Chip Shots by Chip Griffin

What is Disruptive Innovation?

The name of this blog — “Pardon the Disruption” — derives from the notion of disruptive technology or disruptive innovations generally.  But what exactly is that?  Or, more precisely, what does it mean to me?

Wikipedia says:

A disruptive technology or disruptive innovation is a technological innovation, product, or service that eventually overturns the existing dominant technology or product in the market.

Not bad.  But here’s how I’d put it: Disruptive innovations change the rules of the game.

To truly cause disruption, an idea or invention must radically alter its environment.  Mere improvements, enhancements, additions, or modifications don’t count.  We’re talking the Next Big Thing here — or at least something approaching that level.

Let’s look at some good examples:

  • Downloadable Music/MP3/iPod.  Like the CD before it, downloadable music changed the dynamic in listening to music.  The rules were altered.  No longer do consumers need to go to a music store or order a physical CD online.  And who needs boxes of jewel cases?  Music stores are being shuttered, consumers are no longer tethered to bulky portable devices, and the music industry is stuck in a quandary over DRM.  That’s disruptive.
  • Digital Photography.  Forget about the 24 hour photo store and carrying rolls of film on vacation.  Digital picture-taking makes photography simpler.  And consumers can now take far more pictures than before, increasing the odds of capturing the perfect shot.  That’s disruptive.
  • Email.  When was the last time you wrote a letter to a friend and put it in a stamped envelope?  That’s disruptive.
  • eBay/Online Auctions.  Flea markets, yard sales, classified ads, and even some offline auctions have been radically altered by the new marketplace that has sprung up at eBay and, to a lesser extent, other online auction sites.  That’s disruptive.
  • Automobiles.  If you thought disruptive innovation was a new phenomenon, you’d be wrong. Ridden in a horse-drawn carriage recently?  Not likely, unless you were taking a nostalgic ride through Central Park in New York.  That’s disruptive.

In a separate post, I’ll touch on what this means for the PR and marketing industry.

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  1. Need to penetrate a bit deeper on the definition. I don’t believe that “disruptive technology” is a meaningful idea. Technologies are not disruptive. Technologies increase a business model’s disruptive potential. In the end, consumers decide and they don’t decide on the technology, they decide on the thing they buy. That thing is packaged as a business model. So when businesses make disruptions, they make disruptive business models – that will be your best trainable proxy of a disruptive business. Most of your examples are radical, game changing technologies. But, if they had been marketed via sustaining business models, the end result would have been different.
    Take your MP3 example. There were plenty of MP3 players before the iPod. The MP3 business was small, but rapidly growing and not at all interesting yet to Sony, largely because it depended on illegal tracks from Napster. Had the iPod not come along and the leagalities been ironed out, Sony would have entered when the volume potential of the indiustry was right and taken the business, with relative ease. Steve Jobs and Apple changed the game. IPod, iTunes, and the 5 record company contracts he wrote that made tracks legal at $.99/ea. disrupted the market. And that was a business model disruption.
    Interested in your thoughts.

  2. Disruptive technology/innovation and disruptive business models/marketing are often mutually dependent. I was focused on the former, but you are correct to point out that the latter matters as well.
    Often, though, the business model disruption merely accelerates something that was already underway. Now, “merely” diminishes the importance perhaps a bit too much, but hopefully you get the idea. MP3’s were already beginning to disrupt the marketplace and likely would have even without Steve Jobs’ intervention. The fuse was lit, but there was no doubt that Apple poured lots of fuel on the fire.
    Similarly, I’m sure there are instances where disruptive business models served as game changers even without the underlying innovation as well, but the hour is late and the neurons aren’t firing fast enough for me at the moment.

  3. Hi Chip:
    There is no such thing as disruptive technology. Although in his early work, Clay Christensen used this term, he recognized the error and later re-positioned the idea as disruptive innovation. Mark alludes to the reasons why.
    Technology, in and of itself is meaningless. For example, the transistor was a breakthrough technology innovation, but largely meaningless and underutilized in the hands of its inventor, Bell Labs. When Sony recognized its value in miniaturization and started using it extensively in the 50s and 60s in cheap radios, it became disruptive.
    One of the key things to recognize as a marketer is that people buy products/technologies because they have an itch to scratch. Christensen describes this as “hiring a technology to do a job”. This is an important extension of the idea of satisfying customer needs, because it goes beyond the idea of niche segments and buying food because I need to eat, and addresses the question of why do I specifically go to the McDonalds drive-thru for breakfast 4 mornings a week, but on the 5th go to a small diner for a sit down breakfast. It’s not because my needs have changed, but because I’m hiring the diner to do a different job than I’m hiring McDonalds for.
    Sony “hired” the transistor to make electronics small and cheap for export to the US market. Initially, the sound was crappy compared to tubes, but the product footprint was 1/100th the size and the cost was at least an order of magnitude lower, which meant every teenage kid could afford a portable transistor radio to carry around. It wasn’t good enough for audiophiles, but it was plenty good enough for a the underserved needs of teenagers, and for those who needed mobile music. Over time, things got smaller, quality improved, costs continued to fall, and the sound began to rival that in the older generation of products, but at a significantly lower price and eventually supplant it in every niche — a very typical pattern for disruption.
    When Mark talks about the business model, it’s really this property of being “good enough” for some un- or under-served market need, at a fraction of the price and usually in a way that is incompatible with the old way.
    Moreover, a disruptive innovation can be a product, a service, a business process or a business model, but it can’t be a technology, because all technology does is enable the change — it is rarely something that is used directly to disrupt the incumbents in a market. And, as Mark correctly describes, MP3 — the technology, was not disruptive until it was successfully applied in a product (the iPod and iTunes music store) that was good enough in terms of simplicity, legality, music distribution, design elegance, integration, etc. to begin the job of eliminating the need for hard copy CD collections.
    These are very important distinctions to make in correctly evaluating whether a product or company has disruptive potential. There are lots of good and valuable innovations that are just incremental (“sustaining”) but not disruptive. Being better is not disruptive, not even 10x better. Being different, with a different value proposition, and game changing approach is much more likely to be disruptive, although all those things don’t necessarily lead to disruption either.
    By the way, I do think you implicitly get this, because you seem to understand that to be disruptive, you must consider product and marketing strategy, not just technology. In fact, it is most often the way something is positioned and marketed that decides whether a product will be disruptive, more than the capability of the technology, and there-in lies the significance for marketers.
    If you don’t get this, and craft the right strategy, it is highly improbable that you will ever disrupt a market, change the playing field, and take over as the new incumbent.

  4. Paul, in some respects this is a chicken and egg discussion. The “innovation” you speak of relies upon the existence of the technology. Without the tech, disruption cannot occur.
    At the same time you are correct to point out that without the product and marketing strategy (and execution, by the way), the technology itself would not be disruptive.
    Ultimately, disruption marries the two to be successful. Of course, this is part of the reason why I paired “innovation” and “technology” in my original post.

  5. No, technology is not a prerequisite. Most often, the big identifiable disruptive innovations are technology-based, but they can also be based on business processes, business models, culture, methods, or services.
    Fedex, for example, was disruptive to the courier industry when they promised your package would be there. Absolutely. By 10:30 am the next day. Or you don’t pay.
    There was initially no new technology involved. Just planes flying to a central hub to sort pickups and redistribute the packages back onto the appropriate destination planes. It was entirely based on a business process and standard off the shelf components.
    It was the marketing that focused around the uniqueness of the process and next day or you don’t pay value proposition that enabled Fedex to establish itself and to become the best known courier. It was only when they lost their singular focus and tried to compete head on with UPS that they let their chief competitor back into the game.
    Of course, there are advanced logistics and tracking systems today to support the business, but they didn’t exist when Fedex got off the ground and successfully won their underserved niche.
    Another example is word-of-mouth marketing. Although it can be enhanced by technology, such as blogs and other social media types of services, there is nothing about WOM that requires technology. It does require a different organization and business process to facilitate WOM, and it can be enhanced by sophisticated software for tracking metrics and command and control, but again, these weren’t necessary to establish the first WOM agencies.
    Or, the US Constitution. A very disruptive document outlining disruptive processes and rules of government that created the most disruptive country the world has known.
    I could go on, but hopefully you get the point. There must be a key enabler — a differentiating factor that creates the opportunity to change the rules of the game. The rest is execution and how you leverage the opportunity. The two must go hand in hand, or you don’t get disruption.

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