October 10, 2022
Suppose your business operates in either the auto (e.g. internal combustion engine vs hybrid vs electric), banking (e.g. traditional banks vs fintech), entertainment (e.g. cable vs streaming vs satellite), manufacturing (e.g. traditional vs agile vs additive) to name only four. In that case, you probably know or have heard about disruptive innovation; why? Because your industry may have already been disrupted or prone to disruption owing to selective iterations of existing, emergent, or future innovations, including but not limited to radical/breakthrough, architectural, accelerated, modular, and Clayton Christensen’s disruptive innovation. Does it mean that every traditional incumbent is at risk of being disrupted by some small, obscure, under-resourced company or another traditional incumbent? Not if you, the disruption threatened traditional incumbent is Dow Corning whose forward-thinking, proactive, agile, and adaptive approach enabled it to escape turmoil by becoming the disruptor. And thus effectively thwarted the challenges posed by its relatively small low-cost rivals and/or large supplier rivals in the standard silicones business.
Dow Corning was known for its innovative high-quality products supported by best-in-class service offerings for which customers paid premium prices. However, in the late 1990s, commoditization of the standard silicon business presented existential threats to the company’s core business which had slowed dramatically. Confronted with declining performance resulting from 1) customer defections to smaller local suppliers, 2) improved operating efficiencies of global and local rivals to undercut their standard silicon products business, how did the company respond? Well, Dow Corning embraced and applied the theory of disruptive innovation and technological leadership to develop high-quality standard silicon products that were competitively priced and successfully engineered a turnaround in the company’s fortune.
The theory of disruptive innovation introduced circa 30 years ago by Harvard Business School’s Professor Clayton Christensen is a powerful tool for predicting when an industry is ripe for or susceptible to disruption and which entrants are likely to be successful disruptors. It is a theory that attempts to explain innovation-driven growth and has been touted as a springboard for growth by large and small entrepreneurial entities such as Dow Corning, Intel, etc. Disruptive innovation is largely misunderstood and has been widely used to describe the process wherein successful incumbents stumbled by relatively new innovation-driven entrants.
Disruptive innovation is not necessarily about extracting gains from first-mover advantage. In the business sense, disruption is the process in which a resources deficient entity [generally a “tiny” company] successfully challenges its larger traditional incumbent(s). These disruptors succeed by initially seeking out and meeting the needs of the underserved/fringe/overlooked customers and the products offered initially are deemed inferior by most of the incumbent’s customers. In other words, the lower price is not sufficient to get mainstream buyers to switch. As the disruptors then offer the successive iterations of products with rising quality enough to satisfy these mainstream customers of the traditional incumbents, these customers will be happy and content to buy the products at lower prices. This is fundamentally how disruptive innovation unfolds and how it forces prices lower so that more of a nation’s population can afford the products they need to enrich their lives.
1965 Toyota Corolla: This is disruptive innovation
2021 Lucid Air: This is not disruptive innovation
Yes, Clayton Christensen is right: Innovation is the answer.
In the fast-changing and hypercompetitive 21st-century global business environment, the best led, managed, and future thinking organizations constantly scan the external business environment for several purposes. From this author’s perspective, an organization’s ability to detect if its industry is about to and/or undergoing disruption would strongly influence its long-run survival. According to the Clayton Christenson institute, “Disruptive Innovations are NOT breakthrough technologies that make good products better; rather they are innovations that make products and services more accessible and affordable, thereby making them available to a larger population.” Consequently, Tesla and Uber, may be deemed “breakthrough innovations” but should not be regarded as disruptive innovations. Now, getting back to the question of what are the indicators, questions, or checkmarks a company can investigate to determine a game-changing innovation(s) may/will disrupt its industry? There are several indicators/questions, but the four relevant/critical ones are 1) does the invention meet a fundamental need? 2) is it less expensive/affordable and more accessible? 3) is the invention easy to use? 4) to drive adoption of the invention, is the right ecosystem in place?
Suppose your business operates in either the auto (e.g. internal combustion engine vs hybrid vs electric), banking (e.g. traditional banks vs fintech), entertainment (e.g. cable vs streaming vs satellite), manufacturing (e.g. traditional vs agile vs additive) to name only four. In that case, you probably know or have heard about disruptive innovation; why? Because your industry may have already been disrupted or prone to disruption owing to selective iterations of existing, emergent, or future innovations, including but not limited to radical/breakthrough, architectural, accelerated, modular, and Clayton Christensen’s disruptive innovation. Does it mean that every traditional incumbent is at risk of being disrupted by some small, obscure, under-resourced company or another traditional incumbent? Not if you, the disruption threatened traditional incumbent is Dow Corning whose forward-thinking, proactive, agile, and adaptive approach enabled it to escape turmoil by becoming the disruptor. And thus effectively thwarted the challenges posed by its relatively small low-cost rivals and/or large supplier rivals in the standard silicones business.
Dow Corning was known for its innovative high-quality products supported by best-in-class service offerings for which customers paid premium prices. However, in the late 1990s, commoditization of the standard silicon business presented existential threats to the company’s core business which had slowed dramatically. Confronted with declining performance resulting from 1) customer defections to smaller local suppliers, 2) improved operating efficiencies of global and local rivals to undercut their standard silicon products business, how did the company respond? Well, Dow Corning embraced and applied the theory of disruptive innovation and technological leadership to develop high-quality standard silicon products that were competitively priced and successfully engineered a turnaround in the company’s fortune.
The theory of disruptive innovation introduced circa 30 years ago by Harvard Business School’s Professor Clayton Christensen is a powerful tool for predicting when an industry is ripe for or susceptible to disruption and which entrants are likely to be successful disruptors. It is a theory that attempts to explain innovation-driven growth and has been touted as a springboard for growth by large and small entrepreneurial entities such as Dow Corning, Intel, etc. Disruptive innovation is largely misunderstood and has been widely used to describe the process wherein successful incumbents stumbled by relatively new innovation-driven entrants.
Disruptive innovation is not necessarily about extracting gains from first-mover advantage. In the business sense, disruption is the process in which a resources deficient entity [generally a “tiny” company] successfully challenges its larger traditional incumbent(s). These disruptors succeed by initially seeking out and meeting the needs of the underserved/fringe/overlooked customers and the products offered initially are deemed inferior by most of the incumbent’s customers. In other words, the lower price is not sufficient to get mainstream buyers to switch. As the disruptors then offer the successive iterations of products with rising quality enough to satisfy these mainstream customers of the traditional incumbents, these customers will be happy and content to buy the products at lower prices. This is fundamentally how disruptive innovation unfolds and how it forces prices lower so that more of a nation’s population can afford the products they need to enrich their lives.
1965 Toyota Corolla: This is disruptive innovation
2021 Lucid Air: This is not disruptive innovation
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