The disruptive innovation was created in the mid-1990s by Clayton Christensen, and it has been a buzzword ever since, this described the new methods for new entrants of a market to disrupt the established businesses. According to Clayton Christensen, disruptive innovation is the process that a smaller company, usually with few resources, can challenge an established business often called an “incumbent” by entering the market and continuing to move up-market. This disruption process traditionally happens in various steps, such as:
- Businesses known as “incumbent” are innovate and develop their products or services in order to appeal to their most demanding and profitable customers, ignoring the needs of those down market.
- “Entrants” target the ignored market segment and gain market share by targeting the needs at a reduced cost compared to what is offered.
- Incumbents do not respond to the new entrant, continuing to focus on their most profitable segments.
- Entrants with time move toward the top of the market by offering solutions that appeal to the incumbent’s “mainstream” customers.
- Once the new entrant has begun to entice the incumbent business’s mainstream customers at a high volume, disruption has occurred.
Disruption comes in two main forms: Low-end disruption and new-market disruption. I will briefly explain low-end disruption and its strategic value for marketers. Low-end disruption refers to businesses that enter at the bottom of the market and serve customers in a way that is just “enough” for consumers. These are typically the lower profit markets for the incumbent, and thus, when these new businesses enter, the incumbents move further to the top of the market. In other words, they make their focus on the greater profit margins within the market. Whether your business is an incumbent defending its market share/profit or your business is a new entrant into the market trying to grow your market share, understanding disruptive innovation as a process will offer you irreplaceable insights that you and your marketing team can utilize to incorporate in your marketing efforts, marketing goals, marketing plans, and ultimately your organizations overall business plan.
By: Brandon Diaz