What is a disruptive innovation?
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Disruptive innovation, a term of art coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.
As companies tend to innovate faster than their customers’ needs evolve, most organizations eventually end up producing products or services that are actually too sophisticated, too expensive, and too complicated for many customers in their market.
Companies pursue these “sustaining innovations” at the higher tiers of their markets because this is what has historically helped them succeed: by charging the highest prices to their most demanding and sophisticated customers at the top of the market, companies will achieve the greatest profitability.
However, by doing so, companies unwittingly open the door to “disruptive innovations” at the bottom of the market. An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.
Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics. Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.
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Tags: by charging the highest prices , Characteristics of disruptive businesses , Clayton Christensen , displacing established competitors , disruptive , Disruptive innovation , for many customers , innovate faster , Innovation , lower gross margins , new disruptive competitors to emerge , simpler products and services , smaller target markets , sustaining innovations , too complicated , too expensive , too sophisticated
enrique says : June 25, 2014 at 3:00 pm Thanks for this post … By the way, what are your thoughts on Jill Lepore’s recent critique of “disruptive innovation” and Clayton Christensen’s response to Lepore’s critique? Reply olivierlehe says : June 27, 2014 at 7:30 am Yes, I read them enrique. And what is your opinion in regards to Jill Lepore’s and Clayton Christensen’s comments? Reply
Thanks for this post … By the way, what are your thoughts on Jill Lepore’s recent critique of “disruptive innovation” and Clayton Christensen’s response to Lepore’s critique?
olivierlehe says : June 27, 2014 at 7:30 am Yes, I read them enrique. And what is your opinion in regards to Jill Lepore’s and Clayton Christensen’s comments? Reply
Yes, I read them enrique. And what is your opinion in regards to Jill Lepore’s and Clayton Christensen’s comments?
Pedro Calado says : August 13, 2014 at 12:10 am Great post :) On the matter, you should also see this about innovation and disruption: http://pedroagdcalado.wordpress.com/2014/08/09/have-entrepreneurs-lost-the-will-to-innovate/ Reply olivierlehe says : August 13, 2014 at 9:20 pm Yes, you’re right; very interesting film about Virgin disuptors. Reply
Great post :)
On the matter, you should also see this about innovation and disruption: http://pedroagdcalado.wordpress.com/2014/08/09/have-entrepreneurs-lost-the-will-to-innovate/
olivierlehe says : August 13, 2014 at 9:20 pm Yes, you’re right; very interesting film about Virgin disuptors. Reply
Yes, you’re right; very interesting film about Virgin disuptors.
What is a disruptive innovation? | Kobus Van Der Westhuizen - July 23, 2014
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