Higher, faster, disruption!
“Bill, I have a great idea! We may be the biggest software producer on this planet, but we should also produce mobile phones in the future. Mobile phones that run small programmes that we can market worldwide via a shop. That way we generate sales with the mobile phones and the programmes.”
It is not known whether Microsoft co-founder Bill Gates was presented with such a disruptive idea at the turn of the millennium, but it is certain that Apple has sold more than 2 billion iPhones with this idea in the last 15 years, generating more than 1.4 trillion US dollars in sales.1 Impressive figures for an impressive disruption, aren’t they?
Disruption and evolution – what is that?
Have you also noticed that companies are increasingly talking about disruptive products, methods or ideas? It’s easy to get the impression that one innovation is no longer enough to inspire people. Higher, faster, disruption. The marketing machines are running at full speed. Bam! But what exactly does disruption mean and where are the differences to an evolutionary innovation?
The term “disruptive” or “disruptive technologies” was introduced by Clayton Magleby Christensen in his book “The Innovator’s Dilemma”2. A disruptive technology is an innovation that potentially completely displaces an existing technology, product or service.3
Christensen contrasted the terms “disruptive” and “sustaining” and described the mindset of companies in relation to existing technologies and products. Established companies tend to try to exist permanently on the market with their products and services. They want and need to secure their positions in existing markets, and even if something else is very regularly claimed, their purpose often revolves around the continuation of the company.4 Disruptive-thinking companies, on the other hand, consciously look for new ways to meet known needs and for ideas for new challenges. They think in terms of opportunities rather than risks and consciously want to be and act “differently”.
Evolution (Latin: evolvere a.o. “to develop”) is the gradual change of heritable characteristics from generation to generation.5 It is a biology term that has also been used in industry and business for very many years. Typical examples in the economic life of companies are the development of new versions of existing products, the adaptation of services or the transfer of ideas from one product genre to another. Evolution in itself presupposes the existence of something – a product, a service, an idea – that is changed over time. Consequently, a disruption is followed by an evolution. This becomes clear when we look at a few examples.
Examples of disruptive and evolutionary innovations
When you think about disruption, a few examples are bound to come to mind:
- You don’t have to buy music these days, you can stream it to your living room on a monthly subscription.
- You may no longer buy printed books, but download them as e-books.
- And healthy food is delivered to your office every Friday morning, so you can forego the weekend trip to the farm of your choice.
The above examples are changing the markets for all sellers and buyers of music, books and healthy food, so they are clearly disruptions. Bam!
“What’s the next big thing?” This is the question Apple gets to hear over and over again. Apple is probably the company that is most often cited as a shining example of disruptive technology. Let’s take a brief look at some of Apple’s products:
- The idea for the iPhone as a device with a touch display is said to have come to Steve Jobs in 2000, at a time when the Personal Digital Assistant (PDA) from the Palm company (the so-called Palm Pilot) had already been very successful on the market for a long time and Alcatel’s One Touch Com had almost disappeared from the market again.
- Apple did not invent the tablet PC either; one of the first devices of this kind was the GRiDPad from GRiD Systems in 1989, which, however, was not able to achieve great market significance.
- And although Apple’s smartwatch integrates a wristwatch and a computer, I can still remember a Casio wristwatch with a digital display and integrated calculator that I owned in the 1980s.
So are the Apple products mentioned not disruptions at all, but “merely” evolutionary innovations? If you take the invention of the wheel, printing, the steam engine, the light bulb, the telephone or Konrad Zuse’s mechanical calculating machine Z1 as a yardstick, then they are evolutions. But if you look at the effect on affected markets, changed product strategies of global players and the expectations of customers and consumers, then they are certainly disruptions. In short: Higher, faster, further cannot be clearly determined; the assessment depends on the perspective.
The corporate and market relevance of innovations
Two insights can be derived from the Apple examples mentioned above:
- In a disruption, not all elements have to be “novel”. In case of doubt, it may even be sufficient to combine different elements of existing products or services so that something new emerges that has the potential to “completely displace existing technologies, products or services from the market”.
- To be disruptive, it is not important to be first to market. The world is full of successful products and services that were not the first to address a market.
It gets interesting when we take a look at the corporate and market relevance of innovations. Innovations do not have to be directed at a market, but can also address internal workflows, processes, procedures, etc. Accordingly, four categories can be distinguished:
1. evolutionary innovation, high company relevance, no or low market relevance.
The focus of such innovations is on the company itself, which, for example, tries to simplify internal procedures, speed up production processes or establish partnerships with additional suppliers. It is irrelevant whether other companies have already realised similar innovations earlier.
2. disruptive innovation, high company relevance, no or low market relevance
In the 1990s and early 2000s, companies tried to dismantle monostructures while generating new revenue opportunities in other markets (also known as lateral diversification). For example, car manufacturers became involved in aerospace and international hotel groups took stakes in travel agencies and car rental companies. These changes posed major challenges for the companies, but had little or no relevance for the markets concerned. Many of these investments were later discontinued.
3. disruptive innovation, high company and market relevance
A disruptive innovation has a high market relevance if it attacks or even eliminates existing markets. Disruptive innovations also give rise to entirely new ventures, examples of which include long-distance bus travel, car-to-go and rent-a-bike models, private home rentals, online pharmacies or online medical consultations.
4. evolutionary innovation, varying degrees of corporate and business relevance
This form of innovation is the most common. Examples include all new generations of mobile phones, cars, software products, computers, machines, robots, etc. Market relevance varies per market and technology, product or service. And the company relevance depends on the respective strategic orientation.
Interestingly, every innovation that has market relevance also has business relevance, but not every innovation that has business relevance is relevant to the market; this is one of the reasons why product developments flop and product launches fail. And of course the market relevance of a (disruptive or evolutionary) innovation can decline over time, but still increase the business relevance. Example: the 1st generation iPhone generated about $6.74 billion in sales in 2008 with virtually absolute market relevance; in 2021, sales were almost $192 billion with less market relevance.6
Conclusion
In general, companies try to win customers with their technologies, products and services. If a company is successful, it will try to conserve this success. This practically always leads to a disruptive development gradually becoming an evolutionary development.
Many companies offer new versions of their well-known products every year and the weight of the innovations decreases, at least perceptibly, per version – a typical sign of an evolution. What companies should watch out for, however, is “The Innovator’s Dilemma”, as Christensen described it: due to market success with existing products and an accompanying risk aversion, companies can miss the moment when something completely new emerges and a mobile phone and a PDA become a smartphone. Those who miss this moment often find it difficult to achieve similar success with me-too strategies. It could then become all the more important to shine with your own innovations. Whether these are disruptive or evolutionary technologies or services is secondary.
Notes (mostly in German):
1] [6] iPhone Absatz und Umsatz weltweit
[2] The Innovator’s Dilemma: Warum etablierte Unternehmen den Wettbewerb um bahnbrechende Innovationen verlieren, Clayton M. Christensen, Verlag: Vahlen
[3] Wikipedia: Disruptive Technologie
[4] Conny Dethloff has written a very readable article on the purpose of companies: Purpose? I got one: To stay alive!
[5] Wikipedia: Evolution
Many companies want to retain customers for their products or services in the long term. One way of achieving this is the so-called Lock-in Effect.
Michael Schenkel has published more articles in the t2informatik Blog, including
Don’t Uber yourself
Unique Selling What?
Customer retention – an outdated model?
Michael Schenkel
Head of Marketing, t2informatik GmbH
Michael Schenkel has a heart for marketing - so it is fitting that he is responsible for marketing at t2informatik. He likes to blog, likes a change of perspective and tries to offer useful information - e.g. here in the blog - at a time when there is a lot of talk about people's decreasing attention span. If you feel like it, arrange to meet him for a coffee and a piece of cake; he will certainly look forward to it!