What is disruptive innovation? The term was defined and further analysed by Clayton M. Christensen and collaborators in “Disruptive Technologies: Catching the Wave” in 1995, referring to technologies as the processes by which an organization transforms labor, capital materials and information into products and services of greater value (Cayton M. Christensen. The innovator’s dilemma: When new technologies cause great firms to fail. Harvard Business School Press, 1997).Disruptive innovation starts in markets that the incumbents overlook. Incumbents usually provide most demanding and profitable customers with the most improved products and services, but they tend to fail in noticing the less-demanding customers, which usually consider the incumbent’s offer as an overperforming product or service, exceeding the requirements they are looking for or aimed to pay.
Companies have the opportunity of providing these customers with a product or service that suits their needs. It can also refers to the creation of a new market by creating new customers. Christensen then identified two different types of disruptive innovations: new market innovations and low-end innovations. Disrupters start by “catching” both, unsatisfied and less-demanding customers and migrate from the “mainstream market” (The innovator’s dilemma) In the case of new market innovations, the inclusion of those creates a new demand for the technology. On the other hand, low-end innovations are focused on those customers located in the lower parts of the market (as mentioned above, the less demanding and less profitable customers); low-end innovations provide similar and “good enough” solutions compared to existing technologies and cost less (Nagy D et al, 2016). Here it comes into play the differentiation in between disruptive and sustaining innovation. Sustaining innovation refers to all those improvements and new products that the incumbents offer to their existing customers.
On the other hand, disruptive innovation usually starts as a product or service that is considered to have lower performance than the incumbent’s, but that usually suits the needs of those customer segments that are being missed by the later; or directly creates a new need for new customers. It is considered as a new concept of value. (The innovator’s dilemma) (https://hbr.
org/2015/12/what-is-disruptive-innovation )Nagy and colleges proposed an extended definition for disruptive innovation, now comprising the three characteristics that an innovation posses in order to potentially disrupt existing industries or incumbents. They defined disruptive innovation as “an innovation that changes the performance metrics or consumer expectations of a market by providing radically new functionality, discontinuous technical standards, or new forms of ownership” (Nagy D et al, 2016). (description of the characteristics?) incremental vs Radical vs disruptiveSometimes, companies that are known for their ability to innovate and invest in new technology, well-managed, listening to their customers and that have its clear competitive advantage, tend to fail in market dominance. This could happen in both, turbulent industries or industries moving slow and not changing much over time.In this book a theoretical framework is presented. It serve us for the understanding of disruptive technologies and how they have contributed to the fall of industry leaders.