Gain Market Leadership with Disruptive Innovation

In his book, The Innovator’s Dilemma, management thinker Clayton Christensen speaks of how even successful and well-managed companies often end up losing market leadership. This happens when new companies disrupt the market with innovative technologies or business models. With disruptive innovation, companies are able to create spaces for themselves in existing markets, eventually displacing market leaders. For existing leaders, it is necessary for survival.

However, unlike other kinds of innovation, disruptive innovation is risky. It requires companies to invest money in lower-margin, high-risk innovations that may not pay off for years. This is where the dilemma lies. Disruptions occur slowly at first and grow exponentially when they become mainstream. And this is where the opportunity lies for companies pursuing disruptive innovation.

One of the most spectacular examples of disruptive innovations is Netflix. It entered the DVD rental space as a company that serviced a niche customer segment that understood online commerce and was fine with ordering DVDs over mail. In a few years, it was vying for market leadership on par with conventional DVD rental companies such as Blockbuster. Then, Netflix disrupted its own business model by offering online movie streaming, a move that cemented its position as a market leader.

How to Promote Disruptive Innovation

If you’re looking to disrupt an industry and create a space for yourself, remember these tenets of disruptive innovation.

Encourage Bottom-up Innovation

Traditionally, companies restricted innovation to their research and development (R&D) units. Moreover, ideas followed from the top and were executed by R&D employees at the bottom. Companies primarily relied on post-launch performance to access the potential of an idea. However, this limits the kinds of opportunities that a company identifies. On the contrary, bottom-up innovation allows companies to identify challenges that align with their business goals.

In bottom-up innovation, individual business units identify challenges that impact their processes. This allows innovation managers to better define challenges and identify opportunities for disruptive innovations.

Explore Limits of Existing Products/Services

When the market is saturated with similar products or services, new technologies can prove to be a differentiator. However, the novelty of a product isn’t sufficient to create a competitive advantage. The technology needs to translate into improvements in products and services that impact the customer experience. For example, digital cameras quickly took over the photography impact by allowing users to quickly view their photographs after clicking.

Often, such novel technologies are brought to the market by emerging startups. To avoid being displaced by such startups, market leaders need to monitor them to quickly adopt new technologies. To identify disruptive technologies early, companies need to incorporate technology landscaping as a routine part of their innovation strategy.

Identify Low-cost Business Models

Another approach to disrupting a market is to come up with business model innovations. For instance, if a company’s business model allows it to significantly reduce the price of a product or service, it can undercut its competitors and increase its market share. To do this, companies need to find ways to optimize their process beyond the market standard or create completely new channels.

The business model innovation approach allows companies to identify low-cost and disruptive business models. Today, the competitive advantage of new products or services doesn’t last as long as it used to because the rate of innovation across industries is skyrocketing. Innovative business models, on the contrary, provide a more sustained advantage, thereby allowing companies to disrupt the market and gain market leadership.

Use Different Metrics to Evaluate Innovation

Innovation is measured by its impact on business performance. What does not work is abandoned, what works is kept and improved upon. In the fail fast paradigm, companies try dozens of new innovations every year, keeping only a few of them. While this works for incremental or architectural innovation, disruptive innovation requires a long-term strategy.

Disruptive innovations are often not profitable from the start. Take the sharing economy platforms for example. They disrupted how consumers avail services, but have only recently started becoming profitable. Evaluating the success of disruptive innovation requires different metrics as compared to evaluating other kinds of innovation.

Benefits of Disruptive Innovation

Identifies Overlooked Segments

Disruptive innovation allows businesses to identify overlooked or underserved markets. This is why this is the choice of innovation for many startups looking to carve a niche for themselves. For established businesses, disruptive innovation has the potential to expand to new customers and create additional revenue streams.

Identifies Areas for Improvement

When a company adopts disruptive innovation, it is looking for new technologies or business models that allow it to lower costs for its customers. While that often takes a few years, the lessons in the process are more readily applicable to a company’s internal processes. This improves business operations and increases profitability.

Increases Adaptability to New Trends

Companies do not have to react to every emerging technology. However, when it establishes that there is a good chance that a particular technology will impact their industry, they must respond fast or risk playing catch up. Companies with a disruptive innovation culture find it easier to adapt to new technology trends, partly because they are likely to be performing trend landscaping routinely.

Pursue Disruptive Innovation with Innovation Intelligence

Depending on your innovation goals, we offer a range of services enabled by the StartUs Insights Discovery Platform, covering over 2,5 million startups & scaleups globally. Some of our services that help you identify opportunities for innovation include:

• Trend Scouting: Identify the emerging and latent trends and developments that will impact your competitiveness
• Technology Scouting: Reveal emerging technologies that match your innovation goals
• Startup Scouting: Discover over 2,5 million startups & scaleups globally, scouting the right partners & saving you weeks of desk research

Startups are the most prominent drivers of disruptive innovation. To stay competitive, companies need to work with disruptive startups.