The disruptive innovation hypothesis /gvcxer7h3qo, It has been shown that the paradigm for thinking about innovation-driven growth that was first offered on these pages back in 1995 is useful.
Many corporate executives, both large and small, have cited it as their guiding light, including the heads of Intel, Southern New Hampshire University, and Salesforce.com.
Failure /gvcxer7h3qo
Sadly, the success of the disruption theory /gvcxer7h3qo could turn it into a failure. The theory has been widely discussed, but despite this, its fundamental ideas have frequently been misapplied.
It has been shown that the paradigm for thinking about innovation-driven growth that was first offered on these pages back in 1995 is useful.
Many corporate executives, both large and small, have cited it as their guiding light, including the heads of Intel, Southern New Hampshire University, and Salesforce.com.
Another unsettling issue is that, in our view, far too many people who discuss “disruption” have not read any authoritative literature on the subject. They mention the idea of innovation far too frequently to promote whatever they want to achieve.
Researchers, authors, and consultants frequently use the term “disruptive innovation” to characterize any circumstance in which an industry is upended and incumbents who had previously enjoyed success falter. However, such usage is far too broad.
The issue with equating a disruptive /gvcxer7h3qo:
The issue with equating a disruptive innovation /gvcxer7h3qo with any scientific discovery that modifies the competitive dynamics of a market is that various forms of innovation call for various types of strategic approaches.
To put it another way, not every business in a changing market will be able to benefit from the lessons we’ve learned about being a successful disruptive innovator (or fending off a disruptive rival). Managers risk adopting improper tools for their context if they are careless with our labeling or fail to incorporate ideas from later study and experience into the original theory.
The theory’s effectiveness will erode with time /gvcxer7h3qo .
The goal of this article :
The goal of this article is to document the state of the art. We start by looking at the fundamental principles of disruptive innovation and seeing if they apply to Uber. Then we discuss several common application errors, their causes, and the importance of applying the theory appropriately.
We then outline significant turning moments in our thinking’s development and argue that what we’ve discovered makes it possible for us to make more precise predictions about which companies will expand.
Model of disruptive innovation /gvcxer7h3qo :
The model of disruptive innovation. This figure compares consumer demand trajectories, representing customers’ willingness to pay for performance, with product performance trajectories, showing how products or services develop over time.
Existing businesses overshoot the needs of many mainstream and low-end customers while they launch higher-quality products or services to appeal to the high end of the market (where profitability is strongest). View other HBR graphs in Data & Visuals.
Quick recap /gvcxer7h3qo :
A quick recap of the concept comes first: “disruption” refers to the process through which a smaller corporation with fewer resources can compete successfully against long-standing incumbent companies.
Particularly, incumbents surpass the expectations of some sectors while ignoring the needs of others as they concentrate on developing their products and services for their most demanding (and typically most profitable) consumers. Disruptive newcomers start by successfully targeting these underserved markets, gaining a foothold by offering better functionality—often at a lower cost.
Incumbents often do not react quickly because they pursue more profitability in more competitive markets. Then, newcomers climb upscale, providing the performance that incumbents’ mainstream customers demand while holding on to the initial benefits that let them succeed.
Disruption occurs when large numbers of mainstream consumers start utilizing the offerings of the new competitors. (View the display under “The Disruptive Innovation Model.”)
Uber: Is it a Disruptive Innovation /gvcxer7h3qo ?
Take Uber, a well-known transportation provider whose mobile app connects passengers needing rides with drivers who can offer them. The company, founded in 2009 and has since expanded to hundreds of cities across 60 nations, has experienced phenomenal success.
Significant financial success has been claimed (the most recent funding round suggests an enterprise value in the neighborhood of $50 billion). Additionally, many copycats have emerged (other start-ups are attempting to adopt its “market-making” business model).
There is no doubt that Uber is modernizing the American taxi industry. But does it affect the taxi industry?
Answer:
The theory states that the answer is no. Although Uber is frequently touted as disruptive /gvcxer7h3qo , the company’s financial and strategic successes do not meet that criteria.
The label does not suit for the following two reasons.
Innovative breakthroughs usually start in low-end or emerging markets.
The fact that disruptive ideas begin in two different sorts of markets that incumbents ignore makes them conceivable. Because incumbents frequently strive to deliver ever-improving goods and services to their most lucrative and demanding consumers while paying less attention to less demanding customers, low-end footholds exist.
The offerings of the incumbents frequently exceed the latter’s performance expectations. This makes way for a disruptor who initially focuses on offering those low-end clients a “good enough” product.
Footholds in new markets:
Disrupters who establish footholds in new markets build markets where none previously existed. Simply put, they figure out how to convert nonconsumers into buyers.
For instance, Xerox targeted major organizations in the early years of photocopying technology and charged high costs to meet their performance demands. Carbon paper or mimeograph machines sufficed for small clients like school libraries, bowling league owners, and other consumers who were priced out of the market.
Then, in the late 1970s, new competitors released personal copiers, providing a cost-effective alternative to individuals and small businesses—creating a new market. From this small beginning, manufacturers of personal photocopiers soon established a significant presence in the Xerox-valued mainstream photocopier industry.
Fighting Off Disruption:
Intelligent disruptors advance the market by upgrading their offerings.
These two observations helped to explain why incumbents seldom (if ever) responded effectively to disruptive advances, but they did not explain why entrants finally migrated upscale to repeatedly threaten incumbents. However, it turns out that the same motivations that prompt incumbents to disregard early-stage disruptions also drive disrupters to disrupt in the end.
Discovered that low-end /gvcxer7h3qo
We’ve discovered that low-end and new-market footholds are frequently inhabited by multiple comparable entrant enterprises instead of a single would-be disruptor whose products are easier to use, more convenient, or less expensive than those incumbents offer.
Many new entrants can experience profitable expansion inside the foothold market because the incumbents function as a de facto price umbrella. But that only persists temporarily: The price umbrella is essentially removed as incumbents (rationally but wrongly) give up the foothold market, and price-based competition between the entrants takes over.
Some new competitors will fail, but the smart ones—the real disruptors—will enhance their goods and move upmarket, where they can once more contend on the margin with more established, higher-priced rivals. The disruptive effect pushes every competitor—established players and newcomers—upmarket.
The notion of disruptive innovation expanded.
The notion of disruptive innovation /gvcxer7h3qo expanded beyond simple correlation to include a theory of causation once these explanations were in place.
Many industries, including retail, computers, printing, motorcycles, cars, semiconductors, cardiovascular surgery, management education, financial services, management consulting, cameras, communications, and computer-aided design software, have been studied to test and validate the theory’s key concepts.
Interpreting oddities /gvcxer7h3qo :
Interpreting oddities. The theory has been further refined to address several anomalies or unforeseen events that the theory could not explain .
For instance, we formerly believed that disruptive innovations only succeeded in the lowest rungs of an established industry, even though occasionally, new competitors appeared to be engaged in completely unrelated industries /gvcxer7h3qo . As previously mentioned, this resulted in the division between low-end and new-market footholds.
Assaulting that stratum:
Before moving upwards and assaulting that stratum, low-end disrupters (such as integrated steel mills and traditional shops) enter the market from the bottom and seize control within an existing value network.
On the other hand, new-market disruptors establish themselves in an entirely new value network and draw in clients who had previously avoided the product. Think of the PC with the transistor pocket radio: Because they were intended for those who did not use those products, manufacturers of tabletop radios and minicomputers mostly ignored them.
The hypothesis has gained strength and applicability by positing that there are two types of foothold marketplaces where disruptive innovation can start /gvcxer7h3qo.
