Disruptive innovation is the process via which smaller corporations—typically with lower means—circulate upmarket and contest larger, joined businesses. It starts with a small agency getting into the lower part of a marketplace or innovating a brand new marketplace segment, which is traumatic, the slightest beneficial part of the marketplace as its own. Because linked-up critical corporations own the maximum useful marketplace division, they probably could no longer conflict with the newcomer for that marketplace proportion. The entrant then improves its services and movements upmarket with growing profitability. Once incumbent clients have broadly followed the entrant’s services within side the mainstream marketplace, disruption has already occurred. Understanding this method can empower aspiring marketers to attempt to disrupt industries and pro specialists to avoid disruption strategically.
Theory of Disruptive innovation
Clayton M. Christensen has coined the term disruptive innovation. This theory’s framework is where huge corporations are warned about being excessively well in their fields. Christensen’s theory notices how businesses demand to be lucrative. To fulfill this demand, companies tend to adopt strategies. To develop innovative technologies in markets where they already exist and cater to their needs. The drawback of adopting this strategy is that it tends to grow. For clients who are not willing to buy their product. While doing so, they may not acknowledge the needs of less intricate customers. Who may become a part of huge markets.
If there is a breakdown of disruptive innovation, the steps could be:
- Incumbent firms innovate their products or services. To attract their most requisitioned profitable clients, overlooking the requirements of those below par.
- Startups target this ignored market segment and gain traction. By meeting their needs at a reduced cost compared to what the incumbent offers.
- Incumbents don’t respond to the new entrant, focusing on their more profitable segments.
- Entrants eventually move upmarket by offering solutions that appeal to the incumbent’s “mainstream” customers.
- Once the new entrant has begun to attract the incumbent business’s mainstream customers. They start improvising and continue to reach that point where they are considered a normal good or service.
Types of Disruptive Innovation
Christensen explained two types of disruptive innovation in his framework: low-end disruption and new-market disruption.
Low-end disruption is when a corporation utilizes a low-cost business model. To connect to a lower level of an existing market and conquer a segment. Because there’s no profitability spur to struggle for the lower level of the market. A low-end disruption causes incumbent companies to emphasize their attempts on more lucrative parts.
3-D Printed Real Estate
Low-end innovation disruption examples may include 3D-Printed Real Estate:
A low-end disruption rising in the widely popular market is 3D printing technology. 3D printers use softcopies of files as blueprints. To store layers upon the substance of concrete. Moreover, 3D printing has stepped at the bottom of the real estate construction market, capturing the lowest innovation market segment. There’s speculation that 3D printing construction enterprises may continue to flourish. Developing the quality of 3D-printed homes as they do so. 3D printing construction companies can use a low-cost business pattern to motivate incumbent manual construction companies to flee upmarket.
Low-end innovation disruption examples may include Toyota:
Furthermore, Toyota’s entry into the auto industry. By 1957, General Motors (GM) controlled half of the American auto market and expanded internationally. However, GM’s strategy was to create a product line to appeal to a wide audience. Toyota, a Japanese car manufacturer, launched its first model, Corona, in 1957. Corona was not a luxury car, but it attracted customers in the low segment of the car market. Therefore, It’s a “good enough” car for an affordable range. General Motors has models aimed at affluent customers willing to pay for higher-quality cars. So it has no spur to compete with Toyota for market share in the bottom end of the market.
Over the years, Toyota has introduced new models – Tercel, Corolla, Camry, Avalon, and 4-Runner. That appeal to higher market segments and propel GM even further. Ultimately, Toyota launched the Lexus. A high-quality luxury car that competed directly with GM for the top segment of the market. It is an almost successful low-level interrupt.
A low-cost version of the product can also be a disruptive innovation in the form of new-market disruption.
What distinguishes new market disruptions from low-end disruptions is focusing on an audience that doesn’t already exist in the market. Offering a more profitable, simple, or accessible product creates a new niche.
An example of new market disruption is the transistor radio. Since the 1920s, the radio market has been dominated by large and expensive stereo systems. That families buy for their homes. Heavy-duty console, designed to be placed in the living room and for excellent sound quality.
In 1954, Texas Instruments introduced a small, inexpensive radio with crystal-clear sound. In contrast to conventional radios that had been available to more affluent audiences. Semiconductor radios brought in a new audience hitherto untapped. There’s a radio selection: teenagers, the less wealthy, and those already working. It forces them to move around a lot.
Radio drives quality advertising, but transistor radios promise accessibility and freedom, creating a new segment in the radio market. It did not seem worthwhile to the incumbents to take on semiconductor radios. Which were significantly cheaper and had lower profit margins than console radios. Texas Instruments’ market segment was assigned by the incumbents instead of competing.
Over time, the quality of portable radios has increased dramatically. With the introduction of the Sony Walkman, MP3 players, Apple iPods, and smartphones. It is also unlikely that expensive home radio consoles will be in demand shortly. With the help of Texas Instruments, the radio market was disrupted from the bottom up. Eventually leaving incumbents in its wake.
How do disruptive technology cause market leaders to fail?
People around you know how non-profitable and poorly managed businesses fail; the question arises why well-established businesses, including Kodak & Nortel, don’t last long. In every market, customers can use a trajectory of performance improvement. But where this trajectory lies is different from one customer to the next.
Some customer satisfaction levels may vary and have a very low level to fulfill their satisfaction. And the technology through which they may be satisfied is at a basic level. While other customers may have a high level of demand. It may be a task to fulfill the kind of quality demanded in technology and satisfy them. That’s where disruptive technology intervenes, having low-quality uses but slowly and steadily improving. It may not fit the market criteria of being good enough. However, for some customers, those at a basic level in the performance trajectory. Are likely to be exposed to buying such innovative technologies and be perfectly satisfied with them. It provides them a sense of belongingness to society. As the technology is better than what they already have at a lower price.
Problems of disruptive technologies
Problems arise for industry monopolists and incumbents. Especially when analyzing the disruptive technologies erupting in the market. Because the existing customers who are part of the niche market segment. They may not like the fact that they are not receiving an upgrade in technology in their devices. At the same time, disruptive technology innovators may continue to improve their market position. Until the niche market segment buys it and adopts it in their lifestyles.
During this time, the incumbent may fail to adapt and develop new strategies to survive in the market. The capitalists of the industries may fail to fulfill the capabilities and linkages to leverage the new technology. Christensen continues to use the advent of the word processor. As it was difficult for consumers to keep up with the speed of their fingers.
Demanding customers like those involved in the tech-related and the corporate world. It was new to the concept of computers, and it was one example of disruptive innovation. Initially, customers found it difficult to adapt and considered it slow. However, gradually, computers took over the word processor typewriters. And are still dominating it with new and updated software, i.e., Intel introduced the ATX 2.03 revision in May 2000.
Disruptive innovation and five disruptive technologies benefits
- Wireless sensor network
A network of autonomous sensors monitors physical or environmental conditions. Such as temperature, sound, pressure, etc., and passes that information through the network to a central location.
- 5D Printer
Using a 5D printer, you can share the blueprint of a product. With anyone anywhere in the world so that blueprint can reproduce. Synthetic microstructures can be fabricated using additive manufacturing in a five-dimensional design environment.
A shared pool of configurable computing devices can be accessed and serviced over the Internet using hardware and software resources. As opposed to traditional IT infrastructure options, the cloud can prove extremely useful for big data analytics and mobile computing. There are also uses such as cloud-based backup, disaster recovery, and file storage.
- Internet of Things (IoT)
Internet of Things (IoT) is a system of identifiable objects and their virtual representations. Such as utilities, vehicles, structures, and various things. Embedded with electronics, software, sensors, and networking, allowing these elements to come together and exchange information. There can also be dangers, as connecting billions of smart devices can pose a real security threat.
- Renewable Electricity
Renewable sources, such as sun, wind, rain, tides, etc. used to generate electricity, reducing the harmful effects of the climate. However, the benefits of renewable electricity include eco-friendly benefits, reliable power sources, economic benefits, stable energy prices, and more. This disruptive technology can help businesses reduce costs and improve efficiency.
- Automation of Knowledge Work
Automating mental work is using computers to perform activities that depend on complex analysis, fine judgment, and creative problem-solving. These capabilities extend computing to new areas and help establish new connections between knowledge workers and machines. In this sense, instead of entrusting a team member to collect data on the technologies from the market. And waiting for such a request to be translated into work for the IT department. Managers or executives can request a computer to provide data.
Disruptive technology and its impact
Disruptive innovation plays a vital part in the technological world. It leads to improvements in the economy, lifestyle, corporate world, and much more. Transport efficiency and business competitiveness greatly increased in the market and software upgrades. Technologies have made life easier and pushed consumers to seek user-friendly options. Society’s needs are met as no one is left out. It is just like breaking news that may break into the market. And create uncertain situations by being a threat to the monopolist of any market segment. Disruptive technology faces highs and continues to improve. Moreover, disruptive technologies can produce new markets and business practices. New product infrastructure, and new labor skills, all of which can impact growth, employment, and inequality.