Today’s business vocabulary includes several words and phrases that people tend to use to sound cooler than they actually are. Think of tech-savvy, digital transformation and perhaps the most famous of them all: disruptive innovation. The term disruptive innovation seems to be thrown around whenever someone speaks of the slightest shake up in business, but people please, you are better than this. Let’s set some things straight and explain to you why you better start getting on top of your vocab.

Let’s Freshen Up: What Is Disruption ?
The theory of disruptive innovation was introduced in the 90’s by Harvard professor Clayton M. Christensen, outlining that disruption occurs when a smaller company with fewer resources successfully challenges an established business. This knowledgeable fellow is considered the disruptive innovation guru and to be fair, we can see why.

“Once the product or service is of equal or higher quality than how the bIg guys used to do it, basically any customer from any segment will gladly switch to the cheaper version.”

So, what Christensen means in normal English, more or less, is that disruption can occur in two ways. 

Option one is  that truly disruptive startups (mostly) first serve smaller, more price conscious customer segments, the so called low-end of a market.
At this stage they are not taken seriously by the traditional companies which provides the startups with space to experiment and develop the best possible version of the product or service. Once the product or service is of equal or higher quality than how the big guys used to do it, basically any customer from any segment will gladly switch to the cheaper version. Naturally, this version is likely to be provided by the start-up. Consequently, user volumes will skyrocket and voilà, disruption will take place. 

Option two is that disruptors create entirely new markets.
This means that they make consumers want to do or have things that the consumers did not even realize they wanted. Like what? Well, the PC might be the most straightforward example. Your grandma did not know she wanted one, but look who is your biggest Facebook fan now!

Sounds easy, right? Well, it is not. It is all very complicated because theories from Harvard professors usually are. If you are interested in the science behind the complexities of disruptive innovation, we suggest you Google this Christensen guy and get your reading glasses out. If you are the efficient type of person we suggest you focus on the practical benefits of understanding the essence of disruptive innovation.

Benefit 1: Understanding Disruption Keeps You Awake
As a business owner, knowing how to spot a disruptive innovation could prevent pretty nasty stuff, especially if you are among the originals in the business. Let’s imagine a universe where the Marriotts and Hiltons of the hospitality industry would not have laughed at Brian Chesky explaining how he put air mattresses in his San Francisco apartment to welcome strangers in to his flat. While those luxury chains were busy filling minibars and putting chocolates on their customers’ pillows, Chesky managed to build a company you might have heard of, called Airbnb. Airbnb disrupted the travel industry and Chesky, being the CEO, is now worth a modest 3.7 billion USD. We wonder if Marriott and Hilton are still laughing. If they are, they have a great sense of humour. The point is, stay alert folks, stay alert. Do not just mind your own business. 

Benefit 2: Understanding Disruption Makes You Credible
Uber is among the largest disruptors of our Millennial era, right? No, not right. According to our friend Christensen, if you apply the theory correctly, you will learn that Uber is not so disruptive after all. Uber did not come from a low end of the market neither did it create an entirely new market. Instead, it started targeting the normal folks who were already using taxi services. This does not mean that Uber is not innovative, though. Uber surely is. But an innovation is not necessarily disruptive. Whether any disruption is innovative? That we will let you figure out by yourself. Being able to have discussions about these kinds of questions with people that matter, will make you a whole lot more credible than randomly shouting “disruption” every half a minute.

Benefit 3: Understanding Disruption To Protect Your Image
Aspiring to become a disruptor? Let’s face it, being able to call your company a disruptor would be pretty awesome. However, the image of disruption is starting to change rapidly now. The term “disruption” has become its own biggest enemy, as it has become so mainstream that people might have trouble taking you seriously. Remember when your college teachers told you to think outside the box? Right, chances are you feel an urge to vomit whenever you hear someone talking about that box now. Perhaps this fate is awaiting disruptive innovation too. Those are things to consider before you label your company.

Got different ideas? Feel free to share them!  

About Amstel Lab
Amstel Lab partners with start-ups and scale-ups to commercialize your business. On the back of our experience, we have developed the unique Amstel Lab method: a tailor-made approach to maximize success. We test your markets, refine your product, innovate your commercial approach and execute your strategies. Any good idea is worth seeing through.

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