Does your online business use a disruptive innovation approach? In other words: have you ever considered getting a huge advantage over your competition by developing a business strategy that is a completely different way from what everyone else in your field does? Photo credit: Kheng Guan Toh

Disruptive innovation is a term used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically by being lower priced or designed for a different set of consumers. (Source: Wikipedia)

Disruptive innovation happens when a breakthrough development opens new and unexpected scenarios for future development and / or improves an existing product. Scott Anthony, author of the book The Innovator's Guide to Growth, points out that is not necessarily a new technology that drives disruptive innovation: "many times the technology is quite trivial. It is the business model, the way a company organizes and acts that drives disruption". To support this statement, Scott provides two examples. Walmart and the Nintendo Wii:

• When Walmart opened its first discount retailer in 1962, it was not doing something special by selling goods that were different than its competitors. What Walmart did instead, was to revolutionize its business policy by focusing on very low prices and on discount retailing.
• Instead of introducing games with better graphics, Nintendo has made it simpler and more accessible to play a videogame by introducing the Wiimote, an innovative game controller. Nintendo has consciously tried to target the non-gamers, and by doing so, it has greatly expanded the market for videogames and started to lead the future path of the gaming industry.

In both these examples, technology is either not relevant or very marginal to create disruption, whereas is the ability to solve real problems or to address new audiences the key to create effective disruptive innovation opportunities. In fact, for Scott disruptive innovation generally occurs in those markets where some kind of constraints inhibit developments, and when specific needs of customers are not properly addressed. When such barriers to consumption are torn down, you are effectively creating space for disruption to take place. If you want to know how you can facilitate, identify and enable disruptive innovation inside your organization, you will hear about some interesting and inspiring stories in this video interview with Scott Anthony himself. Here is what he had to say (full video and transcription):

How To Spot Disruptive Innovation Opportunities

Duration: 8' 32''
Full English Text Transcription
Paul Michelman: Hello I am Paul Michalman, director of content for HarvardBusiness.org and we are joined today by Scott Anthony. Scott writes the innovations insights blog for HarvardBusiness.org and he is the lead author of the new book The Innovator's Guide to Growth. Scott, thanks for joining the program. Today Scott we are going to talk about disruptive innovation. What does it mean? Who is responsible for it? And how can you can identify disruptive opportunities for your organization? First off: What is disruptive innovation? Scott Anthony: Disruptive innovation is a particular type of innovation that occurs when an innovator brings to a market an innovation that is:

• Simple,
• convenient,
• accessible,
• affordable.

Changing the game. Contrast this to sustaining innovations. Innovations that take what exists and make it better. A disruptive innovator transforms existing markets and creates new ones by playing the innovation game in a fundamentally different way.
Paul Michelman: Does disruptive innovation have to be big? Does it have to be a major change in the landscape? Scott Anthony: Disruptive innovations will result in major changes, but they do not often rely on technological breakthroughs. In fact, many times the technology is quite trivial. It is the business model, the way a company organizes and acts that drives disruption. Think about discount retailing for a minute. When Walmart opens its first discount retailer in 1962, it is not selling goods that are different than its competitors. But what it has done is it has created a new way to organize an act, that allows to make money at low price points, drives change in that organization. Oftentimes it is not the technology, it is the business model.
Paul Michelman: OK, can you give us another example that shows the difference between disruption and sustaining innovation? Scott Anthony: There are dozens of examples throughout history of this pattern taking place. Whether it is the personal computer, Google's auction model, eBay's online model, what P&G has done with Swiffer and Febreze... but a real interesting recent one is from the videogame industry. Contrast the Sony Playstation 3 to Nintendo's Wii product. The Playstation 3 is a technological marvel. The best gameplay you can find, great graphics, Blu-Ray disc in the player. It is aimed at the hardcore gamer, the most demanding consumer in the market. Nintendo has innovated in a very different way. Instead of introducing games with better graphics, Nintendo has made it simpler, made it more accessible. The big innovation is the controller. I actually happen to bring my Wii controller with me because I am a pretty big fan. This controller has an accelerometer in it, which allows it to measure motion along multiple dimensions. If you want to play baseball, you pick it up and you go like this. You want to bowl? you go like this. Nintendo is consciously trying to target the non-gamers. And by doing so, it has greatly expanded the market for videogames, by reaching people that Sony would not even think about targeting. Not winning by doing it better, but winning by doing it differently.
Paul Michelman: Who is responsible for coming up with disruptive innovation ideas and should companies have a disruptive innovations department? Scott Anthony: We really think everyone within an organization has the ability to come up with disruptive ideas. To work inside an organization, senior management does really have to lead and create appropriate organizational space for disruption to flourish, because if there is not that space, corporate antibodies will take even the best idea and force it to look like what has been done before. You do need to have simulators to create space for disruption, but really any innovator inside the company and outside the company can come up with a spark that turns into a disruptive idea.
Paul Michelman: Help us get our minds really around the "how-tos" here. How does a manager starts thinking about disruptive innovation? What are the questions he or she should be asking? Scott Anthony: There are a couple of questions that we found to be really helpful to begin to identify opportunities for disruptive innovation.

1. Look for markets where there is some kind of constrain that inhibits consumption. Where is there something that makes it difficult for people to solve problems in their lives? Sometimes they do not have skills, sometimes they do not have money, sometimes they cannot access the solution and sometimes it just takes too long. Find one of those barriers to consumption and see how you can obliterate it.
2. Try to identify where people have important unsatisfied jobs to be done. Where is there a problem that a costumer faces that they cannot adequately solve today? If you can find that frustrated costumer and ease their pain, you oftentimes have the tickets to disruptive innovation.
3. Then after you have looked for constrained consumption and targeted that job to be done, think about how you can play the innovation game differently.

Remember it is not about doing it better. It is about making it simpler, cheaper, more accessible, more affordable. That is what disruption is all about.
Paul Michelman: Do you always have to satisfy a need or can part of this be creating a need? Because I do not see the Wii satisfying a hole in the market. Scott Anthony: It is a really good question. You do not oftentimes have to be able to target something that a costumer tells you they want. In fact, the costumers can very rarely articulate these specific things they want or need. What the Wii does is make it so much more accessible and so much more affordable for people to enjoy videogaming, that the market begins to expand. Sometimes you cannot even talk to the customer. You have got to trust your intuition and judgement, put something in the marketplace and begin to see how it plays out. This can be a very scary concept for managers who are hone to rely on data. Data unfortunately only exists about the past . Sometimes you need to use intuition to identify an opportunity and go create your own data.
Paul Michelman: OK, we have established the planes you should be thinking on. Now let's look at how we, within our organizations, uncover these jobs that need to be done, these opportunities. Can you walk us through some of the areas we should look at for the biggest opportunities? Scott Anthony: There are a couple of tips that I can provide to help people get this right.

1. The first is to think about the markets that they are going to analyze. Looking not necessarily at the most demanding customer today, but thinking about people who are relatively undemanding, or people who are not consuming anything at all. Look to those markets to begin the exploration for disruption.


2. Then, as you begin that exploration, use a bunch of different techniques to understand those pinpoints in the market. Focused groups can be a simple way to begin a conversation with your customers.

Customer observation can be really powerful, because sometimes the customers simply cannot tell what they want. Sometimes you have got to give customers something. A very early prototype and let them co-develop the product or service with you. Sometimes you have got a more detailed, qualitative research to really pinpoint what are the points of frustration in the market and where there are opportunities to do things differently. The key is always put in the customer and their problem at the center of the innovation equation.
Paul Michelman: Do you always have to be daring to be successful in disruptive innovation? Scott Anthony: It is a really good question. A lot of times organizations hesitate to push for disruptive innovation, because it sounds kind of scary. They think they have got to invest hundreds of millions of dollars. There is lots of risk. They might rip their organization apart. But what we found is that the best way to get to a disruptive end point, is to get a simple small first step. Invest a little, learn a lot. Do not spend a huge amount of money upfront, because the only thing you can be sure, is that your first strategy is wrong. If you invest too much too soon, you are locking into a path that is fatally flawed. In fact you can move forward in ways that do not require huge amounts of money, that do not require huge amounts of risk, and then iterate your way toward success.
Paul Michelman: Scott Anthony. Thank you very much. For more on Scott's ideas on innovation visit his blog on innovation insights at HarvardBusiness.org.

Related Resources on Disruptive Innovation:

• Disruptive innovation
• Predicting the next disruptive innovation
• Disruptive innovation can lead to new ways of thinking
• Prof. Clayton M. Christensen interviewed by Howard Dresner

Original video interview by Paul Michelman for HarvardBusiness.org and first published on October 20th, 2008 as "How To Spot Disruptive Innovation Opportunities".

About Scott Anthony Scott Anthony is currently president of Innosight. In the past he has worked with Fortune 500 and is now a member of the board of directors of Media General. Scott is also the co-author (with Harvard Professor Clayton Christensen) of Seeing What's Next: Using the Theories of Innovation to Predict Industry Change and he is the lead author of The Innovator's Guide to Growth: Putting Disruptive Innovation to Work.

About Paul Michelman As director of content for HarvardBusiness.org, Paul Michelman manages the original content of the web site, including its blog network. He is the executive producer and host of the HarvardBusiness IdeaCast, and a frequent contributor to HarvardBusiness.org's Conversation Starter blog. Paul was formerly director of programming and production for Captivate Network.