Did Apple disrupt the market? Did the launch of iPhone make Apple a market disruptor?
In the text below we are explaining the difference between two types of innovation; radical and disruptive, that often get used interchangeably, although they do have different meanings.
We have in previous articles mentioned different types of innovation and the reoccurring confusion between innovation and invention. Here we also briefly mentioned the concept of disruptive and radical innovation. Disruptive and radical innovation are, like innovation and invention, two terms that are often misunderstood and misused. They are often seen as synonyms when they in fact are descriptions of two different phenomena within innovation.
If you look it up, the word disruption is a synonym with words like disturbance, interference, and disarranging. While radical is a synonym with words like extreme, comprehensive, and thorough. These different synonyms of the words themselves, also reflect the difference between the terms in innovation theory.
What is disruptive innovation?
Disruptive innovation is often used to describe any situation that shake up the industry, and former successful incumbents stumble (Christensen, Raynor, & McDonald, 2015). But this description does not fully cover the spectrum of disruption and can relate to why disruptive and radical innovation often is seen as synonyms.
Disruptive innovation is looking at a situation where a smaller firm is able to challenge established incumbent businesses. This situation occurs as the incumbent businesses are too focused on improving their existing products and services, i.e. focuses too much on sustaining innovation, (Christensen, Raynor, & McDonald, 2015).
According to this definition, yes, Apple has disturbed the whole mobile phone industry when they launched iPhone.
Sustaining innovation “targets demanding high-end customers with better performance than what was previously available,” (Campbellsville University, 2017), which implies that a sustaining innovation does not create any new market, it rather focuses on creating incremental changes in the existing market.
As incumbent business focuses on these incremental changes, opportunities for smaller businesses arises. More specifically, as incumbents focuses on improving their existing products and services, they overlook lower-end segments, that then become available for smaller businesses to encounter (Christensen, Raynor, & McDonald, 2015).
This relates to what a disruptive innovation actually implies. Christensen et al. (2015) presents four key characteristics that need to be identified for a disruption to have taken place;
- We are facing a smaller company with fewer resources than the incumbent companies.
- The innovation originates in the low-end of the market or in new markets. This means that the innovation provides products or services to the incumbents’ overlooked segments or create an entirely new market where a market did not exist, by turning non-consumers into consumers.
- The smaller business is offering a “good-enough” product or service that does not exceed the quality of the incumbents’ products or services. Simply meaning that they offer functionality to a lower price.
- The new innovation gradually moves up-market, pushes prices down, and mainstream customers who previously saw the innovation as inferior, adapt the new innovation. This means that a disruptive innovation has occurred first when the mainstream customers turn to the entrant’s offering.
(Christensen, Raynor, & McDonald, 2015)
According to these four characteristics, Apple is not a disruptor at all. Apple did not disturb the market by entering mobile phone industry through a low-end market. Additionally, iPhone does not offer functionality to a low price. iPhone was a superior product at the time of the launch and still is many years after.
What is important to remember is that disruptive innovation is a process, and is represented by the evolution of a product or a service. This means that disruption is something that happens over time – a new innovation may thus in fact become a disruptive innovation even though it is not identified as one today. It is also important to note that it is not a requirement for disruptive innovation to be successful.
What is different with radical innovation?
What then is a radical innovation? A basic description of the term is that it is an innovation beyond our imagination, it is major. A more formal definition of the term describes radical innovation as something that “stem from the creation of new knowledge and the commercialization of completely novel ideas or products,” (Hopp, Antons, Kaminski, & Salge, 2018).
In difference to disruptive innovation, radical innovation has more focus on organizational behaviour and commercialization structures. In addition to this, radical innovation is usually a method for securing long term competitiveness and can thus be seen as the counterpart to incremental innovation (Hopp, Antons, Kaminski, & Salge, 2018).
Also, Apple is a good example of radical innovation.
Radical innovation may also include actions like displacing current products, coming up with new product categories, or altering customer-supplier relationships. The key difference is that a disruptive innovation is linked to the needs of customers, while a radical innovation is linked to capabilities within incumbents (Hopp, Antons, Kaminski, & Salge, 2018).
The difference between these terms is tightly knit to Christensen et al. (2015)’s requirements for a disruptive innovation to have taken place, which naturally should be read with a nuanced eye. It is though a key factor showing that disruptive and radical innovation is not necessarily the same thing. What is often confused between the two term is that a disruptive innovation is not necessarily a major change, which usually is the case in a radical innovation, i.e. a disruptive innovation can both be radical and incremental by its nature. Another important note is that radical innovation might just as well happen within an incumbent business without self-disruption having to take place.
Uber vs. Netflix
Trying to grasp what disruptive innovation really is, we can look at the case of Uber and Netflix, both of which typically is seen as disruptive innovations, when in fact only one of them is.
Uber is something many see as a disruptive innovation, when in fact their characteristics are more in line with a sustaining innovation and is thus not even seen to be radical. The reason for this is that Uber targets the existing market, or the existing customer base. It can also be argued that their service is even of a higher quality than the existing taxi service, with the ability to order and pay over apps, rate drivers, and even order exclusive cars for a cheaper price, which even was their launching service. It is thus a service that improves the existing taxi service, which is in line with the definition of sustaining innovation.
Netflix on the other hand initially offered a mail-order DVD subscription service that targeted those who did not care about hot new releases, while those that did care and wanted this on-demand did not find them attractive enough. Today, Netflix and similar streaming services have put any DVD rental service out of business, and can even be argued to challenge movie theatres. In other words, they were a small company against an incumbent, they targeted non-customers and created a new market, they offered lower quality to a cheaper price, and eventually, they moved up-market taking over also the high-level customers.
Conclusion / Implications
Understanding the difference between types of innovations are crucial when developing your own innovation strategy. This serves as an example, as the strategic actions needed to deal with radical innovations do not necessarily secure your company from disruptive innovations.
It is also important to remember that even though you might be facing disruption, do not forget your incremental innovations. To succeed, the combination of both exploring and exploiting is crucial.
The author of the text is Malene Sighaug Bigseth.
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