Disruptive innovation

Definition

Disruptive innovation refers to a process by which a smaller company with fewer resources is able to successfully challenge established businesses. This type of innovation often starts at the bottom of the market, targeting overlooked segments, and eventually moves up-market, displacing established competitors. Disruptive innovations can transform industries by creating new markets or altering existing ones, leading to significant changes in program development and fostering a culture of innovation within organizations.

5 Must Know Facts For Your Next Test

1. Disruptive innovation often begins by serving low-end or niche markets that are overlooked by established companies, allowing new entrants to gain traction.
2. As disruptive innovations improve over time, they move upmarket and begin to attract more mainstream customers, which can lead to significant market disruption.
3. Organizations that embrace disruptive innovation are better positioned to adapt and thrive in rapidly changing environments, fostering a culture of creativity and agility.
4. Not all innovations are disruptive; many are sustaining, which means they improve existing products rather than create new markets.
5. The ability to identify and leverage disruptive innovations can be crucial for nonprofits, enabling them to deliver more effective programs and reach underserved populations.

Review Questions

• How does disruptive innovation challenge established organizations in a market?
  • Disruptive innovation challenges established organizations by introducing new products or services that initially target low-end or overlooked segments of the market. These innovations often offer simpler, more affordable solutions that appeal to budget-conscious consumers. As they improve and gain acceptance, they gradually move upmarket, threatening the profitability and market share of established companies that may struggle to respond effectively.
• What role does disruptive innovation play in program development within nonprofit organizations?
  • Disruptive innovation plays a vital role in program development within nonprofit organizations by enabling them to create new solutions that address unmet needs in their communities. By focusing on underserved populations and leveraging innovative approaches, nonprofits can develop programs that are not only effective but also cost-efficient. This leads to greater impact and helps organizations adapt to changing social landscapes while remaining competitive in their mission-driven efforts.
• Evaluate the implications of fostering disruptive innovation in nonprofit organizations and how it could reshape their strategies for achieving social change.
  • Fostering disruptive innovation within nonprofit organizations can profoundly reshape their strategies for achieving social change by promoting an environment that encourages creativity, experimentation, and responsiveness. As these organizations embrace new technologies and innovative approaches, they can better address complex social issues and mobilize resources more effectively. This shift not only enhances their ability to deliver impactful programs but also positions them as leaders in driving systemic change within their communities and beyond.

Related terms

Sustaining Innovation: Sustaining innovation refers to improvements or advancements made by established companies that enhance their existing products or services, often catering to their most demanding customers.

Market Penetration: Market penetration is the strategy of increasing a company's share of existing markets through innovative products or services that attract consumers away from competitors.

Value Proposition: Value proposition is the promise of value to be delivered to customers, highlighting the benefits and features of a product or service that make it attractive compared to competitors.