24 May 2017

What’s the Difference between Innovation and Disruption?

 

Does a business need to be innovative to be disruptive? And does innovation automatically lead to market disruption? The answer is as much yes as it is no. To understand that, it’s important to define what innovation and disruption mean on their own before we look at their how their intersection has translated into digital disruption in the 21st century.

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Innovation

In the context of modern business development, innovation can be defined as the act of turning an idea or invention into a product or concept that has specific economical value and satisfies a need. In a stable industry, where key players have a well-defined position and variables like cost and revenue can be tangibly and reliably forecast, innovation is found in R&D strategies, the roll-out of new platforms and the implementation of new manufacturing processes or human resource management structures. Taken at face value, this kind of innovation will not necessarily change an industry’s status quo. Rather, the industry will move forward as one to reposition itself around this innovation, thus actually maintaining the status quo.

Disruption

At its core, in a similar business-related context, disruption is best defined as the act of offering better value in the same industry, creating a market where there was none, that leaves industry leaders without an appropriate response. Netflix was a disruptor to Blockbuster in the home video and DVD market, for example. In fact, the latter eventually went out of business because they couldn’t compete with Netflix’ initial business plan of home delivery. A disruptive company shatters the status quo, seizing a clear opportunity that key players deemed irrelevant or were unaware of through complacency. Often, all the cogs are in place for an industry paradigm shift—there’s just nobody there to find the right lever.

Disruptive innovation

So where does innovation stop and disruption begin? There’s no clear line; they can overlap and even be unconditionally linked. Disruption can be a form of innovation as much as innovation can be disruptive. A Telegraph article equates it more to innovation being rational, while disruption is irrational. Rational innovation is the well-thought-out process of sound business planning and forecasts. Only then are sound, quantifiable processes put in place. Irrational disruption is more akin to thinking outside the box and seeing if a novel idea can hold any water. Disruptive innovation lies somewhere in the middle: turning the irrational into something rational.

Take the hospitality sector, for instance. The rise of digital disruption through innovation is adequately represented by Airbnb. Their model of turning anyone’s house into potential accommodation and opening a communication channel between the renter and the homeowner, didn’t require hard innovation, but innovative thinking. They didn’t need to develop an infrastructure, device or complicated processes. They looked at consumer demand and discovered a new commercial avenue to satiate that demand. The beauty of it is that their implication is limited to hosting a platform and taking a small fee. All the legwork is done by people renting out their houses with the service quality being governed by the peer-reviewing system inherent to the Airbnb formula. It’s a simple idea that was easy to realise, and to which the rest of the hospitality sector is yet to find a proper answer.

Digital disruption

When talking about digital disruption, innovation should be understood as a process similar to the one Airbnb followed. As a business, you need to look at the market you operate in and correlate your business plan and operational processes accordingly. If you find discrepancies or untapped pockets of the market, take proactive measures to adapt so that you can maximise your output. Do this before somebody else does it. Be innovative and adopt a more agile business model to gain an advantage on your competitors.

To find out more about how to spot and master digital disruption, download our eBook: Disrupt or Become Disrupted. To see how we can help with your own digital transformation, see our services.

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