Accelerate - June 2013

Disruptive innovators: Devastation or deliverance for your business?

What do the iPod, Model T Ford, frozen meat and the telephone have in common? They’re all disruptors – innovations that had a profound effect on their unsuspecting markets. Disruption needn’t mean devastation for your business.

In the world of innovation, it’s common to talk about sustaining and disruptive innovations. Sustaining innovations are the incremental improvements a business makes just to stay in the game. They’re a linear progression, such as a bigger television, a faster car or a cheaper bottle of wine.

Disruptive innovations, on the other hand, are the revolutionary ideas that make us rethink how the game should be played. Imagine the Model T in a world of horse-drawn carriages or the iPod in a market dominated by compact discs and cassette tapes. These ground-breaking ideas are disruptive because they shift how customers think, what they expect and where they spend their money. They can render the status quo obsolete overnight and transform previously marginal businesses into leaders in their self-forged industries.

The relationship between disruptive innovators and their potential to be serious game changers in an industry have become such a hot topic that Forbes recently launched their list of the top 12 Most Disruptive Names in Business in 2013.

Because disruptive innovations have the potential to yield the greatest return, businesses often make the mistake of thinking that disruptive products and services should lead to immediate market success. In fact, they often challenge the accepted norm and can take significant time and resources to achieve market acceptance.

“All innovation is risky and disruptive innovation is perhaps the most risky of all,” says Grant Frear, innovation specialist and Consulting Partner with Deloitte in Auckland. “Whether a business should focus on sustaining or disruptive innovation depends largely on the business’s capability and financial resources, and the dynamics of the particular industry. These clues tell you whether your business is in a period when it will benefit from sustaining innovation or whether there is an opportunity for disruption,” he says.

Successful disruptive endeavours typically require the businesses to adopt different development processes, skills, funding structures and performance expectations.

Businesses also often focus solely on product innovation and neglect to consider other links of the innovation chain, such as customer service, supply chain and distribution, brand engagement, manufacturing processes and even the businesses’ profit models.

For instance, a business that develops a fundamentally different manufacturing process that results in reduced production costs can put itself at an enormous advantage by passing on that saving to its customers. It might make the same product, but because the manufacturing process is so different it has transformed the industry in terms of price expectation.

Research suggests that successful disruptors typically work to bring about change in two or three links in the chain simultaneously. Consider Apple’s innovations in manufacturing, supply chain and customer experience as a good example. The product itself – the iPod – is simply the most visible link in the disruption chain.

Frear says some industries are ripe for disruption and digital technology is driving a wave of disruption through New Zealand as a result.

“Trends such as big data, mobility, gamification and enterprise social software are undoubtedly where the greatest opportunities for disruption lie at the moment, but it is not always obvious how to take advantage of them,” he says.

Businesses in an industry that is subject to a disruptive innovation need to sit back and carefully examine their strategies. Perhaps you want to be the disruptor and lead through the process? Or maybe you want to be a fast follower?

“The best advice is simple – understand the disruption and how it’s likely to change your business and the market dynamics, then develop your strategy accordingly.”

Because disruptive innovations have the potential to yield the greatest return, businesses often make the mistake of thinking that disruptive products and services should lead to immediate market success.

Updated: 4 September 2015