Jul 22, 2016

Disruptive Innovation

What you need to know, beyond the buzz

Author: Alexandra Stanculescu

Disruptive innovation – the buzzword

In 1997, Clayton Christensen coined the term ‘disruptive innovation’ in his book The Innovator’s Dilemma. Since then, the phrase has gone on to become one of the ‘buzz-words’ and must-haves that shape the IT-software landscape. It seems like wherever you turn there’s someone talking about it, either at seminars, conferences and webinars, or during pitches and client meetings. As it’s often the case with business catch-phrases, the original, intended meaning of the term has become broader, stretching to accommodate everyone’s agenda.

In this particular case, Christensen himself, the ‘father’ of the phrase, spoke out about the many instances in which the term has been used too indulgently. ‘Many researchers, writers, and consultants use “disruptive innovation” to describe any situation in which an industry is shaken up and previously successful incumbents stumble. But that’s much too broad a usage.’, he explains in a comprehensive article for The Harvard Business Review. What was a visionary business theory about select few outstanding cases back in 1997, has since gone on to be ‘abused’ by many salesman and marketing writers to promote their products and services.

It just sounds good, doesn’t it? The phrase is quite catchy, and it has a dramatic ring to it. It’s easy to see why people have been stretching the term to achieve a variety of purposes, from ‘scaring’ someone into buying consulting services, to getting people to invest in a certain product or service. But disruptive innovation isn’t simply a case of forward-thinking to disrupt the way things were done before said innovation.

Are we overusing the term and taking away its wow factor?

Let’s look at this in reference to the smartphone. Initially, it started off as ‘just a phone’.

Sure, you could set an alarm on your Nokia 3310 to wake you up in the morning (some argue you can even use them as bricks and build houses), but you couldn’t check your emails off of it while on vacation. This meant that, as a busy professional, you were likely to purchase a laptop.

Slowly but surely, however, the phone became a small computer. This hijacked people right from under the various players making laptops, and onto smartphone territory. (Also, compact travel cameras – what are those?)

To those selling laptops (and those selling compact travel cameras) the rise of the ‘smartphone era’ meant adapt or die. The smartphone is probably the ‘cleanest’ illustration of the concept of disruptive innovation imaginable. Why? Well, Christensen highlights some points, which neatly apply to our smartphone example:

  • Disruptive innovations start-out with low-end/new markets. The smartphone didn’t set-out to be the new laptop, a direct competitor of laptop manufacturers. Instead, it started out as a phone with ‘shiny’ features, and stealthily evolved into a more affordable, dramatically lighter and more versatile laptop.

Laptop manufacturers had their clients hijacked through the course of a ‘natural’, seamless process. There were no waves being created. No sudden ‘competition with a bang’, no this-is-the-end-of-the-laptop-as-we-know-it. We all know the smartphone has replace our laptop, but none of us can say for sure when or how that happen, it just gradually did. Which brings us to the next point:

  • Disruptive innovations move from their niche market segments into the mainstream markets only once quality gets a chance to catch-up on those customers’ higher standards.

You didn’t throw your laptop out the window immediately after purchasing your first smartphone. The technology just wasn’t as reliable yet. For a while, you’ve used them both, with the phone first being just a vector for cat videos, until smartphone quality was high enough to get you to ditch the laptop. This means that:

  • Disruption is a process. Disruptive innovation doesn’t start out to get anyone. It happens gradually, and feels more like a side effect than a business plan to the day-to-day consumer eye.

Well, that’s pretty discouraging. What about smaller companies – can they not aspire to disruptive innovation?

It’s not about market size, or about company size. It’ about ideas. Everyone can aspire, and with some planning even attempt, to be the next disruptor out there. But it’s a business model in itself – and from a software development point of view (because that’s what we’re good at), you will need an experienced, flexible and well-coordinated team to help implement your vision and bring cutting-edge software to your daring ideas. Not all outsourcing providers are implicitly innovation-oriented: people are thought to play it safe, when it comes to delivering software, because let’s face it, innovation cannot come without its bit of risk. To innovate is to venture on roads never walked before, and it means you have no readily-validated benchmark. You need to rely on past experience and on your vision to make the right decision. If you’re going to take the plunge into virgin software territories (nothing venture, nothing gained, they say), you should make sure your provider has like-minded values and a learning and innovation embracing company culture.

If you find the entire smartphone success story a little intimidating and hard to relate to, you needn’t give up on your aspirations just yet – there’re other disruptors out there, and not all of them started-out with an obscenely high budget. Like Netflix for example, which I did mention in passing a bit earlier, in relation to its predecessor, Blockbuster.

Netflix started out unthreateningly, by catering to the lower-end market share that Blockbuster had left out. Blockbuster users were not about to march over to Netflix and compromise on their preferred quality level. But Netflix quality grew steadily – until the one-click-away-advantages they provide since they started streaming in 2007 became impossible to ignore. The breach into Blockbuster territory soon followed, with Netflix eventually leading their competitor into bankruptcy.

The next major disruptor out there could have just finished university a year ago, now working with 2 of his school mates on this one weird niche application – who knows what it might grow into. The next major disruptor out there could have a background in a field completely unrelated to technology. The next disruptor out there could be anybody. It could be you. And if you do decide to attempt such a challenge, you know where to find us.

This does feel like a slightly more relatable example. Can you point any others? What’s your take on this intensely-debated concept? Do you think we should all use it more restrictively, or is it OK to classify Uber as disruptive, even though Clayton Christensen openly disagrees?

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