Disruptive Innovation

Extracted Attributes

• Definition

  Innovation that creates a new market and value network or enters at the bottom of an existing market and eventually displaces established market-leading firms, products, and alliances.

• Risk Level

  Higher than incremental, architectural, or evolutionary forms of innovations

• Concept Type

  Business theory concept

• Target Market

  Undesirable or ignored markets

• Popularized by

  Clayton Christensen

• Development Time

  Can take longer than conventional approaches

• Typical Originator

  Outsiders and entrepreneurs in startups

• Popularization Year

  1995

• Predecessor Concept

  Creative destruction

• Team Size for Creation

  Small teams are more likely to create

• Application in Complex Systems

  Identifying and analyzing systems for possible points of intervention to design disruptive interventions

• Product/Service Transformation

  Simplifies and makes more affordable products and services

• Development Resource Allocation

  Can take scarce resources away from sustaining innovations

• Investment Strategy (Cathie Wood)

  Disruptive companies will outperform MAG Six stocks

• Political Catalysts (Cathie Wood)

  Policies from Donald Trump, Trump's Tax Package

• Market Penetration Post-Deployment

  Achieves much faster penetration

• Key Innovation Platforms (Cathie Wood)

  Robotics, Energy Storage, AI (Artificial Intelligence), Blockchain Technology, Multiomic Sequencing

• Predicted Economic Impact (Cathie Wood)

  Unprecedented productivity boom, accelerating real GDP Growth to over 7%, driving Inflation to 0% or lower

• Initial Profitability for Market Leaders

  Not profitable enough

• Impact on Established Markets Post-Deployment

  Higher degree of impact

Timeline

• The Ford Model T debuted, marking a disruptive innovation in the transportation market by making automobiles lower-priced and mass-produced. (Source: Wikipedia)

  1908

• The term "disruptive innovation" was popularized by American academic Clayton Christensen and his collaborators. (Source: Wikipedia)

  1995

• Amazon launched as an online bookstore, becoming a marketplace powerhouse driven by transformative technology, exemplifying disruptive innovation. (Source: Investopedia)

  1990s (mid)

Disruptive innovation

In business theory, disruptive innovation is innovation that creates a new market and value network or enters at the bottom of an existing market and eventually displaces established market-leading firms, products, and alliances. The term, "disruptive innovation" was popularized by the American academic Clayton Christensen and his collaborators beginning in 1995, but the concept had been previously described in Richard N. Foster's book Innovation: The Attacker's Advantage and in the paper "Strategic responses to technological threats", as well as by Joseph Schumpeter in the book Capitalism, Socialism and Democracy (as creative destruction). Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation, because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. The market for transportation essentially remained intact until the debut of the lower-priced Ford Model T in 1908. The mass-produced automobile was a disruptive innovation, because it changed the transportation market, whereas the first thirty years of automobiles did not. Generative artificial intelligence is expected to have a revolutionary impact on the way humans interact with technology. There is much excitement about its potential, but also worries about its possible negative impact on labor markets across many industries. However, the real-world impacts on labor markets remain to be seen. Disruptive innovations tend to be produced by outsiders and entrepreneurs in startups, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition). Small teams are more likely to create disruptive innovations than large teams. A disruptive process can take longer to develop than by the conventional approach and the risk associated with it is higher than the other more incremental, architectural or evolutionary forms of innovations, but once it is deployed in the market, it achieves a much faster penetration and higher degree of impact on the established markets. Beyond business and economics disruptive innovations can also be considered to disrupt complex systems, including economic and business-related aspects. Through identifying and analyzing systems for possible points of intervention, one can then design changes focused on disruptive interventions.

Web Search Results

• What Is Disruptive Innovation?

  Disruptive innovation is the process by which a smaller company—usually with fewer resources—moves upmarket and challenges larger, established businesses. The process begins with a small company entering the low end of a market, or creating a new market segment, claiming the least profitable portion of the market as its own. Because the established, incumbent companies own the most profitable market segments, they most likely won’t fight the entrant for that market share. [...] Subscribe to the Blog RSS feed # What Is Disruptive Innovation? 03 Sep 2020 Catherine CoteStaff Disruptive Strategy Strategy Email Print Share + Facebook + LinkedIn + Twitter + Email Disruptive innovation is a term coined by Harvard Business School Professor Clayton Christensen, and one that he believed to be widely misunderstood. [...] “Many use ‘disruptive innovation’ to describe any situation in which an industry is shaken up and previously successful incumbents stumble,” Christensen writes in the Harvard Business Review. “But that’s much too broad a usage.” In fact, the process of disruptive innovation is far more nuanced than that. Free E-Book: How to Formulate a Successful Business Strategy Access your free e-book today. DOWNLOAD NOW ## Defining Disruptive Innovation

• Disruptive Innovation Theory

  Disruptive Innovation describes a process by which a product or service takes root in simple applications at the bottom of the market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors.

• Disruptive Innovation ⇒ Definition & Examples | 4strat

  Significance and Application:Disruptive innovation refers to a breakthrough technology or business model that fundamentally alters an existing market by creating new value networks, often displacing established competitors. Its significance lies in its ability to democratize access to products or services, making them more affordable or accessible, and fostering long-term economic growth and innovation. [...] Frequently asked questions and answers ### What is meant by Disruptive Innovation? Disruptive innovation refers to a process where a new product, service, or technology starts by targeting a niche or underserved market and eventually disrupts existing markets, displacing established competitors. This type of innovation typically offers simpler, more affordable, or more accessible alternatives that improve over time, ultimately reshaping industry dynamics. [...] Disruptive innovation is a transformative process where new products or services initially target niche segments within an existing market. These innovations start with simpler, more accessible, or cost-effective solutions that appeal to underserved or overlooked customers. Over time, they evolve and attract a wider audience, often challenging and eventually displacing established companies. Through Innovation Management, businesses systematically develop and refine these disruptive solutions,

• Disruptive Innovation: Opportunities and Challenges | AHA

  # Disruptive Innovation: Opportunities and Challenges Disruptive innovation is a “process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors." -- Harvard Business School Professor Clayton Christensen

• What is Disruptive Innovation? Definition & Examples ...

  ## Comparing Disruptive and Sustaining Innovation Disruptive innovation is an innovation that simplifies and makes more affordable products and services to undesirable or ignored markets. Established firms often enhance products for current profitable customers, ignoring untapped markets' needs. This lack of attention gives smaller companies or new entrants ground to target this ignored population with simpler, more affordable options. [...] Disruptive innovation refers to the process of transforming an expensive or highly sophisticated product, offering, or service into one that is simpler, more affordable, and accessible to a broader population. It explains the process of how innovation and technology can change markets by presenting affordable, simple, and accessible solutions and after doing so, disrupts the market from which its predecessors were born. ## What Are Examples of Disruptive Innovation? [...] Disruptive innovation is a market-altering business approach that transforms sophisticated products into affordable, accessible solutions for broader markets, previously untapped. Amazon and Netflix are major disruptors in their respective industries and displaced established market leaders. For example, Amazon, launched as an online bookstore in the mid-1990s and became a marketplace powerhouse driven by transformative technology. ### Key Takeaways