How to Be a Disruptor

How does a small, young company beat an industry giant on its own turf? Through what Harvard Business School professor Clayton Christensen calls disruptive innovation. 

It works like this. Big players focus on sustaining innovation, upgrading existing products and services to attract higher-paying customers. But soon they start to ignore all the regular customers who just want simple, low-cost alternatives. That’s where the entrepreneurial company jumps in with that basic offering. The big guys stay focused on more profitable customers and begin to overserve, adding bells and whistles no one wants to pay for. Meanwhile, the disruptor improves its product to appeal to more people. By the time the incumbent notices, the disruptor has already started to take over the market.

The classic example is the steel mini mills which first produced low-quality rebar, then moved to sheet steel, stealing business from the large mills that had been dominant. More recent disruptors include makers like Toyota and Hyundai, which launched with economy models then added luxury features and brands.

The only way for industry giants to fight back is by launching their own disruptive innovations. To succeed, they must treat the project as a separate unit with a different business model and growth expectations; ask what job do customers need to get done; segment customers by job, not by product, market size, or demographics; and develop basic, low-cost ways to get the job done. That’s how Procter Gamble came up with Crest White Strips, a cheap, do-it-yourself alternative to an expensive dental service. 

Disruptive innovation creates new markets and reshapes existing ones. To achieve growth in a fast-changing world, you want to be a disruptor. Don’t be disruptive.