Disruptive innovation: A Primer


In an article for HBR co-authored with Joseph Bower, “Disruptive Technologies: Catching the Wave” (January/February 1995), Clayton Christensen introduces the concept of disruptive innovation, one that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances. The car, for example, was not a disruptive innovation because it had little (if any impact) on the horse-and-buggy/wagon market.

However, Henry Ford’s Model T in 1908 was a highly disruptive innovation. Other examples include minim-steel mills, video streaming, online encyclopedias, smartphones, personal computers, retail mini-medical clinics, light bulbs, and personal copiers.

There are several markers that distinguish true disruptive innovators:

o They are low-cost and highly accessible.

o They have lower gross margins than their contemporaries or the incumbent.

o They serve a smaller low-end target market at first, before expanding to a vast market due to their accessibility.

o They’re hard to see coming and aren’t taken seriously. They quietly, slowly “climb the ladder” and can take years or decades to gain traction before they dramatically upend competitors.

Disruptive Innovations are NOT breakthrough technologies that make good products better. Here are some other key points;

o Enabling Technology is an invention or innovation that makes a product more affordable and accessible to a wider population.

o The Innovative Business Model targets nonconsumers (new customers who previously did not buy products or services in a given market) or low-end consumers (the least profitable customers).

o A Coherent Value Network is one in which suppliers, partners, distributors, and customers are each better off when the disruptive technology prospers.

o Modularity Theory (also known as the Theory of Interdependence and Modularity) is a framework for explaining how different parts of a product’s architecture relate to one another and consequently affect metrics of production and adoption.

A product is modular when there are no unpredictable elements in the design of its parts. Modularity standardizes the way by which components fit together — physically, mechanically, chemically and so on. The parts fit and work together in well-understood, crisply codified ways.

A product is interdependent when the way one part is made and delivered depends on the way other parts are made and delivered. Interdependency between parts requires the same organization to develop both components if it hopes to develop either component.

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