What Is Disruptive Innovation? Definition, Importance and Examples
By Indeed Editorial Team
Updated March 1, 2022 | Published April 26, 2021
Updated March 1, 2022
Published April 26, 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Disruptive innovation happens when a new product performs exceptionally well and eventually surpasses competing products in the marketplace. It can be helpful to understand disruptive innovation if you work in sales, business or marketing, so you can use it to your advantage. In this article, we define disruptive innovation, explore why it can be important and what it requires to work effectively, and we offer three examples.
What is disruptive innovation?
Disruptive innovation occurs when a product is introduced to a market and that product quickly rises in popularity, displacing competing products and companies in the process. Most products that experience disruptive innovation are initially offered at a low cost and made widely accessible to consumers. This allows the product to build a customer base quickly which can then be expanded as more consumers learn about the product and its benefits.
Because the main goal of disruptive innovation is typically to make existing products or services more accessible or affordable to consumers, the process can be especially beneficial to new companies that emerge in already lucrative industries.
Why is disruptive innovation important?
There are many reasons why disruptive innovation can be important. One reason is that it can benefit markets in emerging countries by helping them develop creative solutions that make products that can be challenging to acquire or use more accessible to their public. Disruptive innovation can also be important because it can identify upcoming shifts in a market that might impact the production of future products by showing different areas of need or interest that consumers have based on the products they purchase.
Another reason disruptive innovation is important is that it can benefit companies as well as consumers by offering new products that might have improved quality and a lower price than similar products in the same market.
What is required for disruptive innovation?
Here are the key elements that disruptive innovation requires to take place and be effective:
Enabling technology includes technology and new products that can improve how people perform a certain task or process. In disruptive innovation, the enabling technology is the aspect of a new product that allows a company to offer it at an affordable price and make it accessible to large numbers of consumers. The rate at which disruptive innovation can occur largely depends on how quickly the related enabling technology can be developed, tested and improved until it reaches the best possible quality while maintaining a low price and remaining easy to use.
However, even enabling technologies that require a long time before entering the market can result in successful disruptive innovation, as they can still produce effective new products that can rise in the market once they're introduced to consumers.
Innovative business model
An innovative business model is a specific type of business model that focuses on reaching new customers or customers who do not typically spend large amounts of money at a company through innovative products. Some innovative business models take time to produce a profit for a company, as they often release new products at lower prices than similar products are sold for in order to attract new customers quickly. However, there is always potential for profit margins to grow in an innovative business model, as more customers can learn about a product, purchase it and recommend it to their peers.
While eventually growing profits is a benefit of the innovative business model, its main goal is usually to offer new products that are accessible and affordable to consumers.
Related: What Is the Innovative Process?
Coherent value network
A coherent value network is created when all business partners in a company benefit from the disruptive innovation that occurs. This can include partners in the upstream, or processes that prepare for production, such as distributors, suppliers or vendors who contribute to the production of a new product. It also includes partners in the downstream, or efforts to produce and distribute a new product to the public, such as marketing and sales teams. When all parties involved in an innovation can commit to the new business model and benefit from the result, they can achieve successful disruptive innovation.
Examples of disruptive innovation
Consider these examples of disruptive innovation:
Example 1: Smartphones
One example of successful disruptive innovation is the emergence of smartphones in the technology industry. The rise of smartphones can qualify as disruptive innovation because many people use smartphones for computing processes, like browsing the internet and streaming movies or television programs, rather than the traditional choice of a laptop or desktop computer. In this case, the previous leaders in the market, laptop and desktop computers, are surpassed by smartphones, which can be more accessible to use and transport and often cost less than a computer.
Example 2: Online shopping
Another example of disruptive innovation is the introduction of ecommerce into the retail industry. Online shopping uses technology to provide customers with a central location where they can purchase products from companies from any location and have them delivered to their homes. This qualifies as disruptive innovation because it decreases the necessity of in-person retail, or visiting stores to make purchases. As ecommerce becomes increasingly popular, online retailers can surpass their brick-and-mortar competitors through offering easier options for customers to shop using technology and the internet.
Example 3: Streaming services
Streaming services are also an example of effective disruptive innovation. Streaming services allow customers to pay a monthly or annual fee to access libraries of films and television shows on online platforms. This is an example of disruptive innovation because streaming services serve largely the same purpose as video and DVD rental stores but in a more accessible and affordable way.
By giving customers the ability to pay for their content with a monthly fee and access their library of content from almost anywhere, streaming services eliminate the need to visit a video or DVD rental store in-person and pay for each video being rented individually.
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