Influential innovation theorist and Harvard Business School professor Clayton M. Christensen first introduced the notion of disruptive innovation in his 1995 book, The Innovators’ Dilemma. At the crux of Christensen’s argument is the dichotomy between sustaining and disruptive innovations. Sustaining innovations “tend to maintain a rate of improvement; that is, they give customers something more or better in the attributes they already value.” Disruptive innovations, on the other hand, “introduce a very different package of attributes from the one mainstream customers historically value, and they often perform far worse along one or two dimensions that are particularly important to those customers.”
Typically, a sustaining innovation will take an existing technology and improve it, either incrementally or drastically, and will provide customers with a better, more efficient or cheaper version of the existing service or product. This typically means that a company that is the leader in that particular arena will most likely retain its dominant position in the market.
Disruptive innovations, on the other hand, will often have characteristics that traditional customer segments may not want, at least initially. Such innovations will appear as cheaper, simpler and even with inferior quality if compared to existing products, but some marginal or new segment will value it. Hence, disruptive innovations result in the formation of entirely new markets, which in turn are most often accompanied by the emergence of new market leaders.
This may appear contradictory at first – it seems incongruous that a new product of inferior quality could or would actually overtake an existing one that already functions well. But the disruptive element may not always arise out of a technological breakthrough but may rather be the effect of some functional repackaging. For example, the mp3 format is recognized as being inferior to analog sound recordings in terms of quality, but the convenience of saving space and compressing large amounts of data into a tiny portable device overrides the inconvenience of a loss in sound quality. However, even once the mp3 technology was invented, it took a while before it became the norm for music players – it took the genius, highly functional and user-friendly design of the Apple iPod – before the portable mp3 player became truly successful. The introduction of mp3 might not mean the end of all analog recordings – vinyl records, cassettes and CDs – but it certainly reduces those markets significantly and allows for the emergence of new companies as the dominant market leaders.
So how can established companies safeguard themselves against this decay, or rather, this slow move into obsolescence? The multi-layered answer to this large question lies in constantly searching for new developments, being able to predict which of these will become a disruption, and in identifying new markets for these disruptions. This, in great part, means experimenting and taking risks, but it also means ignoring your existing customer base, perhaps the most difficult thing for a well-established company to do, and therefore is also the main reason why many companies fail to maintain their market dominance.
Read Clayton M. Christensen’s seminal article, “Disruptive Technologies: Catching the Wave” here.