Disruptive Innovation#
Disruptive Innovation describes a process where a new, simpler, or more affordable technology and business model takes root at the bottom of a market and eventually displaces established industry leaders.
Never be self-complacent.What works today might not be in 5 years to the future.
Three Essential Components#
Desirability is about creating a user-centered experience, and identifying what your customers really want. It’s about helping your customers complete a job that they need to carry out. You can do this by looking at their priorities.
Viability requires you to focus on the value chain in terms of what customers expect from services of your business, looking at both profitability and sustainability to achieve optimal results.
Feasibility focuses entirely on the technical capability to build, scale, and maintain disruptive technology. It asks: “Can we actually build this, and will it work reliably at scale?”
PESTEL Framework#
PESTEL framework helps organizations identify external factors that should be considered when making decisions, as they can impact their market business position and operations. Now, adoption of technology is often seen as the main driver of change, but, as we can see from this framework, there are other factors that can be catalysts for change.
Factors include governmental policies, leadership, and change; foreign trade policies; internal political issues and trends; tax policy; regulation and de-regulation trends.
Factors include current and projected economic growth; inflation and interest rates; job growth and unemployment; labor costs; impact of globalization; disposable income of consumers and businesses; likely changes in the economic environment.
Factors include demographics (age, gender, race, family size); consumer attitudes, opinions, and buying patterns; population growth rate and employment patterns; socio-cultural changes; ethnic and religious trends; living standards.
Factors that affect marketing in (1) new ways of producing goods and services; (2) new ways of distributing goods and services; (3) new ways of communicating with target markets.
Factors that are important due to the increasing scarcity of raw materials; pollution targets; doing business as an ethical and sustainable company; carbon footprint targets.
Factors include health and safety; equal opportunities; advertising standards; consumer rights and laws; product labeling and product safety.
Characteristics of Disruptive Innovation#
Often starts by offering a less complex or more affordable alternative.
Example
Personal computers were cheaper than mainframes.
Initially appeals to overlooked or underserved customer segments.
Example
Netflix’s DVD-by-mail appealed to those frustrated by Blockbuster late fees.
Introduces a novel way of creating, delivering, and capturing value.
Example
Spotify’s subscription model versus buying individual songs.
Leverages new or emerging technologies to enable the disruption.
Example
Internet for streaming, mobile technology for ride-sharing.
Ability to grow and reach a large number of users quickly.
Example
Social media platforms can onboard millions of users rapidly.
Makes tasks easier, faster, or more accessible for users.
Example
Smartphones combining multiple devices into one.
Initially performs “worse” on some metrics than established products but improves over time.
Example
Early digital cameras had lower resolution than film cameras.
Types of Innovation#
A significant improvement on a product that aims to sustain the position in an existing market.
Example
Niketown
Technology or new business model that disrupts the existing market.
Example
Amazon
Gradual, continuous improvements on existing products and services.
Example
ToysRUs
Technological breakthrough that transforms industries, often creates a new market.
Example
Zara
Source: The Four Types of Innovation – What’s Right for Your Organization?#