What's the Difference Between Breakthrough and Disruptive Innovation?
Throughout history, Industry leaders have often been toppled by forward-thinking competitors. You probably witnessed the demise of major players like Blockbuster, the Blackberry and Xerox as they were surpassed by their respective rivals Netflix, the iPhone and Canon. And don't forget Uber, a company often heralded for its poignant disruption of the taxi industry.
These shifts in the market share were undoubtedly driven by innovation, but can we accurately label these success stories as disruptive or were there other forces at play?
Breakthrough innovation and disruptive innovation are terms that are regularly misrepresented. By failing to understand the differences between these types of innovation, you run the risk of building an innovation strategy with incohesive behaviors making it unlikely for you to yield the hoped-for result.
Disruptive innovation vs. breakthrough innovation: What's the difference and why is it important?
With a wave of agile startups sweeping the globe, once untouchable incumbents are under siege. During an exclusive interview with Pioneers, American entrepreneur Steve Blank said, “I can't think of an industry where large companies are not threatened by disruption… Stores like Macy's and Sears are all going to be ex-companies…there is no survival path for them” (Blank, 2017).
A common error is that people assume a great technological leap forward is synonymous with disruption, which isn't always true. Understanding the differences between different types of innovation is critical for selecting the right tools for your context.
Despite this gloomy outlook for Macy's and Sears, hope remains for established businesses. By grasping the nuances of different innovation types and how they manifest, you can develop a stronger innovation strategy that defends against future rivals and ensures long-term viability.
In the words of Steve Blank once more, “This whole notion of an ambidextrous corporation that can execute and innovate simultaneously is no longer just nice to have, It's a matter of survival!” (Blank, 2017) On that note, let's talk more about disruptive and breakthrough innovation and how they differ.
What is breakthrough innovation?
Breakthrough innovation is conducted by companies to develop new products that are better and can be sold at higher prices to their best customers. Clayton Christensen, a former professor at Harvard Business School, coined the term “sustaining innovation” to describe this process.
Incumbent businesses generally stay on top as long as they continue to deliver next-generation performance to their customers; things like extra blades on razors or bagless vacuum cleaners that are easier to empty. These innovations are principally guided by the needs and desires of a company's best customers and their insatiable appetite for newer and better products.
For managers, deciding which innovations are worthy of funding is relatively straightforward because a reliable market and data set already exists. The customer makes clear what they want, and they wield extraordinary power in directing a company's investments.
With dedicated innovation departments and specialized R&D teams, incumbent businesses have little trouble staying ahead of their industries. Small-time competitors can be easily squashed or absorbed by the corporation before they pose a substantial threat.
Companies that have remained at the top for a long time have done so by making breakthrough innovation a key component of their innovation strategy.
What is disruptive innovation?
Disruptive innovation has become a blanket term used to describe any situation in which an industry is shaken up and previously successful businesses stumble. But that usage is too broad.
Whereas breakthrough innovation is geared towards adding better performance and more bells and whistles to products for established customers, disruptive innovation emerges from the bottom, serving small or emerging markets that have long been overlooked.
“Disruptive innovation is not a breakthrough innovation that makes good products a lot better.” (Chrtistensen, 2012)
Because industry leaders are rarely at the forefront when it comes to new technologies, opportunities arise for less risk-averse competitors to launch an attack.
Typically, disruptive technologies introduce a very different package of attributes from the ones mainstream customers historically value, making them appear somewhat irrelevant to industry leaders. Disruptive innovation forms a catalyst for emerging markets which can go easily unnoticed by top-level businesses. At first, then, disruptive technologies tend to be used and valued only in new markets or new applications.
But as an emerging technology develops, a once expensive and inaccessible product can be transformed into something affordable and within reach of the larger population. When the quality of a disruptive innovation rises enough for mainstream customers to consider switching, disruption has occurred.
At this point, industry leaders will start adopting the technologies pioneered by the disrupters in an attempt to counter the movement. But it's already too late.
What are the other types of innovation?
In his article Clarifying Innovation: Four Zones of Innovation, Jim Kalbach presents a model that demonstrates the four types of innovation that businesses should incorporate into their innovation strategy. We've already gone into detail about breakthrough and disruptive innovation, but there are two other types worth briefly discussing: incremental and game-changing innovation. Kalbach defines these innovation types as follows:
Incremental innovations involve modest changes to existing products and services. These are enhancements that keep a business competitive, such as new product features and service improvements.
Game-changing innovations transform markets and even society. These innovations have a radical impact on how humans act, think and feel in some way.
In Kalbach's model, the four innovation types (Incremental, breakthrough, disruptive and game-changing) are plotted on a graph where the y-axis indicates the degree of technological progress while the x-axis shows the impact an innovation has had on a market.
Incremental innovations help a company to stay in the game and represent a significant portion of a company's innovation strategy. These types of innovations are often small but can compound over time to great effect, sometimes impacting the market greatly and contributing towards significant technological advancements. As a result, incremental innovations occupy much of the real estate on both axes of Kalbach's graph.
Game-changing innovations transform markets. They introduce new product categories, for instance, which can ensure long-term success for a business. These innovations represent some of the rarest and most astute advancements found in mainstream society. Game-changing ideas change the way we think and work, altering the fabric of entire industries. Thus, game-changing innovations occupy the upper-right corner of Kalback's graph which denotes maximum technological progress and market impact.
Why are industry leaders vulnerable to forward-thinking startups?
When leading companies get too close to their existing customers, all their innovation decisions are influenced by customers' desires. In this mad dash to stay marginally ahead of competitors, it's easy to disregard the threats gathered below.
So, shouldn't managers be investing more in potential new technologies? Yes, but it's easier said than done. After all, any adept manager will only pursue innovations that show promise, are supported by data and seemingly provide further value to existing customers. For all the right reasons, managers are trained to identify customers' core aspirations, forecast technological trends, assess profitability and allocate resources accordingly. It's no surprise, then, why industry leaders fail to make investments that customers might demand in the future.
“Before managers decide to launch a technology, develop a product, build a plant, or establish new channels of distribution, they must look to their customers first: Do their customers want it? How big will the market be? Will the investment be profitable?” (Bower & Christensen, 2021)
So companies are faced with two options: target downmarket customers by pursuing new technologies with no pre-existing market or supporting data; or continue serving upmarket customers by developing new products for existing customers. Most managers choose the latter.
Unsurprisingly, managers back projects where the market seems assured, thereby reducing risks and safeguarding their careers. There's simply too much risk involved when innovating downmarket. And so established companies innovate upmarket, unaware of the events unfolding below.
Forward-thinking startups are much more willing to take risks, their business models are based on theories rather than data, which makes their future uncertain. Blank confirmed this during his interview with Pioneers, “Remember that VCs typically invest in 20 to 25 startups – and usually only two of those succeed.” (Blank, 2017)
However, the rare theories that do work give startups a considerable edge over industry leaders. Because large companies base their decisions on historical data, they can't develop new products or services for emerging markets. By the time they cotton on, the game is already over.
How can established companies keep emerging threats at bay?
Does this mean that all successful companies face a similar fate to Blockbuster and Blackberry? Of course not. There is a widely acknowledged strategy that industry leaders can use to prevent disruptive technologies from toppling them from their podium.
Managers must separate explorative innovations from the main business if they want to survive. You see, breakthrough innovations and disruptive innovations work like opposing forces, making it impossible to bundle these concepts into one strategy.
As previously discussed, when it comes to innovation in large companies, the allocation of financial resources is typically swayed by a demonstrable consumer desire. It's not strategically viable for leading companies to risk investing in emerging technologies.
But it's equally vital for large companies to keep a finger on the pulse of downmarket affairs. And this cannot be achieved by basing disruptive innovations within the core business; success is dependent on keeping explorative innovations separate.
Explorative innovation teams must monitor the progress of pioneering companies through monthly meetings with technologists, academics, venture capitalists, and other nontraditional sources of information. Extracting input from a variety of sources is especially important for disruptive innovation activities. The future is so uncertain that no theory, regardless of how unlikely it is, can be disregarded.
“The boardroom very rarely has crazy people in it. And when you're dealing with innovation, if a third of that board isn't crazy, then you're not innovating hard enough.” (Blank, 2017)
By recognizing emerging trends early, you're able to react before being surpassed. The majority of your explorative endeavors will likely fail, but you must be willing to see business units die if you wish to live.
Coordinate your innovation strategy with innovation management software
When we talk about successful innovation, we're referring to a coordinated strategy that addresses all the different types of innovation. Business leaders face difficulty when innovating on such a large scale because the rate at which ideas come in causes the entire process to collapse.
Innovation management software enables you to easily coordinate large-scale innovation activities and achieve results at a colossal rate. InnovationCast is a collaborative innovation management software built to accelerate your innovation activities, improve performance and productivity and ensure long-term viability in your industry.
A collaborative approach to innovation gives you access to an extended network of customers, shareholders, employees and partners from which you can harvest groundbreaking ideas. By running these suggestions through a defined process, you can get results from innovation in months, instead of years.
“You never know what talent and ambition might be lurking in your employee base” (Blank, 2017)
Ready to find that next game-changing idea? Schedule a demo with InnovationCast today.