Disruptive innovation

Definition

Disruptive innovation refers to the process by which a smaller company with fewer resources is able to successfully challenge established businesses. This often involves introducing products or services that are simpler, more affordable, or more accessible than existing offerings, ultimately reshaping entire industries. It highlights the importance of understanding market dynamics and consumer needs in a rapidly changing global environment.

5 Must Know Facts For Your Next Test

1. Disruptive innovations often start in niche markets that are overlooked by larger companies, eventually moving upmarket as they improve.
2. Successful disruptive innovations can lead to significant shifts in consumer behavior and expectations, altering competitive landscapes.
3. The concept of disruptive innovation was popularized by Clayton Christensen in his book 'The Innovator's Dilemma,' highlighting its relevance in technology and business strategy.
4. Industries such as retail, transportation, and telecommunications have experienced disruption due to innovations like e-commerce, ridesharing apps, and mobile communication.
5. Companies must remain vigilant and adaptable to anticipate potential disruptors in their markets to avoid being outpaced by emerging competition.

Review Questions

• How do disruptive innovations challenge established companies in various industries?
  • Disruptive innovations challenge established companies by introducing products or services that initially target lower-end or niche markets. These innovations often provide simpler, more affordable options that attract customers who are dissatisfied with current offerings. As these disruptive entrants improve their products over time, they can eventually appeal to the mainstream market, putting pressure on established firms to adapt or risk losing market share.
• Discuss the implications of disruptive innovation for multinational management and strategic planning.
  • Disruptive innovation has significant implications for multinational management as it requires organizations to rethink their strategic planning processes. Companies must continuously monitor global market trends and technological advancements to identify potential disruptors early on. This proactive approach can lead to opportunities for collaboration, partnerships, or even acquisitions of innovative startups, enabling established firms to stay competitive in an evolving landscape while managing risk across diverse markets.
• Evaluate the long-term impacts of disruptive innovation on emerging technologies and global business strategies.
  • The long-term impacts of disruptive innovation on emerging technologies and global business strategies include fostering a culture of continuous innovation within organizations and reshaping competitive dynamics across industries. As businesses adapt to disruptions, they may shift their focus toward developing new technologies that address changing consumer needs. This evolution not only creates opportunities for growth but also encourages collaboration among firms globally, leading to increased competition and more innovative solutions that can transform entire markets.

Related terms

Sustaining Innovation: Sustaining innovation refers to improvements made by established companies to enhance their existing products or services, typically aimed at higher-end customers.

Market Disruption: Market disruption occurs when new entrants create significant changes in an industry, often leading to the decline of established players.

Value Proposition: Value proposition is the promise of value to be delivered to customers, outlining how a product or service meets their needs better than competitors.