Question

How does disruptive innovation play a role in delivering a new product?

Answer 1

Disruptive innovation theory is related to the fact that incumbent companies usually focus on more profitable avenues, therefore, a smaller company with limited resources can destroy an established & successful business by focusing on the segments that have been neglected by the incumbent companies. The smaller company usually focuses on the bottom end of the market & therefore, successfully taps a new segment of the market that remains unnoticed by the incumbent. In order to deliver a new product the smaller company uses innovative technologies and serves the customers that have been overlooked by the incumbent with new product at lower price. At first the smaller company targets the untapped segments of the incumbent to deliver the products, but with time it widens its scope and starts moving upmarket and serves the mainstream customers of the established business by improving its performance. Mainly disruption starts at the stage when the mainstream customers of established business start buying the smaller company's products. In this way smaller companies are able to unseat established and successful businesses overtime. So, disruptive innovation plays an important role in delivering a new product. Since incumbent companies serves high end of the market by delivering high quality products, so smaller companies taps the lower end of the market by delivering them new innovative products. Smaller companies try to provide the same kind of products to the lower end of the market in order to satisfy their needs which remains usually ignored by incumbent companies. In order to provide similar products as those provided by incumbent companies, smaller companies employ innovative technologies for developing new products & therefore, are able to deliver new products in the market. And these products improve performance over a period of time & outperform established businesses products and are labelled as disruptive innovation. With time they are able to capture the market segments of the established businesses & hence proves to be a disruptive innovation for them. For example, fixed landline phones have been widely replaced by cellphones, therefore, cellphones proved to be a disruptive innovation for landline phones. In this case disruptor is cellphones and disruptee is fixed landline phones. Therefore, a new products comes into existence in order to provide similar services as that provided by some other product and widely covers the market overtime and is termed as disruptive innovation.