Could disruptive innovation kill your business?


Whilst the banks have been busy modernising their branches to “tellerless” machine only branches and losing customer loyalty along the way along came the disrupters.

First it was PayPal that allowed you to send money anywhere in the world at the push of a button. Now it is peer-to-peer lenders that facilitate loans between parties wishing to lend and parties wishing to borrow. The service is fast, the rates are cheaper and the banks are cut out. PayPal now handles 18% of the Internet based banking transfers.

PayPal disrupted the banking world with a new innovative way of making payments on-line. Not that PayPal ruined the banking world, but banks, especially many of the credit card-issuing banks certainly lost a large majority of their on-line business.

Technology has opened up new opportunities and technology driven innovation can make an existing business model virtually extinct overnight.

Smart cell phones killed the pager business and the telegraph system. “Anybody here has got a pager any more?”

Disruption occurs when someone asks, “Is there a better, more convenient way of doing this?” Or “How would I like to deal with this business?”

Uber made it easier to get a taxi, a limo or a ride share. You could see where the car was and know that the driver had a good record because he or she had been rated by other customers. Taxi operators hate it. They don’t want to be rated and they want to maintain their monopoly.

Uber created a disruption to the taxi business by introducing a new method of booking transport. For the average consumer, it’s a change for the better.

Disruptive innovation is any innovation that helps to produce and build a new market and new set of values. It provides a new a customer friendlier way of doing business.

The term is typically used to describe innovation that improves or enhances a product or a service, and it’s usually one that is unexpected by the market.

Contrast disruptive innovation with sustaining innovation and you’ll find that sustaining innovation does not produce or create new markets. It evolves existing markets and compels marketing firms to compete against each other on the basis of improvement versus innovation.

The automobile, for example was a technological innovation that was revolutionary but it wasn’t disruptive. It was such an expensive, almost a luxury item that it couldn’t and didn’t disrupt the horse-drawn carriages for years. The transport market was essentially steady and pretty much intact until the low-priced Ford Model T was introduced in the early 1900’s. This was mass-produced marketed at a low, affordable price, it was, a disruptive innovation. The earlier cars were not.

Ask yourself, is there another way of serving your customers? What would they want in a perfect world? If you don’t think of it, someone else will.

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