What is disruptive innovation?
In startup and tech ecosystems, the word "disruptive innovation" is often commonly used, especially to describe underdogs or products that turn out to be overnight successes. But not all these ground-breaking innovations actually fit the tag "disruptive innovation". Keep reading to find out what disruptive innovation is, its enabling factors and disruption innovation examples. Disruptive Innovation Explained  When a product or service originates as a simple, relatively cheap and low grade solution at the market bottom, relentlessly moves up the market, and eventually displaces established competitors, it is a disruptive innovation. 'Disruptive innovation' is a term coined by Clayton M. Christensen in a 1995 paper at the Harvard Business School, marking the advent of disruptive innovation theory. One among many disruption innovation examples is the steel mini mills, which, in the 20th century, towed a dramatic disruptive path that eventually upended giant integrated steel companies to stay top of the steel industry. It is worth remembering however that disruptive innovation is often mistaken with 'sustaining innovations', in which case an established company improves on a particular product or service to serve its top-tier customers better. This move ties to the need to make more profit and attract more investors, but the same move is a major enabler of disruption innovation. Sustaining Innovation as an Enabler of Disruptive Innovation  As established companies focus on satisfying top-tier customers, a larger segment of the market that cannot afford their products seek alternatives in relatively cheap products which, although low-grade, still serve the same purpose as the sophisticated products. This way, the underrated product gains access to a larger population, is consistently improved upon and becomes more appealing, even to other untapped segments of the market. In the end, they upend established competitors and stay top of the market. Admittedly, some startups such as Uber and Tesla dont follow the disruptive innovation business model but still record early market breakthroughs. They however dont qualify as disruption innovations. The following disruption innovation examples will now attempt to put an end to the breakthrough innovation v. disruption innovation debate. Disruptive Innovation Examples  Video Streaming  Netflix started from a small market comprising people who didnt care about new releases or waiting a few days for DVDs to arrive in their mails. Netflix's slow service couldnt match those the likes of Blockbuster provided their customers, so it was ignored. Still, Netflix focused on serving its small market better, slowly developed with a disruptive innovation business model, and appealed to a larger market, enabled by technology to redefine how we watch film. Yet, cable and video rental companies simply focused on serving their profitable customers, till they got out of sync with the new way people love to watch television. Today, video streaming companies  especially Netflix, now the largest video subscription provider after displacing satellite and cable  arent just changing the way we watch movies, but also how they're produced. Smartphones  Smartphones are disrupting laptops as the primary way to use the internet. This is particularly fostered by their accompanying apps with functions similar to those in laptops, bespoke app marketplaces which not only drive online commerce, but also create wider e-markets. Smartphones are more affordable, more portable and convenient, so their disruptive innovation framework is quite obvious. P2P Accommodation  P2P accommodation is a disruption innovation that thrives on peer-to-peer (P2P) commerce, whereby two individuals interact for the purpose of buying and selling products or services. An example of companies with such disruption innovation business models is Airbnb. Airbnb started by providing low cost accommodation to travelers who couldnt afford expensive hotel chains in unknown locations. With its app, homeowners can connect with visitors requiring one of their displayed cosy rooms for a night. Today, Airbnb provides luxury villas in addition to low cost rooms  a disruptive innovation, stretching to all ends of the market. There are many more disruption innovation examples such as:  How digital cameras disrupted film photography. How online encyclopedias like Wikipedia displaced personal encyclopedias. How LED disrupted incandescent light bulbs. How personal computers disrupted predecessors like mainframe. How retail clinics are disrupting traditional medical services. Likewise, there are several potential disruptors with sighted disruptive innovation business models such as online education and 3D printing. As the examples suggest, disruptive innovation differs from breakthrough innovation in that, unlike the latter, the former necessarily starts at the market bottom, as low-grade and low-cost. We can help  Every business, whether established or entrant, needs a healthy cash flow to stay relevant, and this gets easy with GoCardless automated payment system. Find out how GoCardless can help you with adhoc payment or recurring payements.