an introduction to disruption

breadandpomegranates.com I guess I have always been disruptive, after all I love stories of small beginnings that transform whole industries (Facebook for example). I love reading about musicians and artists that did something innovative that challenged the established methods and eventually became accepted and part of what was considered normal. Although I was fascinated by reading about and hearing these stories I never made the connection that this told me something important about where I should be placing myself. I didn’t realise that my desire to take on the establishment to shake up whole industries and invent new ways of doing things wasn’t just a hobby, or an interest with no application. I also didn’t recognise that not everyone is interested and fascinated by these stories. I failed to see these as important clues about where I should be standing and the environments I should be working in.

As part of my current reflection on what my passions are and where my energies should be focused, my professional supervisor suggested I explore disruptive theory.

My eyes were opened to my fascination with innovation, disruption and future trends.

What Clayton Christensen describes in his disruptive theory resonates with something deep within my questioning, future minded self. As I have been out and about meeting with people I have found that many haven’t come across disruptive theory before and that disruption and the related term innovation have become overused jargon words that have moved from the management literature into common usage. In fact I am almost reluctant to use the term ‘disruptive’ as it is becoming so commonly used and often used without a deeper understanding of disruptive theory that it is on the edge of becoming meaningless. With this in mind I thought a summary of my understanding of disruptive theory so far may be helpful.

Disruptive innovation or disruptive theory as it is sometimes referred to was introduced by Clayton Christensen, in 1995. Although before that some of the core ideas were floating around in the work of Marx (creative destruction) and Schumpeter had started applying these to economic change. As it began disruptive theory described the process by which smaller businesses (with fewer resources) were able to challenge well established businesses, with technological innovations that expanded existing or created new markets. Since it’s early days in the technological sector the theory has been applied to other business environments and higher education.

My understanding of the theory is that as established companies grow they focus on their current customers and because innovations happen quicker than customer demand they often end up exceeding the needs of their existing customers and ignoring the needs of other customers. New companies are then able to come in aiming at customers that the established company has ignored but keep their products or services simple, their costs down and their pricing low. The theory describes the process of disruption that occurs as the new company moves (this can occur slowly) it's target market upwards. They improve their products or services and eventually provide what the established companies' customers want but often at a lower price. Once the customers of the mainstream company begin adopting the new companies (often referred to as disruptors) products then disruption has occurred.

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While established companies are busy focusing on making their existing products better and serving their existing customers, new companies can come in and create a market where none previously existed. Innovation itself is not the same as disruptive theory, both new companies and established companies can innovate. The theory describes the process (which can take some time) by which the new company disrupts the growth curve of the established company. It is common at the beginning for disruptive innovations to be considered inferior by the customers of the established companies.

New disruptive companies often have different business models to that of established companies, and to get the business model right is crucial for their success, they often need the flexibility to experiment with new products or services that will appeal to non-consumers and create a ‘foothold’ market. There is usually lots of competition in a foothold market and this drives the new companies to keep their costs down and forces them to improve their product and try and win customers who are willing to pay more, as there is more profitability in moving upmarket.

Established companies face towards the needs of their existing customers who provide the resources the firm needs to survive, this limits their ability to be flexible and becomes solidified in their internal processes. Which in turn makes it difficult for them to respond effectively to potential disruption. A classic example of disruption is the story of Netflix who although started out offering postal deliveries of DVDs moved to online streaming in a way that challenged existing DVD rental stores leading to their eventual demise. Of course we more often hear about the disruptive success stories but there are stories that not successful too.

I enjoy thinking about the future, trying to predict what will happen around the corner, or what the next big thing will be. Disruptive theory gives us some useful frameworks both for established organisations as they try and recognise and respond to change in their sector and in new organisations who try and find new ways of being and form structures around the values and needs of the future.

It would be great to hear from you, do you love disruption, or are you challenged by change?