What Is Disruptive Innovation? Essay Example

Disruptive innovation is a mechanism used by new entrants in a market, particularly small enterprises with scarce resources, to manage a successful challenge already existing incumbent companies (Christensen, Raynor, & McDonald, 2015). This they do by focusing their attention on the segments of the market that have been bypassed by the established incumbents whose focus is on enhancing their commodities for the customers with the highest demand and profits. The ignored segment of the customers provides a niche where the smaller company ventures into from where they move upmarket and before the incumbents can counter the entrants, disruption has already occurred. This article critically summarizes disruptive innovation, by focusing on its concepts.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

To manage innovation effectively, one has to grasp the true nature of that innovation. Misunderstanding an innovation often leads to misapplication of its concepts, making it to eventually lose its usefulness (Cortez, 2014). Disruptive innovation has been misunderstood and its basic principles frequently misunderstood. However, two basic characteristics can help define whether the innovation at hand is disruptive or not. One, disruptive innovations emerge in low-end or new market footholds. These are two markets mostly overlooked by incumbents, thus providing a gap for entry. For the low-end markets, disruptors focus on the less-demanding customers who are not concerned about ever-improving products that incumbents focus on producing. For the new markets, disrupters establish a market where there was none by converting non-consumers into customers.

The second characteristic of disruptive innovation is that it will only attract mainstream consumers only after the quality of the products and services is up to their standard. As mentioned earlier, this innovation targets low-end customers. These customers are, however, skeptical about embracing new offers based only on lower prices. They tend to wait until the goods or services being offered have raised standards to a level that satisfies them. They then start adopting the new product and happily accept the lower price offers that come with it. One of the company that whose entry has been wrongly categorized under disruptive innovation is Uber. However, a close look at Uber's approach to the market does not fit the two above characteristics that define the disruptive innovation. If an innovation does not portray these two characteristics, then it definitely does not qualify as a disruptive innovation, and vice versa.

Getting it right about an innovation matters a great deal. This is because it is the starting point for the application of the concepts of the innovation as well as finding solutions to challenges that may arise along the way. The proper application also helps in realizing the benefits that are specific to that particular innovation (Christensen et al, 2015). In the case of disruptive innovation, getting it right will ensure that incumbents are not distracted from their development process by new entrants that are trying to penetrate the market if they do not pose the threat. For the managers, getting it right will factor in when making strategic decisions.

With the disruption theory, there are four crucial points that have been misunderstood or overlooked, resulting in the misconceptions surrounding the innovation. One, disruption is but a process. Disruptive innovation does not represent a commodity at a fixed point, rather, it's the progression of that commodity over time (Christensen et al, 2015). Disrupters will tend to get the business model right, and not just the product. With a right model and product, they are able to successfully move from the low-end market to the mainstream market and compete with the incumbents. Two, business models built by disrupters tend to be different from those of incumbents. Disrupters tend to alter or add additional features of a product that will enable it to serve the customer in a different way than the existing products. Three, disruptive innovation is marked by successes and failures. Claiming that a company is disruptive by the virtue of its success is faulty. Disruptive approaches do not always lead to success and not every successful venture employs disruptive innovation. Four, the term "disrupt or be disrupted" can be misguiding. For this reason, incumbents should not rush into dismantling their profitable business to counter a disrupter. Rather, they should build to strengthen ties with their major customers through sustainable innovations. In other words, the disruption factor should only be solved only after it has become an actual problem.

On the one hand, disruptive innovation can be a good mechanism in bringing about better products and services to the customer through the competition between the entrants and the incumbents (King & Baatartogtokh, 2015). Once an incumbent company spots a disrupter, the former will tend to counter the latter by improving performance through sustaining innovation or acquire the disrupter. Either way results in better products and services to the customer, as well as service to all segments of customers in the market. Additionally, disruptive innovation offers an opportunity for small companies to enter a market even with the existence of large and established companies. This they do by covering the gaps in the market segment that has been ignored by the incumbents. Success in this theory will see the entrant climb the ladder to a competitive level with the incumbents.

On the other hand, disruptive innovation may not prove sustainable in many instances. This is often so because the incumbents apply counter techniques that may bring the entrant business down (Schmidt & Druehl, 2008). A study conducted revealed that only 6% of sustaining entrants manage to succeed in their ventures. One way in which incumbents counter disrupters is by acquiring them and by that putting them out of business. Additionally, the disruptive theory is encountered with several anomalies that make the theory to be misunderstood. If one does not get it right at the beginning, then the whole process is compromised. Concepts of the innovation that are meant to aid in the upmarket movement by the entrants may be wrongly applied and problems unsolved even though the process has provided solutions. Lastly, disruptive innovation is incapable of fully explaining business success in general. This is because there are other forces at play which have to be integrated to be able to offer a comprehensive path to business success.

Conclusion

In summary, disruptive innovation is a theory that allows smaller companies, referred to as disrupters, to enter a market dominated by large established companies. They do this by identifying segments of customers that have been left out by the large companies and supplying them. There have been misconceptions about disruptive innovation leading to misapplication of its concepts in business growth and problem-solving. This theory is a good means by which the market can offer better products and services to all the different customer segments through the competitive created by the new entrants. However, the success of disrupters is minimal standing at 6%. Nevertheless, a lot is to be learned about this innovation that could be of much help to those intending to disrupt the market.

References

Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation? Harvard Business Review, 93(12), 44-53.

Cortez, N. (2014). Regulating disruptive innovation. Berkeley Tech. LJ, 29, 175.

Hang, C. C., Chen, J., & Yu, D. (2011). An assessment framework for disruptive innovation. Foresight, 13(5), 4-13.

King, A. A., & Baatartogtokh, B. (2015). How useful is the theory of disruptive innovation? MIT Sloan Management Review, 57(1), 77.

Osiyevskyy, O., & Dewald, J. (2015). Explorative versus exploitative business model change: the cognitive antecedents of firmlevel responses to disruptive innovation. Strategic Entrepreneurship Journal, 9(1), 58-78.

Schmidt, G. M., & Druehl, C. T. (2008). When is a disruptive innovation disruptive? Journal of product innovation management, 25(4), 347-369.

Weeks, M. R. (2015). Is disruption theory wearing new clothes or just naked? Analyzing recent critiques of disruptive innovation theory. Innovation, 17(4), 417-428.

Yu, D., & Hang, C. C. (2010). A reflective review of disruptive innovation theory. International journal of management reviews, 12(4), 435-452.