“The phrase disruptive innovation is being used by entrepreneurs worldwide at the moment. However, the term is widely misunderstood. What classifies a company as genuinely disruptive?”
According to the Harvard Business Review and the man who invented the theory of disruptive innovation, Professor Clayton Christensen, “Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality —frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.
Innovation drives prosperity and is key to business success. Regardless of the size of your organization, real success requires a constant battle for innovation. Click here to watch Ted Graham’s (PriceWaterhouseCooper) TEDx talk on three things he learned about disruptive innovation as an Uber driver, covering partnership, feedback and risk & reward.
Ultimately, disruptive innovations are innovations that create new markets by discovering new categories of customers. This is done both via harnessing new and existing technology, but also by developing new business models. According to The Economist, the average job tenure for the CEO of a Fortune 500 company has halved from ten years in 2000 to less than five years today, partly due to disruptive innovation.
If you’d like to read more on the Disrupt summit recently hosted by BCX, click here for Mikael Hanan’s article. Mikael spent 5 years as COO and founding member of South Africa’s biggest online clothing retailer, Superbalist.com, a subsidiary of Takealot.com.
Mikael was incredibly excited about this event, and here’s a short excerpt of his article telling us why: