The Business Olympics: Disruptive Innovation

Posted by Michael Lindberg on Feb 20, 2017 9:39:12 AM

disruptive innovation

Innovate Your Way To A Gold Medal

Cast your mind back to last summer when, on August 5th, the Games of the XXXI Olympiad opened in Rio de Janeiro, Brazil. Once more we heard the Olympic creed about the importance of giving one’s best and striving for personal excellence. This may be a valid theory, but in matters of business it is unfortunately not enough. In the Olympic Games you win a medal if you end up in either first, second or third place, and the rest are credited for having done their best. In business, it has become an accepted fact that only numbers 1 and 2 and, in rare cases, number 3 are profitable in the long run. What about the rest? They are in a crisis and will eventually close, merge or be acquired. That is why I say:

Who Can Afford Not To Be A Winner?

In business, if you don’t win a medal you are out! Is that a practical reason to strive to live up to the Olympic motto of Citius, Altius, Fortius (Faster, Higher, Stronger)? Well, yes and no. Obviously, when your competitors improve – and they do – you need to react. Many companies do exactly what is prescribed: Faster, Higher, Stronger. However, how much faster can they go? How much higher can they reach? How much stronger can they be? There is a limit to this if they do not make a dramatic change in the way they act. The same goes for Olympic athletes.

 

Let’s take a glimpse into the development of the world record in the longest Olympic running discipline, the marathon:

disruptive innovation

 

As you can see, in the past the improvements were rather grandiose. However, in recent years only very miniscule improvements were seen – despite the fact that the training efforts increased. Therefore, from an economic point of view you could say that the return on investment (increase in world record related to the training efforts) has diminished dramatically over the years. Why? Simply because athletes are training more and more intensely in order to be the best.

Disruptive Innovation

Does this scenario sound familiar to your market as well? It most likely does, even though it can be hard to admit. However, in most markets, be it delimited by geography, products, target groups, or any other variable, the level of progress is rather slow. Each time one competitor is slightly ahead, the other competitors make small improvements to catch up to or even outrun the others in a race that does not seem to end. Do those small improvements really matter to the customers? Are they constantly cheering “Faster, Higher, Stronger”? Or, on the other hand, are they in fact hoping for something very different? Perhaps without even being conscious about it? The answer in most cases is “Yes!” The sad reality is that as long as the competitors constantly look at and attempt to outshine each other by making minor changes then no significant improvements are achieved.

 

Disruptive innovation, a term of coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up, eventually displacing established competitors. This is what Christensen’s theory on disruptive innovation has taught us (if we had only listened):


As companies tend to innovate faster than their customers’ needs evolve, most organizations eventually end up producing products or services that are actually too sophisticated, too expensive, and too complicated for many customers in their market.

- Clayton Christensen

 

What is the result: The customers do not buy the next version because it is only slightly better than what they already own. What is even worse: It opens up a door for entirely new competitors who do think outside of the box to provide a solution that is “good enough” as well as often significantly cheaper and/or easier to use. This is exactly what has happened to companies like Nokia, Kodak and Blockbuster. Believe it or not: It could happen in your industry too.

 

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The creation of disruptive innovation is a key part of Lindberg International's 8-step Mission to Mars growth concept. For further insight please download our free Mission to Mars whitepaper.

 

Topics: Marketing, Change