Do you know your innovation ABCs?

More often than not, we see a tremendous lack of consensus as to what exactly classifies innovations as incremental or disruptive within and across organisations.

Disruptive innovation in particular we see frequently misused. Indeed, many clients point out past examples of disruptive innovation, which actually wouldn’t be classified as disruptive in the true sense of the term.

What we observe is that people tend to describe innovations as disruptive when they make a huge organisational impact, such as a dramatic increase in revenue or increased customer consumption or traffic.

The general thought process is as follows: “The innovation had a huge impact and so it definitely wasn’t incremental; therefore, it must be a disruptive innovation!”

However, innovations shouldn’t be defined by considering the impact of the innovation alone.

The waters get even murkier when innovations fall between incremental and disruptive innovations. We call these in-between innovations, ‘breakthrough innovations’.

To aid understanding, here are the definitions for all three levels of innovation:

Incremental innovation Improvements to an existing product, service or process.

Breakthrough innovation Changes to an existing product, service or process that has a significant impact on the business. For example, it could open up a new consumer category for the business, or change the way existing customers interact or perceive the organisation. This innovation results in a company leapfrogging ahead of its competitors – but the innovation originates from core organisational offerings.

Disruptive innovation A term coined by the godfather of disruptive innovation, Clayton Christensen. Disruptive innovation refers to new products or services that enter at the bottom of the market and, over time, move up and displace established market leaders.

There are three important qualities of disruptive innovation to note:

1. The new product or service enters at the bottom of an established market.
2. It begins as a substandard product that is not seen as a threat by established market leaders.
3. Adopters are non-consumers who couldn’t use the product or service previously because of cost or accessibility issues.

The innovation becomes truly disruptive when adoption becomes more widespread, improves in quality and finally reaches tipping point with established market leaders waking up one day to realise that their market share has slipped away and there is no way to get it back.

Examples of disruptive innovation include: the digital camera; mini mills; personal computers; and peer-to-peer business models such as AirBnB and Zoppa.

When it comes to disruptive innovation, ask yourself:

• What could be the next disruptive innovations in your industry?
• Are there any products or services that have entered at the bottom of the market that you need to keep your eye on?
• What precautions do you have in place to respond to potential disruptive innovations in your industry?
• What are you actively doing to produce disruptive innovations as an established market leader?