Managing the Risk of Disruptive Innovation

Disruptive innovations can hit the competitive environment in many forms, such as a revolutionary business model, a completely new technology, or a new spin on an existing product or service.  These types of innovations have the potential to upset mature organizations and alter the face of entire industries.  This article, “Surviving Disruption” authored by Maxwell Wessel and Clayton M. Christensen, from the Harvard Business Review examines the factors behind the success of disruptive innovators, and presents an approach for strategically outmaneuvering disruptive innovations.

What Makes Disruptive Innovators Successful?

Article authors Maxwell Wessel and Clayton M. Christensen suggest that disruptive innovators achieve success because they utilize their business’s “extendable core.”  Extendable core refers to a business’s ability to progressively develop and leverage its innovative business model or technology as more customers are acquired.  The disruptive innovator does not need to fall into price competition with other market players along the way; this results in steady, sustainable market penetration.  The authors point out that this is why small, opportunistic businesses can compete with larger, more mature operations – by utilizing the extendable core.

Overcoming Disruptive Innovators

Despite the advantages that disruptive innovators hold, established organizations can still counter the strategic risk posed by disruptive innovation.  Rather than worrying about the negative impacts of innovators on an existing business, Wessel and Christensen suggest that managers should focus on the advantages that their business holds over the disruptive competition.  Organizations should pinpoint what makes their offerings attractive to customers and maximize those features of the business. 

Inevitably, some aspects of “legacy business” may be taken away or replaced by disruptive innovators; conversely, many other aspects of an existing business can be preserved if managers strategically focus their efforts where innovators will have more trouble competing.  The article lays out five barriers to disruptive innovation that managers should consider when analyzing the risk of disruptive innovation and formulating a response to it.

Wessel and Christensen also include a real-life example in the article that focuses on an industry that is currently facing disruptive innovation: the grocery business.  The authors apply their disruption risk management approach to this industry from the perspective of a brick-and-mortar grocery store, demonstrating how managers in these businesses might address the threat of innovative competitors, such as online grocery services.

Original Article Source: “Surviving Disruption“, Harvard Business Review, December 2012