Every time you log into Facebook from your laptop or smartphone, you benefit from technology that was once considered disruptive innovation. These convenient tools are commonplace now, but their introduction to customers displaced large immobile desktop computers, the U.S. Post Service and standard landline phones.
In 1995, American economic Clayton Christensen coined the term disruptive innovation to mean an invention that alters the existing market and displaces established firms. He theorized later that many disruptive innovations are not “advanced technologies” but are created from existing industries and applied to a small network.
Forbes found Christensen’s theory holds true with roughly 87 percent of companies on the Fortune 500 in 1955 no longer existing. Companies lose their hold on industry as newer and smaller businesses upset the existing paradigm by courting low-revenue consumers and/or new markets.
ResearchLive, a website dedicated to research and insight, wrote one of its clients explained how difficult it was to remain successful with competition coming from local players, niche brands and private labels. “Years ago, creating a brand and reaching a considerable number of customers took years; today, it can be done in months.”
Because of how frequently incumbent companies succumb to disruptive innovation from startups, many are developing strategies to stay current and prevent the loss of customers and revenue.
Companies are looking into the following means of preventing disruptive innovation:
Solicit feedback and create idea incubators: Successful companies like Uber “continuously experiment to not lose its edge or value.” This means businesses must be open to investing time, money and employee talent in rethinking their products and being ready to evolve with customer needs. Other companies prefer to create their own internal disruptor via an incubator onsite. For example, cosmetic company L’Oreal hosts an incubator that acts as separate startup within the existing brand.
Purchase the competition: Larger companies must always keep an eye turned toward up and coming competition. Companies can either try to outthink the competition, or they can acquire the smaller business. Tech giants from Apple to Microsoft have purchased their competitors and used them to produce AI like Siri.
Learn to read the market: Managers must realize their existing business models need to be nimble enough to address market changes and act quickly. Forbes notes that this requires a combination of data and analytic resources before any action can be taken.
Rita Gunther McGrath, Columbia University Graduate School of Business professor and author of “The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business” shared some advice with business leaders:
“Leaders need a process that enables them to step back from the day-to-day hustle and ask the right questions. A lot of companies don’t have that level of rigor. They need to look for warning signs, such as whether they are investing in a business without getting the proper returns.”
Michele Cuthbert is the CEO and creator of Baker Creative, a global WBE-certified creative brand management firm based in Ohio.
