A new product or a service becomes disruptive when it intersects and exceeds the current market growth through its accelerated performance over a short period of time. Disruption will either trigger a change to the current market or entirely creates a new market. ‘Disruptive innovation’, first introduced by Joseph Bowyer and Clayton Christenson 20 years back in an HBR article is the buzzword now.
Disruptions caused by innovations can be broadly categorised as briefed below in simple terms.
Value based disruption - is where the market is not ready to pay extra for the innovation however provides a good entry for the Start-up into the market. One such classic case in the recent times is Zenefits which has developed a unique business model where it provides cloud based HR system for free to small and midsized firms, while it generates revenue by playing the role of health insurance broker (Insurance broker market is multi billion in the US) for its customers and receives commissions from insurance companies.
Transformation based disruption - is where the market get direct hard dollar benefits by embracing the innovation, the case where the innovation happens within the current market. Workday is a firm that provides SaaS (cloud based ondemand HR software) for various firms and creates a tough competition to the existing market leaders, Oracle Peoplesoft in particular. Customers like new firms can readily get the service without needing to invest in capital spend on hardware or software. Customers who use On premises software too are looking at options of migrating into Workday instead of upgrading the current versions, as a cost effective way.
Out of the box disruption - is where the innovation creates a totally new market that was never served by any firm at all. Wearable gadgets are a good example where a new market gets created with several players gearing up to grab the market share. Customers get new products they have never seen before nor produced by any firms earlier.
Behavioural disruption - is where an out of the box behaviour by an individual or group of individuals (not a product or a service) causes impact to the mainstream market. Typically seen in political or sports arena where a small party/leader or a team/player gets into limelight and completely steal the show through their unique approach. Sometimes, this creates a positive social impact too. Very recent example is how volunteers created a mass movement in Chennai flood emergency response where it all started with a few and ended up with several hundred people extending help in and around their community, a never seen before social behavioural change.
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