Disruptive innovation has usually been considered by established businesses as an attack that must be met through defensive measures. And indeed, disruptive technologies and business models have toppled many established industry leaders and will likely continue to do so. But the real story behind disruptive innovation is not one of destruction, but of its opposite: In every industry changed by disruption, the net effect has been total market growth. Moreover, disruption can be a powerful avenue for growth through new market discovery for incumbents as well as for upstarts.
There are several keys to the successful navigation of this growth path. The first is recognizing that established players have more time than they think, provided they take off the blinders that keep them from seeing beyond their current customers. Disruption is not an immediate phenomenon — it can take years and even decades before the upstart business encroaches heavily on the established market. The second is finding the new customers who are eager to be served by the disruption. That can happen in a variety of ways, and there is no magic formula. Managerial intuition, knowledge of a variety of markets and serendipity can all play a part. The third key is building an organization that is capable of serving the new customers. It’s essential for companies to abandon their usual ways of dealing with the established market and to let the new customers dictate the business model by which they can be profitably served. The examples that follow suggest how companies can put these ideas into practice. (See “About the Research.”)
1. This correlates with Howard Stevenson’s definition of entrepreneurship as “the pursuit of opportunity without regard for the tangible resources currently controlled.” H.H. Stevenson and J.C. Jarillo, “A Paradigm of Entrepreneurship: Entrepreneurial Management,” Strategic Management Review 11 (summer 1990): 17–27.
2. C. Gilbert and J.L. Bower, “Disruptive Change: When Trying Harder Is Part of the Problem,” Harvard Business Review 80 (May 2002): 94–101.
3. Note that a similar fate likely awaits minicomputer makers that did not learn from their experience in taking on mainframes when desktop machines came on the scene.
4. See C.M. Christensen, M.W. Johnson and D.K. Rigby, “Foundations for Growth: How To Identify and Build Disruptive New Businesses,” MIT Sloan Management Review 43 (spring 2002): 22–31.
5. For example, the Internet allows an advertiser to target men in the 30-to-35 age range who primarily read the sports section with a different ad than it would use for women between 50 and 55 who spend most of their time on the arts section. The advertiser could later follow up the display ad with an e-mail targeted to that specific profile.
6. T.R. Eisenmann, “Internet Business Models: Text and Cases” (New York: McGraw Hill, 2002).
7. C.M. Christensen and G.C. Rogers, “Hewlett-Packard: The Flight of the Kittyhawk,” Harvard Business School case no. 9-697-060 (Boston: Harvard Business School Publishing, 1997).
8. J.L. Bower, “Teradyne: Managing Disruptive Change,” Harvard Business School case no. 9-397-112 (Boston: Harvard Business School Publishing, 1997).