovative, more inexpensive product to a neglected or lower sector. The larger firms are initially unconcerned about this since they are so focused on keeping their existing consumers happy by enhancing their present product and service offerings.

Then it gradually moves upwards, delivering the performance that the bigger company's target consumers demand while preserving the advantages that propelled it to success in the first place. True disruption occurs when a major company's mainstream consumers choose in huge numbers for the start-up's products or services. Consider Netflix and Blockbuster.

This is not to say that major corporations have ceased inventing. They, on the contrary, are always looking for methods to enhance their products and services. This is referred to as "sustaining innovation," as opposed to "disruptive innovation.

This is not to say that major corporations have ceased inventing. They, on the contrary, are always looking for methods to enhance their products and services. This is referred to as "sustaining innovation," as opposed to "disruptive innovation.

The effect disruptive innovation has on businesses

Businesses are aware that change is on the way. They recognize that it may have an influence on their current procedures and infrastructure, yet they are still hesitant to change. There are a number of reasons for this, in no particular order. First, there is a lack of clarity about what the proper reaction is, and as a result, a digital investment plan that is far too diverse and unsuited to a company's specific situation. Secondly, conflicting priorities, and thirdly, a lack of understanding for the time it takes to build up digital, and fourth, the remainder of the incumbent organization's "tissue rejection."

However, if company executives expect to keep up with the continuous shift in customer tastes in today's business world, they must welcome disruptive innovation. If a company does not alter itself on a regular basis, it risks becoming obsolete. If company executives embrace disruptive technology and innovation, this shift in consumer preferences may be regarded as an opportunity for growth and competitive advantage.

5 ways for business leaders to embrace disruptive innovation

“Most businesses find change challenging, and executives who resist it risk being caught off guard.”

Managers and leaders must begin planning now in order to guide their teams through this transition. These are the five ways that company executives may embrace innovation, according to RG Academy.

  1. Consider a living creature rather than a static structure. Create a diversified and distinct ecosystem in your company by thinking of yourself as a host organism that embraces both internal and external sources of innovation, rather than a static organization.

  2. Concentrate your efforts on bringing people together. Make an attempt to start dialogues with employees from other departments and functions who would not normally interact to improve your team's skills. These discussions are referred to as "productive collisions". This permits the shift in mindset to take root throughout the organization, allowing you to thrive even during times of turmoil.

  3. Consider talent and leadership in a new light. It's no longer enough to be a subject matter expert in one area. What adds true value to a business is the ability to successfully cooperate and link information from people both within and outside the company.

  4. Shift from "no" to "how." New prospects can bring with them new company rules and compliance requirements, as well as internal dangers and legalities. Whereas this may appear to be a barrier to moving forward, being disruption-ready entails working closely with these authorities to first understand their requirements, and then collaborating with their expertise and knowledge to determine how the firm can effectively carry out the opportunity.

  5. Ongoing commitment to disruption. This isn't a one-time investment in disruption readiness; instead, it's a company-wide commitment to change, development, and innovation. This commitment must begin at the top, with the CFO, CEO, and board of directors all sharing a common purpose and ambition for disruptive innovation in order to guide investment, governance, and shareholder communication. Keep in mind that you should put your innovation idea to the test with your present investor base. If you discover that they do not support your innovation goal, you may need to seek new investors. Fortunately, successfully conveying your disruption agenda will almost certainly attract other institutional investors who share your disruptive preparedness goals.

Make open workplaces that allow you to envision new possibilities. If you want to generate dialogues that are constructive and have momentum, bring together creative and business minds. Always keep in mind that everything relies on human results. These are a few things you can do to get your team ready for the forthcoming interruptions.

10 Ways to make disruption work for you

You shouldn't try to outrun prospective upstart competitors; instead, you should strive to outperform them. The impact of a sector-wide disruption on a specific business is determined by how well that company can preserve a fundamental advantage over others in its industry. Keep in mind that the few things that allow you to outperform your competitors in the areas that matter most to your consumers usually outlive marketplaces. You're at the mercy of others to redefine your space if you don't have those amazing talents that set you apart from the others; with them, you have immense power to design your own destiny.

The following guidelines are provided to assist businesses in preparing for the new digital era.

  1. Adopt new logic. Consider each difficulty as a learning opportunity for your startup, and figure out how to provide more value.

  2. Begin right now, and move slowly. Overestimation should be balanced by underestimating, and when the moment is right, move quickly.

  3. If you want to win, concentrate on your right. Don't give up on your company concept simply because it's taking a long time to succeed. First and foremost, concentrate on developing a strong identity and executing what you do effectively.

  4. Construct the future of your consumer. Companies, in the words of Steve Jobs, must first figure out what their consumers want.

  5. Let pricing be the driving force behind demand. Customers respond more strongly to lower expenses, so give your costing approach some attention.

  6. Make money from undervalued assets. By utilizing products, talents, places, and computer power more efficiently, cost can be reduced or profit increased.

  7. Take command of your section of the platform. Know what your company excels at, but when required, use other people's apps and services.

  8. Don't isolate; instead, integrate. To increase their chances of success, digital projects should be tied to the heart of your organization.

  9. Disrupt the established order. It's probable that a regulation that prevents customers from receiving what they need would cause disruption. To catalyze legislative change, think outside the box.

  10. Defining a new manner of working is number ten. Reconsider how your departments may collaborate. When you put technological know-how, strategic thinking, and a passion for the customer experience together in one group, you may envision products and services you wouldn't have considered otherwise.

Amazon is an excellent example of a company that is relentless in its pursuit of disruptive innovation in order to remain ahead of the competition. They presented themselves as an online store that interacted with consumers through a unique and creative interface that allowed individuals to share their opinions and suggestions on the worth of their items.

Another example is Netflix, a media firm that has effectively transitioned from postal delivery to online content streaming. Their perseverance and desire to embrace innovation helped them to disrupt the media business, and eventually how we consume media, which is still apparent today.

Even with a pre-determined set of viable methods, taking chances is necessary to be disruption-ready. It is up to company executives to decide which risks are worthwhile to take in order to progress in this ever-changing environment. Committing to your company's disruption-ready agenda and clearly communicating it to employees and key stakeholders, as well as cultivating an innovative collaboration mindset both inside and outside the company, will ensure that your company is primed and ready to ride the wave of disruptive innovation now and in the future.


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