What does disruption really mean, should we be afraid?
Well the short answer is that it is disruptive innovation – a new idea that changes things or creates a new market.
An example could be Netflix, who took the customers that didn’t like the fees and inflexibility of renting videos from Blockbuster and introduced them to all online content.
This became disruptive because all Blockbuster’s customers then realised the benefits of Netflix and switched over. A new market of online movie streaming was created.
This is different to breakthrough innovation, which simply takes an existing idea, market, product or service and makes it better. Through these definitions then, Uber – which is often quoted as an example of disruptive innovation, is in fact just a breakthrough innovation.
Uber have taken an existing idea of catching a cab and made it better. A new market of cab users has not been created – it’s the existing market using Uber, more than the cab company they used to call.
It’s helpful to be aware of this difference between disruptive and breakthrough innovation because every business needs to protect itself from both types of risk. How do you go about this?
Every business must make sure it is offering the best version of its product and service for its particular market – so Ryanair must stay the cheapest and BA must stay high quality to maintain their positions with their particular customer bases.
This protects the company from breakthrough innovation – that is, another company working out a way to do it better. If a new airline appeared that offered the prices Ryanair publicise, at the same level of profitability for the company owners, but with far better customer service, comfort and overall customer experience, then Ryanair would be at risk.
We can protect our businesses from the risk of outside breakthrough innovation by making sure we are the breakthrough innovators. Let’s stay focused on offering the best version of whatever we do for the particular people we do it for, so we cannot be beaten by others.
Then we need to protect ourselves from disruptive innovation. This means looking at the markets we don’t go after. Often disruptors will go for the people that nobody else is going after.
With Blockbuster as an example, the original Netflix customers were offered old movies at a low price – whereas Blockbuster was all about the newest releases. What is the lower end of your market, or the people you don’t really service? What risk could there be to your business if someone offered something they liked, which in turn could create a new market?
Many companies have been too slow to respond to breakthrough and disruptive innovation, make sure you’re not the next Kodak or Blockbuster story by educating your teams on these risks and helping them stay commercially alert.