3 Key Criteria of Disruptive Innovation

Just a few hours before sitting down to write this post I was in a meeting were a group of people pitched themselves as disruptive, they aren’t, but people on the other end of the table soaked it all in. Why? One, the misconception and another is disruption is good PR, there isn’t a day that goes by where some new upstart describes itself or is described as disruptive.

The truth is not all innovation is disruptive. How can you tell what has the potential to be disruptive?

Disruption is one of the most misunderstood innovation concepts, here are 3 key criteria of disruptive innovation…

Disruption is associated with startups, with good reason because disruption is not for the faint of heart. It takes you out of your comfort zone and requires an established organization to “cannibalize itself” by chaning its business model and strategy; so that means most organizations are not doing anything disruptive.

Which takes me to the Father of the theory of disruption, Clay Christensen, who describes disruption as solutions that are simpler, more affordable and more accessible to a non-consuming group; the last point is one key criteria of disruption.

And, as we saw in my previous post, disruption means using existing technology with a new business model. Which takes me to the last two criteria, from an article in the New Yorker Clayton Christensen’s Theory of Disruption we find some nuggets:

“New technologies that brought established companies to their knees weren’t better or more advanced—they were worse”

This means that new entrants, the disruptors, used existing technology but with a low cost business model aimed at a non-consuming market. So, improving the technology is not the focus; it’s the market.

“A low-cost strategy only works when you have a high-cost competitor”

Basically, an entrant pursuing a disruption strategy goes for the low-end of the market; the non-consuming one. The reason this group of people is underserved is varied but one is definitely price; they simply want a cheaper alternative because they are not willing to pay for premium.

Incumbents will rarely pay attention to this group of people because they focus on the more “profitable customers”, and doing so would mean changing their business model and strategy; not a safe proposition for established organizations.

Disruption creates better choices and outcomes; not destruction

The video below explains the disruptive innovation in two minutes highlighting the criteria:

If this isn’t enough, a few years ago Marc Andreessen, entrepreneur and venture capitalist, summarized disruption in a tweetstorm:

Disruptive innovation theory in 15 tweets

He makes a great point that disruption is not destruction, it is about creating choice; which rarely gets talked about. What gets talked and debated about is the competitive side of things and how old industries are being transformed and wiped altogether. For example, there is great debate as to whether or not Tesla and Uber are disruptors.

My take: who cares!

The only people who care are the people sitting on the sidelines, the color commentators of business, talking about companies going head to head as if it were sports. At the end of the day discussing whether or not they are or are not is an academic exercise. Do you think Elon Musk cares whether his company is a disruptor?

What innovators care about is creating better choices and outcomes for people, and that is what we should focus on.

Bottom line: Innovation is about better choices and outcomes. Disruption is one way, but not the only way, to achieve that.