Framework library · Innovation and product
Disruptive innovation theory
Disruption is a specific process. An entrant starts where incumbents are not looking, with customers they overserve or with people who do not buy at all, using a simpler, cheaper offer and a business model the incumbents find unattractive. It then improves until it is good enough for mainstream customers. Most new competitors do not follow this pattern, and calling them disruptive leads to the wrong response.
Use it when
- A new entrant or technology is winning customers you do not value much, or customers who did not buy before, and you need to know whether it will come for your core.
- The board is calling a competitor disruptive and you want to test whether the label fits before choosing a response.
- You are the entrant and want to know whether incumbents are likely to ignore you or fight.
- You are deciding whether to set up a separate unit for a new, cheaper offer that would compete with your own products.
Avoid it when
- The rival offers a better product to your best customers. That is a sustaining challenge. Compare positions with competitive benchmarking and respond directly.
- You need to forecast how fast a technology will be adopted. Use the technology adoption life cycle or scenario planning.
- The change comes from regulation or a shift in demand rather than from an entrant's business model. Use PESTLE or scenario planning.
How to run it
Describe the entrant precisely
Who it sells to first, at what price, with what performance, and on what business model. "Software radio on commodity servers, sold to factories" is testable; "the cloud" is not.
Rate the statements with evidence
Rate how true each statement is today. Note the evidence beside each pattern: who the first customers are, what they used before, what the entrant charges.
Read the closest fit, and how close it is
Low-end and new-market footholds are disruption. Sustaining means the entrant is attacking on your own terms. If every pattern scores low, the entrant may be a niche player rather than a threat.
Write the improvement path
Disruption needs the entrant to improve until it meets mainstream needs. Write what it has to get better at and how fast it is improving.
Choose a response that fits the pattern
Against disruption, a separate unit with its own economics usually beats cutting prices in the core. Against a sustaining rival, compete directly or buy the capability.
Set signals to watch
Name two or three events that would show the entrant moving up, and review them on a fixed date.
Work through it
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Mistakes to avoid
- Calling every successful newcomer disruptive. An entrant with a better product for your best customers is not disrupting you, and responding as if it were wastes money.
- Judging the entrant by today's performance alone. The theory is about the improvement path; a weak product that improves fast is the threat.
- Matching the entrant's price across the whole base, which destroys margin in segments it cannot yet serve.
- Assuming disruption is certain once the pattern fits. Many entrants with the right foothold still fail.
Where it comes from
Joseph L. Bower and Clayton M. Christensen, "Disruptive Technologies: Catching the Wave", Harvard Business Review, January to February 1995; developed in Christensen's The Innovator's Dilemma (1997). Christensen, Michael E. Raynor and Rory McDonald restated what the theory does and does not cover in "What Is Disruptive Innovation?", Harvard Business Review, December 2015. Source.
Use it with
Further reading
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