Updated on: 17.05.2022
Innovation Management | Service Design
Disruptive innovations are characterised by a high innovation return in a short time.
What is a disruptive innovation?
New technologies or business models can change user and user behaviour very quickly, so that within a very short time new markets are created or established market participants are displaced in seemingly saturated markets. In retrospect, such innovations are often described as disruptive. The emphasis here is on "in retrospect", as success can only be measured in retrospect. Even if one or the other start-up likes to see it differently, a solution that is contrary to the previous approach alone does not constitute a disruptive innovation. Simply put, an innovation is disruptive if it is very successful in a short period of time.
Clayton Christensen 's model of disruptive innovation describes disruption as a process in which a small company displaces established market players. However, his widely cited article also points out that rapid growth is not the sole criterion in his view, which is why he does not classify the company Uber as a disruptive innovator. According to the theory, disruptors start by targeting low-end or unserved consumers and then move into the mainstream market. Thus, if an innovation targets an already existing established market, the criterion of disruption is not met.
But large companies can also break new ground and rapidly change the market. Above all, it should not be forgotten that hyped start-ups have the financial power to realise their idea, which can dwarf the development budget of a global player.
What characterises a disruptive innovation?
As already explained at the beginning, the classification as "disruptive" is primarily dependent on the disruptive spread and less on the level of innovation. Even small changes to the existing can have a disruptive character. It is therefore advisable to keep all innovation dimensions in mind and not to focus solely on technological innovations. This issue has already been explained in our article on the service design of service packages.
It does not do justice to the nature of disruptive innovations to speak only of technology innovations in this context. Processual or organisational changes can also literally turn the world upside down.
Business model innovations
Can disruptive innovations be systematically generated?
Although one hears from time to time about people who are supposedly working on disruptive technologies that they want to bring to market, this is more likely to be seen as self-marketing. Of course, disruptive innovation can come from a new technology, but even with technological sophistication, commercial success is often lacking. Companies that work to develop a climate of innovation that is open in many directions certainly have a better chance. It is important, however, to promote both team and individual innovation, as history has shown that the sparking idea often comes from "just" one person.
Disruptive innovation - How do you create the conditions?
As a rule, the speed at which innovation spreads is always high when it hits a decisive nerve on the user side. If we leave aside the price screw, which could of course also boost the speed of diffusion, there is still a wide field that can be ploughed. It doesn't hurt to take a look at classic market field strategies to get an initial indication of where to look for the groundbreaking idea.
Especially when the starting point is not a hip start-up, but an existing company with an established business model, this approach lends itself well. Now, this textbook approach may not seem exactly innovative, but applied with a fresh mind, an "aha moment" can quickly arise, which is articulated with the question: "Why didn't we think of that earlier? So let's take a look at this from just that angle.
Disruptive market penetration
The sales machine is running, the margins are stable and the last holiday is discussed with the customers before new orders are placed. New customers are welcome, as long as they bring high order volumes directly or alternatively with the sentence: "I'll send you the price list sometime." put off.
In the days when presence fairs were still in vogue, companies could always be easily recognised at this stage by a large catering area, which, however, could only be entered by invitation. Nowadays, uninviting websites are a good indicator. Even if your company doesn't tick like this, but new customer acquisition still leaves a lot to be desired, it's time to think about innovative approaches that aim at higher market penetration.
Especially since a healthy customer base already exists, incremental improvements can be quickly tested, validated or discarded before a large marketing campaign is set up to attract new customers. What is often forgotten in the B2B sector is also the fact that marketing measures themselves can have an enormous innovative power without requiring any product or service change.
The fundamental question in this context is not "Where to play?" but "How to win? The subject of the innovation workshop is therefore the touchpoints at the beginning of the customer journey and the task can be formulated in much greater detail, which increases the chances of success enormously. Competitor analyses do not sound innovative at first, but they can be the starting point for chains of associations at the end of which lies the decisive comparative advantage. Higher market penetration can be achieved through measures in both the sweet and the sour spot. The latter, however, would be more like catching up with an innovation lead.
Disruptive market expansion
Now many will say that the regional expansion of the sales market is really not innovative, but only requires an ROI analysis. This only applies if the existing business model is to be copied 1 to 1. However, with a little creativity, new digital business processes or additive manufacturing methods have the potential to level some of the economic market entry barriers of the past. The workshop on innovative market penetration will continue after the coffee break. The focus of attention is now on the previous obstacles, which first need to be clearly identified in order to be able to develop targeted innovative measures. In any case, employees should also be added to the supply chain management and other operational areas.
Disruptive upselling or product range expansion
To a not inconsiderable extent, a disruptive speed of expansion is achieved by combining or extending services. There are actually no limits to originality and ingenuity, and apparent trivialities develop into game-changers. In any case, however, it is important not to create a boomerang effect. By this I mean developing combinations of services that generate short-term sales growth at the expense of long-term margin development. This can happen if the innovative additional service acts as a kind of gimmick that quickly generates habituation effects. Interactions in the portfolio must therefore be considered in different time dimensions.
Many companies are currently developing new digital service components without a clear objective in relation to the current range of services. Although everyone talks about system selling, only very few use service design methods to create innovative system structures. As already described in my article on modularisation in service design, structural optimisation is a decisive innovation lever.
What are fixed, what are optional components? Can scalable add-ons be defined that create new incentives?
Those who really master the topic of structural variants, i.e. design structures with different fixed and variable areas, will be able to work out significant competitive advantages, especially in combination with digital performance components.
Disruptive innovation through diversification
Creating completely new sales markets with innovation management methods is certainly the most ambitious task. This cannot be solved so easily through acquisitions, which is why it is not a good idea to hand this field over to the M&A department alone.
Rather, what matters is an open culture of innovation that also embraces trends and ideas that are not directly related to the current portfolio.
In my professional career so far, I have often experienced that the word process is understood as the exact opposite of creativity and a pragmatic approach. However, I understand this to mean creating a framework for action that supports the targeted transformation of ideas into innovations. However, it is by no means true that the introduction of an innovation process also makes one innovative.
The innovation process can be roughly divided into three phases, and it is only at the end that at some point the realisation follows whether the supposed innovation really had a disruptive effect. In the concept phase, the focus is on generating and evaluating ideas.
If promising potential is seen, concrete steps are taken in the implementation and realisation phase to bring the idea to market maturity.
However, with each level of concretisation, the acceptance filter also becomes narrower and successful innovation management can also consist of rejecting ideas again and thus releasing the innovative power once more.
The marketing phase then shows whether the idea also becomes innovation, and history is full of examples that show that among those who have solved the problem technologically, only some with a good marketing concept succeed.
Why only sustainable innovations can be disruptive?
Sustainability goals will have an increasing influence on investment decisions, which in the foreseeable future will reach the point where new products and services can only be successfully marketed if sustainability is proven. Sustainability is not to be confused with some certification label, but the innovation performance of a company must contribute value to the entire ecosystem that is greater than its own direct return.
Sustainable innovation principles
Close the loop
Is the innovation based on principles of the circular economy?
A disruptive innovation should last a long time.
Does innovation contribute to optimising resource consumption?