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Disruptive innovation involves the introduction of new business models or technology that disrupt existing markets (Christensen, Raynor & McDonald, 2015). Disruptive innovations have two primary characteristics; first, they introduce products into existing markets that are not immediately popular, and second, these products slowly gain the confidence of customers to the point that they invade established markets (Baiyere & Hukal, 2020). Through disruptive innovation, small startups have been able to upset industry giants who mostly focus on sustaining innovation. In the last few decades, the low-cost alternatives regarding products and services that have been offered by disruptive innovations have led to the decline of big players in many industries over the years.
One of the great examples of this phenomenon is the disruption of the video rental market by Netflix. Netflix offered video streaming services at a time when retail chains were more popular. By the turn of the millennium, Blockbuster was earning an enormous amount of money because of its widespread nationwide outlets and the late fees it charged on its customers (Shih, Kaufman & Spinola, 2007). On the other hand, Netflix had no retail stores and was thus difficult to find. However, its mail-delivery service and later streaming services continued to grow in popularity because they charged subscription fees, did not depend on penalizing their clients, and had a more customer-friendly way of delivering video content to their clients. By 2010, Blockbuster had declared bankruptcy while Netflix had grown to be worth close to $ 30 billion. The decline of Blockbuster was mainly as a result of its reluctance to shift from its retail model to a digital platform, as well as its refusal to cancel late fees, which were an essential source of revenue for the company but increasingly repulsive to customers. Netflix thus overthrew Blockbuster as streaming services became more popular and physical video merchandise became outdated.
Other examples of disruptive innovation include the emergence of online news sites that have made physical newspapers outdated. Even though both sources of information operate in the same market, consumers prefer online news sites because they can conveniently be read from a phone or portable computer, can update their content as consumers are still reading, and offer the latest news that could be accompanied by videos or live footage (Karimi & Walter,2016). Therefore, the print media industry has thus witnessed mass closures, especially for companies that did not transition to internet news. Another notable example is the mini-mill, a disruptive innovation that over 40 years, caused integrated steel companies to go under. The mini-mills progressively established how to produce higher qualities of steel at lower production costs using melted down manufacturing waste and recycled car metal.
Additionally, in the 1950s, companies like Zenith and RCA manufactured radio consoles that produced high sound quality. However, they were expensive, clunky, and inefficient. Several years later, smaller transistor radios produced by Sony, which were of much lower sound quality, were introduced into the market (Cohen,2016). Despite their weaknesses in terms of sound quality, they were portable, lighter, and cheaper. Even though high-end companies ignored them, they had improved in sound quality by the 1960 and 1970s, and thus, companies that death with them made huge profits while older versions of the radio declined. Furthermore, Apple Company’s iPhones, despite being an example of sustaining innovation within the smartphone market, disrupted the laptop market. This is because the iPhone allowed developers all over the world to create applications and directly connect with their clients.
Another example of disruptive innovation was the disruption of earlier, heavier computers such as the mainframe computer by smaller personal computers. Consistent with patterns within disruptive innovation, it was newer companies, and not the pioneers of the computer industry, that manufactured the more popular laptops. In addition, cell phone cameras have disrupted the photography market. The disruption by the cell phone camera started with the gradual decline of the film photography industry. The Kodak company was making substantial profits from film technology for many decades, to the extent that they rejected a form of filmless technology that was developed by one of their engineers in the 1970s. At the time, filmless technology was viewed as a crude version of photography that would not threaten the film photography industry.
However, digital cameras led to the eventual decline of Kodak, as more and more sophisticated digital cameras were introduced into the market (Lucas & Goh, 2009). Similarly, cellphone cameras were at first crude, with much inferior quality of food as compared to digital cameras. However, with every new release of a cell phone model, cell phone cameras evolved to match what digital cameras could produce in terms of quality. Thus, more people today rely on phones such as the iPhone to meet their photography and videography needs than those who use digital cameras. This is because an integrated camera is much more convenient to carry and handle.
Moreover, examples of disruptive innovations include the emergence of ride-sharing apps that have taken over the taxi business. Today, one does not have to be a taxi driver as long as they are registered to a ride-hailing company. Furthermore, Airbnbs are gradually running hotels out of business because they offer a homely environment at a cheaper cost to previous hoteliers (Oskam & Boswijk, 2016). Today, when people travel to new destinations, they view Airbnb as low-cost solutions to their accommodation needs. Airbnbs also offer users a higher sense of freedom and privacy as compared to hotels. Also, artificial intelligence is continually learning how to perform a task that would be performed by ordinary humans and is thus taking over traditional human jobs.
In conclusion, disruptive innovations often take time to gain a market hold, but the use of a more sophisticated form of technology to disrupt existing markets. Also, the products and services offered as part of disruptive innovation are more convenient and often are cheaper.
Baiyere, A., & Hukal, P. (2020, January). Digital disruption: a conceptual clarification. In Proceedings of the 53rd Hawaii International Conference on System Sciences.
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard business review, 93(12), 44-53.
Cohen, M. M. (2016). “Always on and always on them”: Portable radios and the creation of the mobile media experience. Mobile Media & Communication, 4(3), 371-384.
Karimi, J., & Walter, Z. (2016). Corporate entrepreneurship, disruptive business model innovation adoption, and its performance: The case of the newspaper industry. Long Range Planning, 49(3), 342-360.
Lucas Jr, H. C., & Goh, J. M. (2009). Disruptive technology: How Kodak missed the digital photography revolution. The Journal of Strategic Information Systems, 18(1), 46-55.
Oskam, J., & Boswijk, A. (2016). Airbnb: the future of networked hospitality businesses. Journal of tourism futures.
Shih, W. C., Kaufman, S. P., & Spinola, D. (2007). Netflix.