Have you ever heard the term disruptive innovation before? Most people are familiar with what innovation is and how it is so important when you want to move an industry forward. Disruptive innovation is a term that refers to a small company that is moving up and challenging much larger companies due to some type of innovation that they are capable of. Disruptive innovation has the potential to completely change industries and shift power positions rapidly.
Understanding Low-End Disruption
Low-end disruption is probably the most common type of disruptive innovation that you will encounter. This generally involves a company using a low-cost business model to enter an industry and take a share of the market. A company using this method manages to keep costs low, and they entice customers due to the lower prices that they offer. People will be more willing to buy certain things if they can get them at a lower cost, which changes things quite a bit in the market.
Understanding New Market Disruption
New market disruption is a lot different than low-end disruption because it involves a company coming in and creating a new segment in a market that already exists. For example, someone could develop an innovative product that changes the way that people consume something. This new alternative could disrupt the market and take a sizable piece of the pie very suddenly. What makes this so much different from low-end disruption is that this is mostly focusing on creating a new market and attracting new customers that weren’t interested in the old market.
There are many examples of new market disruption that you could point to over the last 30 or 40 years. You could look at the video game market and how handheld video game consoles caused a new market disruption. They appealed to people who wanted to be able to play something on the go and weren’t limited to appealing to people who wanted to play games on a home console or computer. That’s just one example out of dozens that could be used to illustrate this point.