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What disruptive innovation means, and what businesses can do to encourage (or combat) it

Innovation Disruption New Ways of Working

There are some words that we have heard so often now that we don’t dare ask what they actually mean. “Disruption” is one such word. In our magazine, we’ve set out in search of the origin and meaning of this term that has caused such a stir in today’s worlds of finance and culture.

The theory of disruptive innovation has its origin in the book “The Innovator’s Dilemma” by Clayton Christensen. In his book Christensen suggests that, aside from the “classic” approach to innovation, which for example develops existing products and services, there exists also a disruptive form of innovation. This, according to Christensen, follows certain rules: one speaks of disruption if a small business with limited resources manages to displace established, hitherto successful businesses in a given industry.

The “intruder”, armed with new technologies and business models, targets above all customer groups which are overlooked by the industry top dogs. As the quality and attractiveness of the product increases, the customer groups for the once-small business grow larger and larger and suddenly become a threat to previously well-established businesses.

Disruption Success Stories

Oft-cited success stories when it comes to disruptive innovations are AirBnB and Netflix, both companies that, in their own way, have revolutionised their markets: The online booking platform AirBnB has now become one of the largest providers of accommodation worldwide, having done so without owning a single piece of real estate. Netflix radically changed their business model many years ago: at a time when their main business was lending DVDs to customers via post, Netflix took a gamble on streaming services. At first this was only of interest to “early adopter” customers and didn’t present any serious competition to traditional video rental businesses, but with the progressive development of the internet, Netflix suddenly conquered the mass market as well.

However, not every commercial success from the IT industry is necessarily a disruptive innovation. Indeed, in an in-depth article in the Harvard Business Review, Christensen laments that the concept is often misunderstood. For example, Christensen doesn’t see the Taxi app Uber as a disruptive innovation: in the end, this service is aimed at the same customer base as “standard” taxi firms and isn’t targeting a new market. Furthermore, right from the start, the quality of the service wasn’t worse or less developed than standard taxi services, but in fact was just as good, if not better, utilising digital communication channels.

The “Uber Syndrome”

Even if Uber is not typical of disruptive innovations, the fear of market displacement from unexpected sources is now known as “Uber syndrome” in boardrooms.

The fact remains that, in recent years, the world has been moving more and more quickly and new technologies and business models are presenting existing companies with challenges. How should businesses be conducting themselves if suddenly their competition is coming not only from within the same industry, but from start-ups in other industries as well?

It’s also clear that old methods of thinking are unlikely to produce new ideas. Businesses which want to be financially successful in the future, as well as those which would like to become disruptors themselves, require new approaches, new solutions, and above all, audacity.

Spaces that facilitate new ideas

But where should new ideas be coming from? Many traditional workspaces don’t facilitate creativity; on the contrary, they hinder the development of ideas. The author Christoph Keese has discussed this in his best-seller “Silicon Valley”. He analysed at a local level what constitutes the innovation capacity and creative culture in Silicon Valley. He writes: “Innovation originates in the free, uninhibited exchange of people on the smallest level…. People become creative if they are allowed to work professionally as they live privately: closely intertwined, in friendly detachment, in constant dialogue, in a free play of ideas….”

The bottom line: If you are looking for new ideas, you should pay closer attention to their working environment. Whether we’re talking about future-proofing an existing business model or developing an entirely new disruptive business: the good old-fashioned conference room will reach its limits.

More on the subject:

Harvard Business Review: What is disruptive innovation? Clayton M. Christensen, Michael E. Raynor, Rory McDonald