Disruptive Innovation Essay PDF

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Disruptive Innovation Introduction The following discussion attempts grasping the concept of disruptive innovation, dealing with elements like differences between disruptive innovation and disruptive technologies, and identification of two key sub-classes of disruptive innovation: (i)Business- model innovation, and (ii) radical product-innovation. It also highlights factors which makes Airbnb a classic example of Disruptive Innovation,

Definitions and Business Case Coined originally by Christensen's (1997), disruptive technological innovation refers to new technologies that significantly modify the way a market or industry operate, such as Personal Computers displacing typewriters, or Smartphones replacing Cell phones. It is in contrast to sustaining technologies, which leads to incremental improvements in prevailing technologies. Over the last two decades, academics and managers tend to treat all different types of innovation under one umbrella term, mistaking disruptive technologies with disruptive innovation, A recent assessment of the topic Christensen et al (2015) discusses how the concept has been misapplied in inaccurate contexts, reminding how “disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. “ As such, disruptive innovation targets consumers currently not dealt by the existent players, as opposed to the sustaining innovation. In addition, Markides (2006) classifies disruptive innovation into two following categories: Business Model Innovation: “Business-model innovation is the discovery of a fundamentally different business model in an existing business” Markides (2006) – such as Airbnb modifying the provision of temporary accommodation, and Amazon offering a new way of bookselling. Radical Product Innovation: New products such, the Ford T in 1908 and VCRs in 1980s are disruptive to both consumers and producers as the offered value prepositions greatly transform consumer habits and behaviours

Understanding Disruptive and Business-Model Innovation: The case of Airbnb Vs Uber Christensen et al (2015) dismissed Uber as a genuine form of disruptive innovation as it doesn't meet the two basic characterizes of disruption: (i) dealing with the low-end or new-market footholds and (ii) initially failing to acquire customers for being “inferior” and then raising quality to address this. Uber started off as high-quality alternative to taxis: competing with the existing customers at the top of the market. The prospect of booking a taxi while being at home was regarded as a superior service rather than inferior. Uber is regarded as a sustaining innovation for offering incremental improvement to current business-model and targeting customers already engaged by the current players.

Airbnb, on the other hand, began things off with offering travelers a “couch” in someone’s living room, targeting savvy travelers, backpackers- and not “conventional” tourists, already engaged by chains of hotels (Guttentag, 2015). The cost-effective business-model where Airbnb doesn’t own a property allowed offering value proposition to low-end customers. It did then, however go on to improve the quality of the service, competing directly with the hotels (which are restricted by costly, asset-intensive business-models.) Airbnb started from the bottom, and worked up through the market, hence is a fine example of disruptive innovation.

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It is imperative to correctly identify what is an actual case of disruptive innovation, as lack of clarity would lead managers taking wrong decisions and employing inapt tools/strategies. Also for the same reasons, it is crucial to understand that not all disruptive innovations are same. A business-model innovation is fundamentally different from a radical product innovation. Disruption is a process, not merely an event (Markides, 2006). The disruptors evolvefor instance, the mainstream computers gradually taking the shape of current computing (Christensen et al, 2015) The importance of turning innovation into a value-creating, financially-feasible reality is emphasized again. The significance of business-model innovation is stressed as well. No matter how radical a product is, it requires a feasible business model to succeed....