To capture new markets, think disruptive innovation
If the push to innovate wasn’t stressful enough, there’s a new sheriff in town, and it goes by the name disruptive innovation. The explicit goal of disruptive innovation is to unravel your industry and undo everything that’s made you successful.
Disruptive innovation is different from “ordinary” innovation. The goal of plain vanilla innovation is to seek radical improvement in functionality—doing a whole lot more of what worked and piling on to the tried-and-true value proposition. Disruptive innovation goes after a radical reduction in functionality—doing a whole lot less of what worked to deliver a new value proposition. Disruptive innovation actively devalues the very thing responsible for your success; it demands you obsolete what worked. And that’s the rub.
Here’s an example. Your company sells an industrial product that does many good things for many flavors of customer. It’s a capital purchase, but because it’s such a good product, the return on investment is short.
Conventional innovation drives you to improve the product’s existing functions and to add more. Disruptive innovation calls you to strip out all but one function, then reduce the goodness of what remains. This stripping and gutting creates a product that costs 90 percent less, and that, in turn, enables you to sell to a whole new segment of customers. More importantly, it helps you create a whole new market segment that you can have all to yourself. The wonderful part is the new market. The troubling part is what it takes to get there.
Think of the improvement in process simplification. Think of the reduction in floor space. Think of all the new customers. Think of the reduction in profit per unit. Think about how the new product could erode sales of your most profitable product. That’s why it’s called disruptive.
The radical reduction in functionality will transform the product’s size and weight, which will then spin you down the disruptive path of portability. Where the existing product must be installed with a forklift and hard wired to wall power, the new one fits in a backpack. Now, with a price the developing world can afford, the new product can be walked to where it’s needed. Game changed.
However, your engineers will not achieve that result with any of the product and process technologies they currently know. They must create new technologies that will obsolete the ones that made you successful—the same technologies that they had once so painstakingly invented and developed. This will not happen without strong leadership.
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When you reduce the size, weight and functionality of your product, you’ll soon discover that it needs less power. That might lead you to add a battery pack. Now, the product can provide value where it previously could not—where there’s no power. This is another disruption, because your team doesn’t know anything about batteries. You’ve never considered applications where there’s no power, and there are no known customers. Disruption squared!
If you’re thinking “more,” you’re not thinking disruptive. If you want to build on what is, that’s not disruptive. If you want to sell more to existing customers, that’s not disruptive. If you’re thinking about improving your assembly processes, think about reimagining them.
The potential payoff with disruptive innovation is huge, but so is the effort required to make it happen. It’s much easier to wait for your competitors to create disruptive products and take almost all the business from you. You may go out of business, but at least you will be motivated to do disruptive work.
It would be much better to commit to creating new markets in the developing world and improving the lives of others. Think about solving new problems in new ways to make the world a better place.
Hopefully, it’s more exciting than scary.
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