Applying the theory of disruptive innovation to your startup strategy
By Jason Bell | Clayton Christensen wrote The Innovator’s Dilemma in 1997. In the book, he coined the term ‘disruptive innovation.’ Since then, the term has entered the popular lexicon and became major buzzwords. The popularity of the idea suggests value, but society certainly uses it loosely, which sometimes leads to confusion. To properly apply Christensen’s insight, startup leaders must first understand it and where it came from.
The best illustration of Christensen’s concept of disruptive innovation is the case study he used to develop it. It details how the disk drive industry came to be dominated by a group of small, innovative firms as opposed to the established ones. The central point Christensen makes is that big firms ignored the innovative technology of newer firms because of the latter’s inferior performance at the time. Eventually, the technology evolved to become superior to existing technology, allowing newer firms to take over the market, as the incumbent firms were too far behind to catch up by that point.
Generally, disruptive innovations are new technologies that start by having worse performance than existing technologies, but eventually, come to dominate the market. Christensen’s theory is useful for academics, entrepreneurs, and managers. For academics, it solves the puzzle of why and how dominant firms with the best technology can fail to newcomers within a short period. For entrepreneurs, it provides a framework for attacking incumbent firms and technologies. For managers, it describes a threat and how to overcome it.
However, there exist some problems. First, while the theory of disruptive innovation is useful for making sense of firms that have already disrupted, it is much harder to apply the concept before a disruption. Second, big firms are not as clueless as the disk drive case study suggests, and since the notion of disruptive innovation has spread, they’ve become ever more careful.
Concerning the first problem, it is important to avoid concluding too much from past disruptions. If you only look at the successful disruptions in your industry, you may misjudge the reason for the success and waste time trying to replicate their approach. Rather than copying current or recent disruptions, try to look ahead to where the industry is going. Find the people on the frontier. You can run much faster with your eyes ahead rather than behind.
There are several ways to stay on the frontier. Follow academic literature about the industry, read blogs, and pay attention to investment decisions and research and development. Pay more attention to industry employees than customers. Talking to customers will reveal information about current technological offerings, but it won’t tell you where things are going next.
The best chance of success is when you know something other people don’t. If the industry is ignoring a new technology because of a particular problem, but you know how to solve that problem, then this opportunity will reduce the competitive pressure dramatically.
The second problem with the way most people understand disruptive innovation is that they believe big firms are destined to fail, as long as new firms are nimble and clever. We all love stories of success against the odds, the small overcoming the large, and the new replacing the old. However, the desire for the underdog to come out on top can leave us susceptible to misleading perceptions.
As it turns out, research suggests that big, established companies usually produce the breakthrough technologies that become dominant, not the small newcomers. This is partly because the established players are already at the frontier of the technology, and they are always on the lookout for who and what could disrupt them.
One way for a small newcomer to improve the odds is to leverage its strengths, such as increasing the pace of decision-making, development, and integrating customer feedback into the product. Big firms have considerable advantages regarding resources, knowledge, and the ability to execute a vision at a high-quality standard. However, they are slow to approve major changes, adopt an unproven technology, take innovations to the market, and feedback is often not integrated into the product quickly.
If a startup can get to the frontier of an industry or technology and can leverage its strengths as a small newcomer, it has a better chance of finding a foothold and eventually disrupting the incumbents. While the odds are not as good as some people think, it is certainly possible to take disruptive innovations to market. The rewards of doing so, for startups, customers, and society are well worth the effort.
About the Author
Jason Bell is a researcher at Saïd Business School, University of Oxford and the Co-founder of Novaline. Novaline builds tools and offers services to improve ideation, prototyping, and manufacturing of physical goods.