Ignoring the status quo. Envisioning new products and services that stay ahead of the curve and meet the needs of niche markets. Constant innovation that goes beyond mainstream thinking. These are all characteristics of disruptive thinkers, and they are shaking up existing business models. The term “disruptive innovation” was first introduced by Harvard Business School professor Clayton Christensen. It refers to a way that businesses can disrupt their industry: while bigger businesses are focused on creating high-end products that cater to their top customers, disrupters can take advantage of the gaps created at the bottom of the market.
This is done by first by creating products or services that appeal to the small or niche segments that sit outside the mainstream customer base and are often looking for a lower price, and then by using the market share gained to move upwards, expanding and adapting to a larger segment, thereby overtaking larger or more established companies. It’s a tricky strategy to employ – a business must be willing to accept that their gross margins will be lower initially, that their target market could be smaller and that their offering may have to be simpler and less exclusive. All of these may appear less attractive on paper, and this strategy could seem counter-intuitive given that many traditional business models are focused on creating a superior, high-quality offering. However, it is a smart way to gain a foothold into the market, and the disruptive approach has been proven successful by a number of organisations which are now global names, such as Netflix, Snapchat, Buzzfeed, Kickstarter, Mark Shuttleworth’s company, Canonical. Arguably the biggest success story is that of Apple, which used disruption as a strategy to enter the computer market.
Businesses that are considering a disruptive approach need to understand exactly what it entails and and there must be a constant, relentless drive to create novel businesses, products and services that are of an acceptable quality at a lower price, are useful and high impact, and that can be scaled up to meet mainstream, and even high-end market demands. This scale up must be matched with the ability to improve the quality of the offering, and this needs to be considered in the long-term strategy of any potentially disruptive organisation. Disruptive products can also grab initial market share by being available more widely (for example, in more languages or in a greater number of countries) and disruption strategies must carefully investigate how they can best reach “neglected” sections of the market.
Christensen also notes that disruption is not instantaneous, but is an ongoing process that happens over time. For example, Netflix was launched in 2002 but it’s dominance over competitor Blockbuster was only considered complete in 2012. It’s also critical to note that disrupters don’t just give the market different products or services, but develop an entirely new business model based around their planned entry and growth throughout the industry. Read more about disruptive innovation here: http://www.claytonchristensen.com/ and https://hbr.org/2015/12/what-is-disruptive-innovation.
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