Bringing Disruptive Innovation to Business

November 9, 2023

Disruptive innovation has enormous implications for business profitability

Disruptive innovation, as the website Investopedia defines it, is “a new development that dramatically changes the way a structure or industry functions.”

The development can be a technology, a technique, or a process. Because disruptive innovations are unproven and unfamiliar, they are often viewed with skepticism at first. Over time, however, they gain market share and momentum as consumers come to appreciate their benefits.

A tipping point eventually occurs where the innovation catches up to existing technologies or processes in popularity—and then blows by them, sometimes turning entire industries on their head.

Truly disruptive innovation has enormous implications for a business’s profitability and success. For this reason, executives who have the ability to think disruptively are highly prized and sought after in today’s business world. This talent is not innate; it can be learned through academic programs such as Washington State’s Executive Master of Business Administration Online. Combining top-tier instruction with the convenience of online schooling, an online Executive MBA provides strategies to improve business performance for executives who wish to take their careers to an advanced level.

Examples in Action

Not all successful businesses are considered disruptive. Clayton Christensen, who pioneered the theory of disruptive innovation in 1995, explains that to be truly disruptive, an innovation must bring something new to the table. By this definition, a company such as Uber would not be considered disruptive. Yes, Uber transformed the transport-for-hire business, but it did not substantially change its model; it just did the same things better, faster, and cheaper.

The company Netflix, on the other hand, is a true disruptor. In 1997, Netflix entered the movie-rental business then dominated by Blockbuster. It found a niche where Blockbuster didn’t operate—mailing out DVDs (as opposed to videocassettes, which made up the bulk of Blockbuster’s business) on a subscription basis. The company gained a foothold with consumers but didn’t really take off until it began offering streaming services—and when it did, its sales shot into the stratosphere. Blockbuster was not equipped or prepared to compete with this technology, and the company wound up going bankrupt. Netflix, on the other hand, is now a household name and is considered a must-have service by millions upon millions of consumers.

Another often-cited example of a disruptor is Airbnb, a peer-to-peer lodging rental service. Combining an all-new business model with cutting-edge technology, Airbnb has completely overturned the hotel industry. Today the service has 5 million lodging options across 81,000 cities globally, and it offers more rooms for rent than any hotel chain in the world.

Creating Disruptive Innovation in Business

The world-shaking success of these disruptors and others has set the standard for businesses everywhere. In today’s world, everyone aspires to be a disruptor and rewrite the face of their industry.

There is no tried-and-true formula for achieving this goal. However, a recent article on the website Viima lays out some key steps for achieving what the innovation software company calls “outside-the-box innovation.” An outside-the-box innovation is one that solves a problem by identifying something that others haven’t seen. “There is…a lot of creativity involved, but it’s without a doubt a skill that can be learned,” the article explains.

The skill, according to Viima, involves 5 steps:

Engage in first-principles thinking. A “first principle” is a basic, objective truth that is not open to question or interpretation. When confronting a business question, break it down to its simplest parts and build up from there, following this rough thought path:

What aspects of this issue do we know to be true, without a single shred of doubt?
Are there aspects of this issue that are universally thought to be true, but which actually might not be?
Are there possibilities that are not currently being explored, for one reason or another?
Have there been similar issues in other industries that other people have solved? If so, how?
This exercise can help to bring your thinking from “It can’t be done” to “Maybe it could, but I would have to do X, Y, and Z.” By opening your mind to possibilities, no matter how remote, you foster a mindset where innovation can thrive.

Embrace constraints. The problem with thinking outside the box is that there is always a box. You will always be operating within a series of constraints that might include laws, budgetary considerations, corporate codes of conduct, your personal ethical standards, and your customers’ ability to pay for your goods or services.

While constraints can seem restrictive, Viima points out that they can actually help you in the long run. Constraints help you to understand your situation better, and they can force you to think more creatively. If everyone in your industry faces the same constraints, they can even become a source of competitive advantage with the most creative thinkers outpacing everyone else.

One key is understanding the difference between hard and soft constraints. A hard constraint is something that cannot be changed, such as a law. A soft constraint is something you might be able to change, such as a budget. To be innovative, first understand the constraints you face, then find creative ways to work within or around them.

Dig deeper.
Let’s say you have identified a market niche. You know your customers need something—but is it really what you think they need? “People don’t want a quarter-inch drill, they want a quarter-inch hole in the wall,” Viima explains. Many businesses will try to sell the metaphorical drill to their customers when they really should be focusing on the end result—the hole. Before you try to provide a solution to a problem, dig deep by questioning your customer base or even heading out into the field for discussion and observation.
Think bigger. If your goal is to improve your business performance a little bit, you’re probably going to tweak existing products and methods to accomplish this goal. If, on the other hand, your goal is to be 10 times bigger than you are at the moment, you’re going to have to throw everything out the window and think in an entirely different way. Think big to foster creativity and innovation.
Constantly seek criticism and critique. “Let’s face it: no idea is perfect when someone first comes up with it,” Viima says. “It takes a lot of work and iteration to refine and perfect it, and constructive feedback and real-world observations are a key part in achieving that.” This observation is particularly true of potentially disruptive ideas, which by definition are unfamiliar and unlike the current norms. Few people enjoy the critique process, but innovators embrace it as a necessary stepping-stone to success.

A Culture of Disruption

Viima’s advice applies mostly to individuals. Everything starts with people—but according to the website Talent Economy, creating a culture of disruption within one’s business is also possible. These 3 pieces of advice can give a company a jump on the competition and move it toward disruptive innovation:

Train employees to be innovators. Teach the 5 key “out-of-the-box innovation” skills to your staff. Give everyone the ability to think disruptively.
Change the culture. Over time, businesses tend to settle into a rut in the ways they do things. Shake things up by empowering your employees to generate ideas. Give them the time to do so and make sure they know you are open to innovation.
Hire disruptors. When hiring staff, prioritize candidates who have a proven track record of innovation. These people may not always be the easiest or most comfortable ones to work with—but by stacking your organization with creative thinkers, you greatly increase your chances of creating disruptive innovation.

About WSU’s Executive Master of Business Administration Online Program

Washington State University’s Carson College of Business delivers one of the top-ranked EMBA programs in the nation. The curriculum is designed to equip students with the tactics, knowledge, skills, strategies, and other resources utilized by today’s high-profile business leaders and focuses on developing executive-level strategic expertise.

For more information, visit WSU’s Executive MBA Online website.

Sources:

Disruptive innovation definition – Investopedia

Characteristics of a true disruptor and Uber example – Harvard Business Review

Netflix and Airbnb examples – Viima

Creating disruptive innovation in business – Viima