What is the difference between innovation and disruptive technology

A disruptive innovation helps create a new market and value network. The innovation eventually disrupts an existing market and value network.

It is the business model and not the technology that enables and creates the disruptive effect. A key to disruptive innovation is that, opposed to sustaining innovation, it does not take place with established competitors , as Christensen explains in Harvard Business Review.

Specifically, as incumbents focus on improving their products and services for their most demanding and usually most profitable customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price.

Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. An example of disruptive innovation is how when Apple introduced the iPod, the company brought together a strong technology with a groundbreaking business model. From this relatively modest beginning, personal photocopier makers gradually built a major position in the mainstream photocopier market that Xerox valued. A disruptive innovation, by definition, starts from one of those two footholds.

But Uber did not originate in either one. It is difficult to claim that the company found a low-end opportunity: That would have meant taxi service providers had overshot the needs of a material number of customers by making cabs too plentiful, too easy to use, and too clean. But disrupters start by appealing to low-end or unserved consumers and then migrate to the mainstream market. Uber has gone in exactly the opposite direction: building a position in the mainstream market first and subsequently appealing to historically overlooked segments.

These improvements can be incremental advances or major breakthroughs, but they all enable firms to sell more products to their most profitable customers. Typically, customers are not willing to switch to the new offering merely because it is less expensive. Instead, they wait until its quality rises enough to satisfy them. This is how disruption drives prices down in a market. Booking a ride requires just a few taps on a smartphone; payment is cashless and convenient; and passengers can rate their rides afterward, which helps ensure high standards.

Furthermore, Uber delivers service reliably and punctually, and its pricing is usually competitive with or lower than that of established taxi services. And as is typical when incumbents face threats from sustaining innovations, many of the taxi companies are motivated to respond. Readers may still be wondering, Why does it matter what words we use to describe Uber? Applying the theory correctly is essential to realizing its benefits.

For example, small competitors that nibble away at the periphery of your business very likely should be ignored—unless they are on a disruptive trajectory, in which case they are a potentially mortal threat. And both of these challenges are fundamentally different from efforts by competitors to woo your bread-and-butter customers.

As the example of Uber shows, identifying true disruptive innovation is tricky. Yet even executives with a good understanding of disruption theory tend to forget some of its subtler aspects when making strategic decisions. The first minicomputers were disruptive not merely because they were low-end upstarts when they appeared on the scene, nor because they were later heralded as superior to mainframes in many markets; they were disruptive by virtue of the path they followed from the fringe to the mainstream.

Most every innovation—disruptive or not—begins life as a small-scale experiment. Disrupters tend to focus on getting the business model, rather than merely the product, just right.

This process can take time, and incumbents can get quite creative in the defense of their established franchises. For example, more than 50 years after the first discount department store was opened, mainstream retail companies still operate their traditional department-store formats.

Complete substitution, if it comes at all, may take decades, because the incremental profit from staying with the old model for one more year trumps proposals to write off the assets in one stroke.

The fact that disruption can take time helps to explain why incumbents frequently overlook disrupters. Netflix had an exclusively online interface and a large inventory of movies, but delivery through the U. Because disruption can take time, incumbents frequently overlook disrupters. And it got there via a classically disruptive path. But failing to respond effectively to the trajectory that Netflix was on led Blockbuster to collapse.

Consider the health care industry. The product that Apple debuted in was a sustaining innovation in the smartphone market: It targeted the same customers coveted by incumbents, and its initial success is likely explained by product superiority. This was achieved not merely through product improvements but also through the introduction of a new business model. By building a facilitated network connecting application developers with phone users, Apple changed the game.

A third common mistake is to focus on the results achieved—to claim that a company is disruptive by virtue of its success. But success is not built into the definition of disruption: Not every disruptive path leads to a triumph, and not every triumphant newcomer follows a disruptive path.

For example, any number of internet-based retailers pursued disruptive paths in the late s, but only a small number prospered. The theory says very little about how to win in the foothold market, other than to play the odds and avoid head-on competition with better-resourced incumbents. Business Business Essentials. Table of Contents Expand. What Is Disruptive Innovation? Understanding Disruptive Innovation. Requirements for Disruptive Innovation. Disruptive Innovation Vs.

Sustaining Innovation. The Bottom Line. What Is the Meaning of Disruptive Innovation? What Are Examples of Disruptive Innovation? Key Takeaways Disruptive innovation refers to innovations and technologies that make expensive or sophisticated products and services accessible and more affordable to a broader market. Disruptive innovation refers to the use of technology that upsets a structure, as opposed to "disruptive technology", which refers to the technology itself.

Amazon, launched as an online bookstore in the mids, is an example of disruptive innovation. Disruptive innovation requires enabling technology, an innovative business model, and a coherent value network.

Sustaining innovation is the process of innovating to improving products and services for existing customers. Article Sources. Investopedia requires writers to use primary sources to support their work.

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Related Terms Electronic Commerce e-commerce Ecommerce is a business model that enables the buying and selling of goods and services over the Internet. Read about ecommerce benefits and trends. What Is a Startup? A startup is a company in the first stage of its operations, often being financed by its entrepreneurial founders during the initial starting period. Who Is Joseph Schumpeter? Joseph Schumpeter is one of the 20th century's great economic thinkers, best-known for his theories on business cycles and capitalist development.

Market Leader A company with the largest market share in an industry that can often use its dominance to affect the competitive landscape and direction the market takes.

Disruption does not happen overnight; neither does success. There are also no overnight reactions to a market disruption. According to research published by Capgemini , nearly 74 percent of incumbent businesses take over two years to react to unfolding disruption after its occurrence.

Disruptive companies like Netflix did not change the media industry overnight. Netflix survived long enough, staying in business each day, even during lean times, which allowed it to disruptively pivot from its mail delivery strategy to streaming online content. This would not have been possible without technological innovations. Using streaming technology and presenting content in a different way created a revolution in the way that media is consumed, which we are still seeing today.

Although it's less common, you can also disrupt the high end of a market. One of my mentors, Sydney Frank, accomplished a disruptive approach to selling vodka, something that had nothing to do with a technological innovation. Frank realized the viability of a vodka market that over-served consumers' mid-range products. He then created a French distilled vodka that didn't cater to the lower economic class. Instead, Frank catered to the high end of the market with a million-dollar commissioned bottle, in addition to other premium-priced products, forever changing the distribution and sale of vodka worldwide.

I personally would rather be known for my rapid evolutionary disruption in the philanthropy space. We have raised more money with my 50 For 50 campaign and the recent weekend's Unstoppable Gala than in the history of the nonprofit's existence.

I want to be known as a disruptor who is affecting and impacting thousands of people by giving them water, food, financial services and health care to empower them to empower others.