How To Define Innovation and Disruption

In today’s digitally enabled economy, the need for innovation has never been greater.

This is especially true in established markets like the telecommunication space, where product and service commoditization, changing customer needs, disruptive competition like over the top services (OTTs) and organizational inertia are compounding things even more thus driving a greater need for organizations to put innovation at the core of their corporate culture.

Unpacking Innovation

The innovation pillar is claimed by many brands, but the term innovation is largely not understood — and this is especially true in the context of product innovations.

Generally speaking, there are three types of product innovations:

Disruptive Innovations — disruptive innovations transform complicated, costly products, previously only available to a few, into simpler, cheaper products available to many.

An example of a disruptive innovation was the launch of the Model T Ford, which gave consumers access to new mode of affordable transport.

Similarly, MTN’s launch of their Pay-As-You-Go service in 1996 enabled access for unbanked South African’s to reap the benefits of having a mobile phone.

Sustaining Innovations — sustaining innovations make good products better or replace them entirely, and are sold to the same markets.

In the automotive sector the evolution of the Toyota Camry to the hybrid Prius, is a classic example of a sustaining innovation. Equally, the Sony PlayStation; a product aimed at the premium gamer, evolved over time to include new technology and more powerful processors starting from it’s initial launch in 1994 to subsequent better versions namely PlayStation 2 (2000), PlayStation 3 (2006), and PlayStation 4 (2013).

Efficiency Innovations — efficiency innovations reduce the cost of making and distributing existing products and services, and are sold to the same markets.

In the automotive industry, one could argue that Toyota has achieved the highest levels of manufacturing efficiency in the world.

The company adopted innovation in production management as an integral part of its competitive strategy and then spent the 1950s and 1960s making this strategy work.

Robotic assembly lines increase throughput production and reduce overall labour and production costs by removing human inefficiencies.

How to think about Disruptive Innovation

Disruption is a word loaded with meaning: an interruption, break or severance. Put the word in the context of the technology industry, and it stands in nicely for the incredible impact a new approach can have on the status quo. Done right, IT strategy and leadership can catapult growth; done wrong, the corporate bottom line isn’t the only thing that suffers.

But disruptive innovation should not be viewed as something that is incredibly risky to undertake for several reasons.

Disruptive innovations do not rely on implementing a major change in a business and in more cases than not, it does not rely on technological breakthroughs or heavy amounts of capital and resources.

This is primarily because disruptive innovation is largely competing against constrained consumption — and not major competitors.

Competing Against Non-Consumption

When you’re competing against non-consumption, you simply have to make a product that is better than nothing — in fact; the opposite of disruptive innovation is literally nothing.

The important thing to remember, is that when you give constrained users access to a product or service for the first time — they’re just happy to get it. They don’t care if it’s “crappy”, or if it doesn’t include the latest Facebook authentication function, they’re just chuffed to get access to it and if you can make it affordable, then you’re along way to being successful on the path to disruptive innovation.

Examples of constrained consumption in developing economies can be found literally everywhere you look.

Launching disruption lead products that address constrained consumption, comes with a number of key benefits including:

1) Typically low capital investments
2) Reduced time to market
3) Little or few competitors

Why Disruptive Competition Wins

Perhaps the biggest benefit of deploying disruption and innovation lead products is that established competitors do not see them coming and if they do observe disruptive products, they are more motivated by achieving existing profit streams than they are about competing with new disruptive entrants to their market. And there are countless examples of this. When Toyota launched the Pinto in the US market, it was a super affordable product designed to capture market share through first time car buyers. Interstingly, the biggest player by market share at the time was Ford, and they did nothing to react to the launch of the Pinto. And why would they? Why would they bother to compete by launching a new product aimed at first time buyers, when they have the luxury of competing with BMW and Mercedes Benz.

History shows that established competitors typically chase profit — not the competition. When Skype launched in 2003 and gave consumers access to cheaper calls (VOIP) over the Internet, AT&T only opened up their 3G network to VOIP call some 6 years later. AirBNB launched in 2008 and gave consumers access to broader accommodation inventory — the hotel industry has yet to react and can be summed up by CEO of Choice Hotels, Steve Joice: “I take my hat off to them. They saw an opportunity the rest of us missed.” The same lesson can be seen in the context of over-the-top-services (OTTs) like WeChat and WhatsApp in South Africa, and the reaction of established telecommunications brands.

The irony in all this is that chasing company profits is not a poor executive decision. It’s just that competing with disruptive innovation is more of a distraction than anything else for existing and major competitors in an established market.

Implementing Disruptive Innovation

Disruptive innovation is really the enabler of scalable business value and always has the greatest impact when focused either at a product or business model level.

Disruptive innovation may seem scary — but it shouldn’t be. It’s important to take a simple small step first, invest a little and learn a lot. It is possible to move forward in a manner, which doesn’t require huge amounts of capital and doesn’t require huge amounts of risk — disruptive companies always iterate their way towards success.

Conclusion

There is an old saying that goes something like this: “If the rate of innovation inside your company is slower than the rate of innovation outside it, your company is doomed.” With the increasing penetration of disruptive competition and technology in business, this is truer today than it has ever been.

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