what is disruptive innovation 
disruptive innovation refers to the innovation that transforms expensive or highly sophisticated products or services previously accessible to a high end or more skilled segment of consumers to those that are more affordable and accessible to a broader population this transformation disrupts the market by displacing long standing established competitors investopedia candra huffunderstanding disruptive innovationdisruptive innovation involves technologies used to make products easier to use or access and available to a larger non targeted market note that it does not involve the process of improving or enhancing products for the same target market an example of disruptive innovation is the introduction of digital music downloads which have by far replaced compact discs clayton christensen popularized the idea of disruptive innovation in the book the innovator s solution which was a follow up to the innovators dilemma published in 1997 1christensen posited that there are two types of technologies businesses deal with sustainable technologies allow a business to incrementally improve its operations in a predictable timeframe these technologies and the way they are incorporated into a business are primarily designed to allow companies to remain competitive or at least maintain a status quo disruptive technologies and the way they are integrated the disruptive innovations are more difficult to plan for and potentially more devastating to companies that do not pay enough attention to them 2investing in a disruptive innovation can be complicated it requires an investor to focus on how companies will adapt to disruptive technology instead of focusing on the development of the technology itself companies such as amazon amzn google googl and meta meta formerly facebook are examples of companies that have heavily focused on the internet as a disruptive technology the internet has become so ingrained in the modern world that the companies that failed to integrate disruptive innovation into their business models have been pushed aside artificial intelligence ai and its potential to learn from employees and perform their jobs may be a disruptive innovation for the job market as a whole soon 3the internet was disruptive because it was not an iteration of previous technology it was something new that created unique models for making money that never existed before of course that created losses for other business models people using smartphones instead of laptops and desktops for their computing needs including web browsing and streaming is another example of disruptive innovation technological enhancements have enabled cell phones to be equipped with small processors chips and software applications that support these functions requirements for disruptive innovationdisruptive innovation requires access to ignored or overlooked markets and technology that can transform a product into a more accessible and affordable one to be disruptive the network of partners suppliers contractors and distributors also must benefit from the new disruptive business model certain core requirements include disruptive innovation vs sustaining innovationdisruptive innovation is an innovation that simplifies and makes more affordable products and services to undesirable or ignored markets established companies typically strive to improve their products and services for their profitable customer base largely ignoring the needs and desires of untapped segments this lack of attention gives smaller companies or new entrants ground to target this ignored population with simpler more affordable options sustaining innovation on the other hand is the process of innovating to make existing products and services better for the existing customer base either based on customer or market demands sustaining innovation does not target untapped or ignored markets rather it s innovating to remain relevant and competitive cd makers making cds with the capacity to hold large volumes of music that are scratch resistant is sustaining innovation a company introducing digital downloads via the internet making cds obsolete is disruptive innovation 2examples of disruptive innovationdisruptive innovation is differentiated from disruptive technology in that it focuses on the use of the technology rather than the technology itself 4 two well known examples of this are amazon and netflix a classic example of the disruptive innovation of the internet being unleashed was the restructuring of the bookselling industry the big bookselling chains lost out to amazon amzn because it could display its inventory without owning a physical store in every town and then ship the book to the buyer s home before online shopping became popular books were sold in traditional bookstores such as barnes noble and the now defunct borders 5amazon s popularity grew along with its profits and market share moving many bookstores to the back of the shelf or out of business since its launch amazon has successfully used the internet to create an online shopping platform whereby most of what s offered in a physical store including groceries can be ordered from amazon s website and it all began with a small garage born company using the power of the internet to attend to the needs of a niche market of online shopping book enthusiasts the model t car is an example of something not considered to be disruptive innovation because it was an improvement on existing technology and it wasn t widely adopted upon its release the auto industry didn t take off until mass production reduced prices moving the entire transportation system from hooves to wheels in that sense the system of mass production does meet the criteria for disruptive innovation netflix nflx is another disruptive innovator during a time when vhs tapes and dvds were rented in abundance from thousands of video stores new entrant netflix saw an opening to cater to an overlooked market of online shoppers utilizing the growing power of the internet it offered consumers the ability to peruse their catalog of dvds rent unencumbered by someone else s choice to rent the same selection and have their selections sent directly to their home 6after netflix disrupted the media industry blockbuster went from having more than 9 000 blockbuster brick and mortar stores to one 7not long after offering mail delivered dvd rentals it revised its business model finding an avenue to disrupt itself in the market by providing online streamed entertainment 6 however competitors have successfully duplicated this business model taking away from netflix s market share time will tell how long netflix can remain dominant but there is no doubt about the disruption it brought about 