AMS Concept: Disruptive Innovation

In every market, there are two trajectories—the pace at which products and services improve and the pace at which customers can utilize the improvements.

Customers’ needs tend to be relatively stable over time, while the offerings improve at a much faster rate.

Therefore, over time, products and services that once were not good enough for the typical customer ultimately pack in more features and functions than the customer can use. These are sustaining innovations. Whether they are simple or breakthrough improvements, they help industry leaders make better products that they can sell for higher profits to their best customers.

Industry leaders—or incumbents—almost always win battles of sustaining innovations, regardless of how technologically challenging they are.

Industry leaders stumble, however, when they face disruptive innovations.

A disruptive product or service is not a breakthrough improvement — in fact, it’s actually not as good as the item the industry leaders are selling. Because of this, existing customers won’t use it, and the leaders ignore it.

But these disruptive innovations are more threatening than industry leaders realize.

They transform complicated and expensive products into simpler and more affordable ones, so they appeal to consumers who previously lacked the money and skill to own and use the leaders’ products.

And little by little, the disruption predictably improves, until the disruptive products serve a much wider audience better and more affordably.

As a result, everyone is better off—except for the disrupted companies.   Consumers abandon more expensive and less accessible old-line products, and the incumbent companies that produced these go out of business.

The dynamics of disruption play out in virtually every industry, from electronics to transportation. The personal computer disrupted mainframes and minicomputers. Southwest disrupted the major airlines. Toyota disrupted the Detroit car companies.

Excerpted from BizEd, “On Innovation”, Clayton Christensen, May / June 2008

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3 Responses to “AMS Concept: Disruptive Innovation”

  1. Mark Davenport Says:

    We’re seeing this dynamic at hyper-speed right now as end users are increasingly empowered to combine existing products and services into novel approaches. Witness the enormous volume of apps and online experiences being hurled at the market. While most of these are trivial at best, many are interesting and some are catching hold. Across financial services (pay-by-phone, crowd-sourced angel investing), education (Khan Academy, flipped classrooms), advertising (Pinterest), gaming (Zenga) we’re going to see many giants disrupted. The speed and volume of disruptive activity is simply amazing right now.

  2. “Disruptive innovation” … an incomplete idea ? « The Homa Files Says:

    […] In AMS, we’ve being reading about Clayton Christensen’s theories on disruptive innovation. For background, see last weeks post disruptive innovation. […]

  3. Mike Says:

    Reminds me of a great Wired article, The Good Enough Revolution, http://www.wired.com/gadgets/miscellaneous/magazine/17-09/ff_goodenough?currentPage=all

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