Disruptive Innovation: Why the Status Quo is No Longer an Option

A Retrospective on the Biggest Business Buzzword of the 21st Century

Prof. Christensen’s work on disruptive innovation has had a significant impact on business strategy and innovation management. His research has been widely cited and has influenced the strategies of many companies, including Apple, Intel, and Amazon. Over the years, researchers and practitioners have expanded on Prof. Christensen’s work, exploring the different types and characteristics of disruptive innovation, as well as the conditions that enable or hinder its success. Researchers have also looked at the role of disruptive innovation in economic growth, job creation, and social and environmental change.

One of the key insights from this research is that disruptive innovation is often driven by new technologies, business models, or customer needs that are not being met by existing products or services, or oversatisfied and the relation price-percepived value is not any more sustainable. Disruptive innovations start as niche products or services that are initially inferior to existing offerings, but improve over time and eventually displace traditional products or services.

Today, disruptive innovation continues to be a major force driving change in many industries, from healthcare and education to transportation and finance. It is an important topic for researchers, policymakers, and business leaders, as they seek to understand the impact of new technologies and business models on the economy and society as a whole.

Understanding Disruptive Innovation through an Example

Before exploring a specific example, it’s crucial to establish a common understanding of the terminology used in the field of innovation. Many people mistakenly conflate innovation with invention. To clarify, an invention refers to the creation of a new idea, product, or process, whereas innovation involves the practical application and implementation of that invention in order to generate value within the market or society. Inventions provide the foundation for innovations; however, it is through the process of innovation that these inventions gain value and become truly transformative. With this distinction in mind, we can now examine an example that showcases the dynamic relationship between invention and innovation.

Invention and innovation are related concepts but have distinct meanings in the context of technology, business, and society. Here is a brief explanation of the differences between the two:

Invention:

1. An invention is the creation of a new product, process, or idea that did not exist before.
2. Inventions often result from scientific research or technical experimentation, leading to the development of new technologies or the improvement of existing ones.
3. Inventions can be tangible (e.g., a physical device or machine) or intangible (e.g., a mathematical formula or a new algorithm).
4. The process of inventing usually involves problem-solving, creativity, and technical skills to bring a new concept to life.

Innovation:

1. Innovation is the process of implementing and applying an invention or idea in a way that creates value for individuals, organizations, or society as a whole.
2. It involves taking an existing invention or idea and introducing it into the market, industry, or any environment where it can be used to solve problems, improve efficiency, or meet previously unmet needs.
3. Innovations can be incremental (small improvements to existing products or processes) or disruptive (radical changes that significantly alter the way things are done or create entirely new markets).
4. The process of innovating often requires entrepreneurial skills, strategic thinking, and the ability to adapt and scale inventions to meet the needs of different users.

With these two concepts of invention and innovation clarified, we can now illustrate disruptive innovation using the example of creating photos. When the photo camera was invented in the 19th century, there was no competing technology in the market. This novel technology was initially adopted by high-end consumers. Through a series of incremental inventions and occasional radical inventions, businesses that invented and produced this technology were able to sustain their operations. As a result, they secured jobs and contributed to economic growth. In this context, these innovations can be considered as sustaining innovations rather than disruptive innovations.

The “WOW” Effect in Disruptive Innovation

Other Examples of “WOW” Effect in Disruptive Innovation

Tesla electric cars: Tesla’s electric cars offer a new and innovative driving experience that is quiet, emissions-free, and powerful. The Model S, for example, can accelerate from 0 to 60 miles per hour in just 2.4 seconds, which is faster than most gasoline-powered cars on the market. Tesla’s cars also have unique features like self-driving capabilities, an expansive touchscreen display, and over-the-air software updates that can improve the car’s performance and features. Tesla has disrupted the traditional automotive industry by offering high-performance electric cars due to its innovative electric drivetrain technology allows for fast acceleration, long-range driving, and low emissions. Tesla’s “WOW” factor is its ability to offer a sustainable and high-tech alternative to traditional gasoline-powered cars.

Apple iPhone: When Apple released the first iPhone in 2007, it revolutionized the smartphone industry with its innovative touch screen interface, sleek design, and multi-functional capabilities. The iPhone introduced features like pinch-to-zoom, swipe-to-unlock, and the App Store, which created a new market for mobile apps and transformed the way people communicate, work, and access information.

Airbnb: Airbnb disrupted the hospitality industry by offering a new and unique way for people to find and book lodging. The platform allows homeowners to rent out their properties to travelers, providing a more affordable and personalized alternative to hotels. Airbnb’s “WOW” factor comes from the ability to stay in unique and unusual accommodations, like treehouses, castles, and yurts, which creates a memorable and exciting travel experience for customers.

3D printing: 3D printing technology allows for the creation of three-dimensional objects from digital designs. This disruptive innovation has transformed the manufacturing industry by enabling faster, more efficient, and more flexible production of customized products. The “WOW” factor of 3D printing is its ability to create intricate and complex shapes and designs that would be difficult or impossible to produce with traditional manufacturing techniques.

Amazon Prime: Amazon Prime is a subscription service that offers free two-day shipping, access to streaming music and video content, and other benefits to members. The “WOW” factor of Amazon Prime is the convenience and speed of delivery, which has transformed the e-commerce industry and changed consumer expectations for fast and reliable shipping.

Peloton: Peloton is a fitness company that has disrupted the traditional gym and workout industry with its innovative home exercise equipment and online workout classes. The company’s stationary bikes and treadmills have a touchscreen display that streams live and on-demand classes, providing a personalized and interactive workout experience. Peloton’s “WOW” factor comes from the ability to bring the energy and motivation of a group fitness class to the comfort of customers’ homes.

Dollar Shave Club: Dollar Shave Club is a subscription-based service that delivers high-quality shaving products to customers at an affordable price. The company disrupted the shaving industry by offering a convenient and personalized way to purchase shaving products online, rather than relying on traditional retail channels. Dollar Shave Club’s “WOW” factor is its humorous and irreverent marketing campaigns that have created a loyal and enthusiastic customer base.

Warby Parker: Warby Parker is a company that disrupted the eyewear industry by offering high-quality and stylish prescription glasses at an affordable price. The company’s innovative direct-to-consumer model allows customers to try on glasses at home and purchase them online, eliminating the need for expensive retail markups. Warby Parker’s “WOW” factor is its commitment to social responsibility, by donating a pair of glasses to someone in need for every pair purchased.

Hims: Hims is a wellness company that offers affordable and convenient products for men’s health and wellness, including hair loss treatments, skincare products, and vitamins. The company’s direct-to-consumer model and personalized recommendations based on individual health needs have disrupted the traditional healthcare industry. Hims’ “WOW” factor is its modern and stylish branding and packaging, which has made it appealing and accessible to a younger demographic.

Allbirds: Allbirds is a shoe company that has disrupted the footwear industry by offering eco-friendly and sustainable shoes made from natural materials like wool and eucalyptus. The company’s innovative materials and production techniques have created a unique and comfortable shoe that has become popular among environmentally-conscious consumers. Allbirds’ “WOW” factor is its commitment to sustainability and transparency, which has helped the company build a strong and loyal customer base.

Revolut: Revolut is a digital banking and payments company that has disrupted the traditional banking industry by offering a fast, flexible, and low-cost alternative to traditional banks. The company’s innovative app allows customers to open accounts, transfer money, and make payments in multiple currencies, without any hidden fees or exchange rate markups. Revolut’s “WOW” factor is its ability to simplify and streamline financial services, making it accessible to a wider range of customers.

TransferWise: TransferWise is a money transfer company that has disrupted the international payments industry by offering a fast, easy, and low-cost way to send money abroad. The company’s innovative peer-to-peer model allows customers to exchange currencies directly with each other, eliminating the need for banks or middlemen. TransferWise’s “WOW” factor is its ability to save customers money and time on international transfers, making it a popular choice for expats, freelancers, and travelers.

Klarna: Klarna is a payments company that has disrupted the e-commerce industry by offering a “buy now, pay later” option at checkout. The company’s innovative financing model allows customers to split their purchases into multiple payments, without any interest or fees. Klarna’s “WOW” factor is its ability to provide a flexible and convenient way for customers to make purchases, without the burden of upfront payments.

Spotify: Spotify is a music streaming service that has disrupted the traditional music industry by offering a personalized and on-demand way to listen to music. The company’s innovative algorithmic recommendations and curated playlists have created a unique and engaging music experience for customers. Spotify’s “WOW” factor is its ability to give customers access to a vast library of music and podcasts, anytime and anywhere.

Deliveroo: Deliveroo is a food delivery company that has disrupted the traditional restaurant industry by offering a fast and convenient way to order food from local restaurants. The company’s innovative app and delivery model allow customers to order food from multiple restaurants at once, with fast and reliable delivery. Deliveroo’s “WOW” factor is its ability to provide a wider range of food options and greater convenience than traditional dine-in or takeout restaurants.

Stratasys: Stratasys is a 3D printing company that has disrupted the traditional manufacturing industry by offering a fast, efficient, and cost-effective way to produce complex and customized products. The company’s innovative 3D printing technology allows for the creation of functional prototypes, end-use parts, and production tools, with a high degree of accuracy and precision. Stratasys’ “WOW” factor is its ability to enable designers and engineers to iterate and innovate quickly, while reducing the time and cost of traditional manufacturing.

Festo: Festo is a German manufacturing company that has disrupted the traditional automation industry by offering innovative pneumatic and electric automation technology, like robotics, sensors, and control systems. The company’s innovative products and systems enable faster, more efficient, and more flexible production processes, while reducing the need for manual labor and improving safety and quality. Festo’s “WOW” factor is its ability to provide intelligent and interconnected automation solutions that can adapt to changing production needs and customer demands.

Carbon: Carbon is a 3D printing company that has disrupted the traditional manufacturing industry by offering a proprietary digital light synthesis technology that allows for the production of high-performance and complex parts, with a range of materials, including elastomers and composites. The company’s innovative 3D printing technology enables faster, more reliable, and more flexible production of functional parts and products, while reducing the time and cost of traditional manufacturing. Carbon’s “WOW” factor is its ability to create new and unique applications for 3D printing, from automotive parts to prosthetics and medical devices.

Desktop Metal: Desktop Metal is a metal 3D printing company that has disrupted the traditional manufacturing industry by offering a range of innovative metal 3D printing technologies, including binder jetting and single-pass jetting. The company’s technology enables faster, more reliable, and more cost-effective production of metal parts, with a range of materials, including aluminum, copper, and steel. Desktop Metal’s “WOW” factor is its ability to enable designers and engineers to create complex and intricate metal parts that were previously impossible or too expensive to produce.

The Effect of Captivity: Why Market Leaders Are Trapped by Disruptive Innovation

In the context of disruptive innovation, captivity refers to the phenomenon where established companies become trapped or stuck in their existing business models, processes, and systems, and are unable to respond effectively to disruptive threats or opportunities. Captivity can occur when companies become too focused on optimizing their existing operations and maximizing short-term profits, at the expense of innovation and long-term growth.

Disruptive innovations often emerge from new or niche markets, and are initially seen as inferior or irrelevant by established companies. However, over time, these innovations can gain traction and disrupt the existing market, as they offer new and better solutions that meet the changing needs and preferences of customers.

Companies that are captive may fail to recognize the potential of disruptive innovations, or may dismiss them as niche or unprofitable. They may also be unwilling or unable to make the necessary changes to their business models, processes, and systems, in order to compete effectively with disruptive threats.

Captivity can be particularly problematic for companies in industries that are heavily regulated or protected, as they may have less incentive to innovate and may face more barriers to entry from new competitors. Here are three examples that highlight the concept of captivity in the context of disruptive innovation:

BlackBerry: BlackBerry, once the dominant player in the smartphone market, faced captivity as it failed to respond effectively to the disruptive threat posed by Apple’s iPhone and Android devices. BlackBerry was deeply invested in its existing business model, focusing on physical keyboards and enterprise customers. When touchscreen smartphones gained traction, BlackBerry was slow to adapt, dismissing the new technology as a passing trend. The company’s reluctance to embrace change and innovate ultimately led to a significant loss of market share.

Borders: Borders, a leading bookstore chain, fell captive to its existing business model, which was heavily reliant on physical retail stores. As e-commerce and digital reading devices like Amazon’s Kindle gained popularity, Borders was unable to respond effectively to the disruptive innovation. The company failed to recognize the potential of online sales and e-books, and did not invest sufficiently in developing its own e-commerce platform or digital reading offerings. Eventually, Borders filed for bankruptcy in 2011.

Yellow Cab: The traditional taxi industry, represented by companies like Yellow Cab, faced captivity as they struggled to adapt to the rise of ridesharing services like Uber and Lyft. The taxi industry was entrenched in a heavily regulated environment, with a focus on optimizing existing operations, such as medallion systems and dispatch centers. When ridesharing platforms emerged, offering a more convenient and cost-effective solution for customers, traditional taxi companies were slow to respond and adapt their business models, leading to a decline in their market share.

Captivity from the Perspective of Sunk Costs: How Previous Investments Constrain Market Leaders’ Response to Disruptive Innovation

An additional aspect of captivity that market leaders face when dealing with disruptive innovation is the influence of sunk costs. Sunk costs are past investments that cannot be recovered or reversed, such as capital expenditures, research and development, or infrastructure. These investments often lead to a psychological and financial commitment to the current business model, making it challenging for companies to adapt to disruptive changes.

The sunk cost fallacy occurs when decision-makers irrationally factor in the costs they have already incurred when assessing new opportunities, causing them to be overly committed to the existing strategy. This fallacy often prevents market leaders from responding effectively to disruptive innovations, as they may be unwilling to abandon their existing investments in favor of new technologies or business models.

There are several reasons why sunk costs can contribute to captivity:

• Financial constraints: Companies may be reluctant to invest in new technologies or business models due to the significant financial resources already allocated to existing assets, infrastructure, or projects.
• Organizational inertia: The investments made in current processes and systems can create a sense of inertia within the organization, making it difficult to shift focus and resources to new opportunities.
• Risk aversion: The prospect of losing the value of previous investments can make companies risk-averse, causing them to avoid or delay pursuing disruptive innovations.
• Emotional attachment: Company leaders and employees may have an emotional attachment to existing investments, which can create resistance to change and a reluctance to consider new approaches.

To overcome the captivity caused by sunk costs, market leaders should:

• Recognize and challenge the sunk cost fallacy: Be aware of the potential influence of sunk costs on decision-making, and critically evaluate new opportunities based on their potential for future success, rather than past investments.
• Adopt a forward-looking approach: Focus on long-term growth and value creation, rather than clinging to past investments. Emphasize the potential returns of new opportunities, and accept that some previous investments may not yield the expected results.
• Cultivate a culture of learning and experimentation: Encourage a mindset of continuous learning, experimentation, and adaptation. This can help organizations become more resilient and open to change, enabling them to respond effectively to disruptive innovations.

• Implement portfolio management techniques: Use portfolio management techniques to balance investments across various projects, technologies, and business models. This approach can help companies allocate resources more effectively and reduce the impact of sunk costs on decision-making.

There are several well-known cases of established companies falling victim to the captivity caused by sunk costs, which hindered their ability to respond effectively to disruptive innovations. Here are three prominent examples:

Kodak: Kodak, once a leader in the photography industry, serves as a classic example of a company held captive by sunk costs. Despite having developed one of the first digital cameras in the 1970s, Kodak was reluctant to shift its focus away from the profitable film-based photography business. The company had heavily invested in film production infrastructure and processes, which made it difficult to accept the potential obsolescence of their existing business model. Consequently, Kodak failed to embrace digital technology as rapidly as its competitors, ultimately leading to bankruptcy in 2012.

Blockbuster: Blockbuster, a former giant in the movie rental business, also fell victim to captivity caused by sunk costs. With a vast network of physical stores and substantial investments in inventory and distribution systems, Blockbuster was slow to adapt to the digital streaming revolution. When Netflix entered the market with its DVD-by-mail service and later shifted to online streaming, Blockbuster was unable to respond effectively, as it was too committed to its existing brick-and-mortar business model. The company filed for bankruptcy in 2010.

Nokia: Nokia, once the world’s largest mobile phone manufacturer, struggled to adapt to the smartphone revolution. The company had invested heavily in its proprietary Symbian operating system and was hesitant to abandon it in favor of new, disruptive technologies. Despite the rapid growth of competitors like Apple and Android, Nokia’s commitment to its existing investments and technology prevented it from responding effectively to the changing market dynamics. The company eventually sold its mobile phone business to Microsoft in 2013 and has since refocused on telecommunications infrastructure.

The entrapment dilemma poses a significant challenge for market leaders, as they often struggle to adapt to disruptive innovation. To escape this trap and maintain their competitive edge, leaders should consider the following strategies:

Foster a culture of innovation and adaptability: Create an organizational culture that encourages risk-taking, experimentation, and learning from failures. By promoting a mindset of continuous improvement and adaptability, companies will be better positioned to respond to disruptive innovations.

Scan the horizon for emerging trends and technologies: Stay informed about industry trends, emerging technologies, and potential disruptors. Regularly assess the competitive landscape and invest in research and development to stay ahead of the curve.

Engage with customers and stakeholders: Actively listen to feedback from customers, employees, and other stakeholders to identify unmet needs, preferences, and potential opportunities for innovation. Engaging with external partners, such as startups and research institutions, can also help companies gain insights and access to new ideas.

Allocate resources for innovation: Dedicate resources, such as time, talent, and budget, specifically for innovation initiatives. This includes creating cross-functional teams, setting up innovation labs, or collaborating with external partners to drive breakthroughs.

Embrace agile and lean methodologies: Adopt agile and lean methodologies to streamline processes, reduce bureaucracy, and accelerate decision-making. These methodologies can help companies become more flexible and responsive to change, enabling them to adapt more effectively to disruptive innovations.

Encourage intrapreneurship: Empower employees to act as “intrapreneurs” by giving them the autonomy and resources to develop and pursue innovative ideas. Intrapreneurship can help companies tap into their internal talent and foster a sense of ownership and engagement among employees.

Be willing to disrupt own business model: Embrace the possibility of cannibalizing your own products or services in favor of new, disruptive solutions. By being proactive and willing to disrupt your own business model, you can stay ahead of competitors and maintain your market leadership.

Implement a dual transformation strategy: Pursue a dual transformation strategy that involves optimizing the core business while simultaneously investing in new growth opportunities. This approach allows companies to maintain their existing revenue streams while positioning themselves for future success in emerging markets and technologies.

Here are three examples of companies that have successfully overcome the entrapment dilemma and adapted to disruptive innovation:

IBM: IBM, a technology giant with a long history, has repeatedly reinvented itself to stay relevant and competitive in the face of disruptive innovation. From its beginnings as a manufacturer of punch card machines and mainframe computers, IBM has evolved into a leading provider of software, services, and cloud computing solutions. The company has fostered a culture of innovation and adaptability, invested heavily in research and development, and embraced emerging trends and technologies, such as artificial intelligence, to maintain its market leadership.

Microsoft: Microsoft, once primarily known for its Windows operating system and Office productivity suite, has successfully navigated several disruptive innovations in the technology industry. Recognizing the potential of cloud computing and the decline in PC sales, Microsoft shifted its focus to cloud-based services and platforms like Azure and Office 365. The company has embraced agile and lean methodologies, invested in research and development, and encouraged intrapreneurship, enabling it to stay ahead of its competitors and continue to thrive in a rapidly changing market.

Netflix: Netflix started as a DVD rental-by-mail service and managed to pivot successfully to become a leading streaming service provider. The company recognized the disruptive potential of digital streaming and invested in developing its own streaming platform, even at the risk of cannibalizing its existing DVD rental business. By embracing a dual transformation strategy, listening to customer feedback, and continuously innovating its content and technology offerings, Netflix has been able to maintain its market leadership and stay ahead of competitors like Hulu and Amazon Prime Video.

Exploring the Multifaceted Impact of Disruptive Innovation

How Captivity Can Impact Investment And Wealth Perspectives

Investment perspective: Captivity can impact investments in several ways. For example, established companies that are captive to their existing business models may be less attractive to investors, as they may face greater risks from disruptive threats or may have limited growth potential. On the other hand, new and innovative companies that are disrupting existing industries may present attractive investment opportunities, as they may have a greater potential for growth and value creation.

Wealth perspective: Captivity can also impact wealth creation for individuals and households. For example, if individuals are employed by companies that are captive to their existing business models, they may face greater job insecurity or limited career growth opportunities. On the other hand, individuals who work for innovative and disruptive companies may have greater career prospects and earning potential. Additionally, from a wealth creation perspective, individuals who invest in innovative and disruptive companies may see greater returns over time, as these companies have the potential to generate significant value for shareholders. However, it is important to note that investing in disruptive companies also carries greater risks, as these companies may face greater uncertainty and volatility in the early stages of their growth.

Captivity of Rich Countries versus Emerging Economies

The captivity of rich countries versus emerging economies in the context of disruptive innovation can be seen in terms of their ability to adapt to change and embrace innovation.

Rich countries, particularly those in the developed world, have historically been at the forefront of innovation and have been the major beneficiaries of the wealth and economic growth that innovation generates. However, as disruptive innovation becomes more prevalent and widespread, these countries may become captive to their existing business models and technologies, and may be less willing or able to embrace new and disruptive ideas.

In contrast, emerging economies, particularly those in Asia and Africa, are often seen as more agile and adaptable to change, as they have fewer legacy systems and processes to maintain. These economies may be more willing to experiment with new ideas and technologies, and may be more open to partnerships and collaborations with startups and other innovative companies.

The captivity of rich countries versus emerging economies can also be seen in terms of the level of investment and support that is provided to innovation and entrepreneurship. Rich countries often have well-established innovation ecosystems, with established venture capital firms, universities, and government agencies that support innovation and entrepreneurship. Emerging economies, on the other hand, may have less developed innovation ecosystems, but may have more supportive government policies and incentives for innovation and entrepreneurship.

The High Cost of Living in Wealthy Nations: Impact on Embracing Disruptive Innovation

The high cost of living in wealthy countries can impact their ability to embrace disruptive innovation. Due to expensive labor, materials, and overhead, companies in affluent nations may face a higher cost structure, making it challenging to compete on price with firms in emerging economies with lower expenses.

To address this issue, companies in wealthy countries may concentrate on innovation in sectors where they can maintain a competitive advantage, such as high-end or niche markets, where customers are willing to pay a premium for quality, performance, or exclusivity. These firms may also focus on developing proprietary technologies or intellectual property, providing a sustainable competitive edge over time.

Another approach for companies in affluent nations is to outsource specific aspects of their operations to emerging economies with lower labor costs. This strategy can help reduce expenses and enhance efficiency while allowing companies to retain control over their core competencies.

Moreover, companies in wealthy countries may partner with or acquire innovative startups and firms in emerging economies to access new technologies and business models. This approach can help diversify product offerings, expand their customer base, and stay ahead of disruptive threats.

To be involved in disruptive innovation with low-cost business models, companies in rich countries can take several approaches:

Simplify and streamline operations: Companies can identify and eliminate inefficiencies in their existing operations to reduce costs. By optimizing their processes and systems, companies can free up resources to invest in new technologies and business models.

Embrace open innovation: Companies can partner with startups, universities, and other organizations to access new technologies and ideas. By collaborating with others, companies can gain access to new markets, technologies, and business models, while sharing the risks and costs of innovation.

Leverage digital technologies: Companies can use digital technologies, such as cloud computing, data analytics, and artificial intelligence, to automate and streamline their operations. By digitizing their processes and systems, companies can reduce costs and improve efficiency, while also creating new opportunities for innovation and growth.

Adopt agile methodologies: Companies can adopt agile methodologies, such as design thinking and lean startup, to iterate and test new ideas quickly and efficiently. By embracing a culture of experimentation and learning, companies can identify and pursue new business models and technologies that are more cost-effective and innovative.

Repurpose existing technologies: Companies can repurpose existing technologies for new applications and markets. By identifying new use cases for their existing technologies, companies can enter new markets and create new revenue streams without significant investments in new technologies.

Spinoffs can be an effective way for companies in rich countries to embrace disruptive innovation with low-cost business models. Spinoffs refer to the creation of a new, independent company from an existing company’s assets or operations. By spinning off certain assets or operations, companies can create more agile and focused entities that can pursue disruptive innovation with lower costs and greater flexibility.

Spinoffs can also help companies to access new markets and technologies, by leveraging the expertise and networks of the new entity. For example, a spinoff focused on a particular technology or market may be better positioned to collaborate with startups or universities in that area, or to access funding from investors who specialize in that area.

In addition, spinoffs can also provide a way for companies to realize value from underutilized or undervalued assets, by allowing them to be developed and commercialized by a new entity with a more focused mission and mandate.

To create effective spinoffs, companies need to carefully consider which assets or operations to spin off, and how to structure the new entity to ensure its success. They also need to ensure that the spinoff is aligned with their overall strategic goals and objectives, and that it is supported by the necessary resources and expertise to thrive.

Harnessing Disruptive Innovation in Emerging Economies: Strategies for Leveraging Unique Strengths and Opportunities

Emerging countries can work with disruptive innovation by leveraging their unique strengths and advantages, such as lower costs of labor, materials, and overhead, as well as a willingness to experiment and embrace new ideas.

One approach that emerging countries can take is to focus on developing technologies and solutions that are tailored to the needs and preferences of their local markets. By identifying unmet needs and addressing them with innovative and affordable solutions, emerging countries can create new markets and opportunities for growth.

Another approach that emerging countries can take is to partner with established companies and startups in developed countries to access new technologies, expertise, and markets. By collaborating with others, emerging countries can gain access to new technologies and business models, while also leveraging their own strengths and advantages.

In addition, emerging countries can also engage in reverse innovation, which refers to the process of developing innovative solutions in emerging countries and then bringing them back to developed countries. By developing solutions that are optimized for emerging markets, companies can create cost-effective and innovative solutions that can also be adapted for other markets.

Reverse innovation can also be applied to business models, such as developing low-cost distribution models that can be scaled globally. By developing innovative business models that are optimized for emerging markets, companies can create new markets and opportunities for growth. Reverse / inverse innovation can be adopted by companies in rich countries, too.

Here are some examples of inverse innovations:

GE Healthcare: GE Healthcare developed a portable ultrasound machine, the Vscan, that was specifically designed for emerging markets. The Vscan is small, lightweight, and affordable, and can be used by healthcare professionals in remote areas to provide diagnostic imaging for a range of conditions. The success of the Vscan in emerging markets has led to its adoption in developed countries, where it is used in emergency and critical care settings.

Tata Motors: Tata Motors developed the Nano, a low-cost car that was specifically designed for the Indian market. The Nano was designed to be affordable and accessible to the millions of Indians who could not afford a traditional car, and was marketed as the “people’s car”. While the Nano was not successful in India due to marketing and quality issues, its concept and design has been studied and adapted by other automakers, who are now exploring similar low-cost car models for emerging markets.

Godrej: Godrej, an Indian consumer goods company, developed the Chotukool, a small, portable refrigerator that was specifically designed for rural and semi-urban areas. The Chotukool was developed to address the unique needs and challenges of these areas, where electricity supply is unreliable and transportation is difficult. The Chotukool runs on a battery and can be charged using a car battery or a solar panel, making it accessible and affordable to millions of Indians who previously had no access to refrigeration.

M-Pesa: M-Pesa is a mobile payment and money transfer service that was developed by Vodafone in Kenya. The service was designed to address the challenges of accessing financial services in rural and low-income areas, where traditional banking services are limited. M-Pesa allows users to send and receive money using their mobile phones, and has been widely adopted in Kenya and other African countries. The success of M-Pesa has led to its adoption in other emerging markets, as well as developed countries, where it is used for remittances and other financial transactions.

WorkFusion: WorkFusion is a software company based in New York, but with a development team in Belarus. The company has developed an artificial intelligence-powered automation platform that is designed to help companies automate repetitive and time-consuming tasks, such as data entry and processing. The platform is affordable and accessible to companies of all sizes, and has been adopted by a range of industries, including finance, healthcare, and retail.

BetterMe: BetterMe is a Ukrainian-based health and wellness startup that has developed a mobile app to help users achieve their fitness goals. The app provides customized meal plans and workouts, and tracks users’ progress over time. The app is affordable and accessible to users in Eastern Europe and other emerging markets, and has been downloaded over 50 million times.

Velmart: Velmart is a Romanian-based grocery store chain that has developed an innovative business model to address the challenges of food distribution in rural areas. The company operates a network of small, franchise-based grocery stores in rural communities, which are supplied by a central warehouse. The model has been successful in providing affordable and accessible groceries to underserved communities, and has been recognized by the European Union for its innovation and impact.

MyBucks: MyBucks is a Luxembourg-based fintech company with operations in Eastern Europe and Africa. The company has developed a range of financial products and services, including microloans, insurance, and mobile banking, that are designed to address the unique needs and challenges of users in emerging markets. The company has been recognized for its innovation and impact, and has received investment from a range of international investors.

Steps and Principles for Guiding the Process towards Successful Disruptive Innovation

There is no one-size-fits-all approach to setting up a disruptive innovation, as the process can vary depending on the industry, market, and specific innovation in question. However, there are some common steps and principles that can be followed to increase the chances of success. Here is a general methodology that can be useful to set up a disruptive innovation:

• Identify the opportunity: The first step is to identify an opportunity for disruptive innovation. This can involve analyzing market trends, customer needs, and emerging technologies to identify areas of potential disruption.
• Define the problem: Once the opportunity has been identified, the next step is to define the problem that the innovation will address. This involves clearly defining the customer pain point or unmet need that the innovation will solve.
• Develop the solution: The next step is to develop a solution that addresses the defined problem. This can involve a range of activities, such as ideation, prototyping, and user testing.
• Build a team: To bring the innovation to market, it is important to build a team with the necessary skills and expertise. This can involve hiring employees, partnering with other companies or organizations, or leveraging existing networks and resources.
• Secure funding: Innovations often require significant investments of time and resources. To secure funding, it is important to develop a business plan and pitch to potential investors or funders.
• Test and iterate: Once the innovation has been developed and funding secured, it is important to test and iterate the solution. This involves refining the product or service based on user feedback, market testing, and other factors.
• Launch and scale: The final step is to launch the innovation to the market and scale the solution to reach a broader audience. This can involve marketing and promotion, partnerships and collaborations, and ongoing product development and improvement.

One example of a methodology that can be useful for setting up a disruptive innovation is the Lean Startup methodology, which emphasizes rapid experimentation, validated learning, and iterative development. The Lean Startup methodology involves developing a Minimum Viable Product (MVP), testing and validating the product with customers, and making ongoing improvements based on feedback and data.

Unleashing Disruptive Innovation with TRIZ

TRIZ (Theory of Inventive Problem Solving) can be applied to create disruptive innovations. A possible roadmap might be the following:

• Identify contradictions: TRIZ is based on the premise that innovation arises from contradictions. By identifying contradictions in a system, product, or process, innovators can identify new ways to address these contradictions and create innovative solutions. For example, a contradiction between two conflicting product features can be resolved by identifying a new material or technology that can enable both features to coexist.
• Apply TRIZ principles: TRIZ includes a set of principles or patterns for solving problems and generating innovative solutions. By applying these principles, innovators can identify new approaches to a problem or opportunity. For example, the TRIZ principle of “segmentation” suggests dividing a product or system into smaller parts or components to enable greater flexibility and customization.
• Use the TRIZ algorithm: The TRIZ algorithm is a step-by-step process for applying TRIZ principles and tools to solve problems and generate innovative solutions. The algorithm involves defining the problem, identifying the contradictions, applying TRIZ principles, and evaluating and refining the solution. By following this process, innovators can systematically and consistently generate innovative solutions to complex problems.
• Combine TRIZ with other methodologies: TRIZ can be combined with other innovation methodologies, such as design thinking or lean startup, to generate disruptive innovation. By combining different methodologies, innovators can leverage the strengths and advantages of each approach, and create more robust and innovative solutions.

From the angle of disruptive innovation, the use of TRIZ principles and tools can help companies to develop new solutions that challenge existing paradigms and create new markets. In the case of a medical device company, the development of a blood-based diagnostic test that is both accurate and affordable has the potential to disrupt the existing market for cancer diagnostic tests, which is dominated by expensive and invasive tests. By applying TRIZ principles such as the “principle of multiple use” and the “principle of compromise”, the company might able to identify potential solutions to the contradiction between accuracy and affordability, leading to a disruptive innovation in the medical device market. The resulting test is not only more accurate and accessible, but also has the potential to reach a wider range of patients, including those who may not have access to traditional diagnostic tests. By using TRIZ tools such as the ideality formula and function analysis system technique (FAST), the company might also be able to evaluate and refine the solution to ensure that it met the needs of both patients and healthcare professionals. This helps to ensure that the solution is both effective and efficient, while also being easy to use and implement.

Example: A company is looking to create a new type of bicycle that is both more efficient and more comfortable for riders.

Step 1: Identify the contradiction
The first step is to identify the contradiction that is preventing the company from creating an innovative solution. In this case, the contradiction is between efficiency and comfort. Traditional bicycles that are designed for efficiency often sacrifice comfort, while those designed for comfort often sacrifice efficiency.

Step 2: Apply TRIZ principles
Next, we can apply TRIZ principles to identify potential solutions to the contradiction. One principle that could be applied is the “principle of segmentation”, which suggests breaking a system or product into smaller, more manageable parts. In this case, the company could consider segmenting the bicycle into two parts – one designed for efficiency and one designed for comfort. Another principle that could be applied is the “principle of nesting”, which suggests finding ways to fit one system inside another. In this case, the company could consider nesting the comfort components inside the efficiency components, creating a more streamlined and integrated design.

Step 3: Evaluate and refine the solution
Once potential solutions have been identified, the next step is to evaluate and refine them using TRIZ tools such as the ideality formula or function analysis system technique (FAST). These tools help to evaluate the effectiveness of the solution based on factors such as cost, efficiency, and ease of implementation. One potential solution that the company could consider is developing a modular bicycle design that allows riders to customize their bicycle based on their preferences and needs. The bicycle could be divided into two parts – an efficiency module and a comfort module – that can be easily swapped out and customized based on the rider’s needs. To evaluate and refine this solution, the company could use the ideality formula to evaluate the bicycle’s effectiveness in terms of efficiency, comfort, and customizability. They could also use the FAST tool to refine the design of the bicycle and ensure that it is efficient, effective, and easy to use.

Step 4: Develop and test the solution
Once the solution has been evaluated and refined, the next step is to develop and test the solution. This involves developing a prototype of the bicycle and conducting user testing to evaluate its effectiveness and usability. In this case, the company could work with professional cyclists and recreational riders to ensure that the bicycle meets the needs of a wide range of users. They could also conduct market research to identify potential customers and develop a go-to-market strategy that is aligned with the needs and preferences of their target audience.

Step 5: Launch and scale the solution
The final step is to launch and scale the solution. This involves marketing and promoting the bicycle to potential customers, building partnerships and collaborations with cycling enthusiasts and other stakeholders, and continuously improving and refining the product based on user feedback and market data.

In this example, the disruptive innovation is in the development of a new type of bicycle that addresses the contradiction between efficiency and comfort, which traditionally have been seen as mutually exclusive. The application of TRIZ principles to resolve this contradiction, such as segmentation and nesting, has led to a unique and innovative solution – a modular bicycle design that allows riders to customize their bicycle based on their preferences and needs. This innovative approach has the potential to disrupt the traditional bicycle market by offering a new, more personalized experience for riders that caters to both their comfort and efficiency needs. As the modular bicycle gains traction in the market, several evolutionary paths can be envisioned over time. Here are some possibilities:

Conclusions

————–

Credits: Stelian Brad