Hello. I'm Natasha, a teaching fellow at Imperial College London. Let's here review one type of innovation. What do you think of when you hear the word disruption? Perhaps you think of someone interrupting a meeting, loud music causing a disturbance, or a product becoming more popular than another. Well in the world of innovation, new products or services are frequently wrongly identified as disruptive. This is mainly due to the public's misunderstanding of this word. So let me take you through what disruptive innovation is. I'll give you examples along the way, and explain the benefits of this type of innovation. Disruption can be said to occur when a less known smaller business with few resources successfully challenges a well known business. They disrupt the big businesses position in the marketplace. This happens by first addressing the needs of the least demanding consumers, and results in the less established business creating products, services, or technologies, that do a good enough job at a far lower cost. You can see then, the disrupters might not have the highest or most complex specification. Established businesses on the other hand are often focused on improving their products or services for their most demanding and profitable customers. This means they exceed the needs of some customers, yet overlook the needs of others. It is these overlooked customers that smaller businesses, perhaps new entrants to the market can then target. Smaller businesses then begin moving up market by improving the quality of their product or service until they perform to a level expected by mainstream customers. They do this whilst also maintaining their original advantages. It is when mainstream customers start favoring the smaller businesses product or service that disruption has occurred. Take a closer look at the processes involved. You can see what I've described in this figure, from an article by Clayton Christiansen and colleagues. The y-axis shows the performance of the product. The x-axis is time. This line shows the customer's willingness to pay for a product or service. This is based upon perceived performance, and shows that there is a distribution of consumer's expectations with respect to a product. Some, the high-end consumers shown on the top line, will have higher expectations, needs, or demands on the product. The line at the bottom, the low end consumers, have much lower needs, demands, or expectations from the product. These lines show how a product or service improves over time. Established businesses often known as incumbents, introduce products or services to satisfied the high-end of the market where more profits are. You can see this here in the upper line. By doing so, they neglect the low end of the market, as well as some mainstream customers who are less willing to pay higher prices. You can therefore see how this allows new or smaller businesses, known as entrants, to find a foothold in the less profitable end of the market. By gradually improving the performance of those products, it challenges the market dominance of established businesses. This means, the smaller business is on a disruptive trajectory. Let's take a real world example of a disruptive innovation, Netflix. This company challenged the dominance of Blockbuster, which led to Blockbuster filing for bankruptcy in 2010. So how did this disruption occur? When Netflix first launched in 1998, it was the world's first online DVD rental store. But it wasn't of interest to the majority of Blockbusters customers. While Netflix had a large catalog of programs, DVDs were delivered through the mail, meaning they took several days to arrive. The majority of Blockbuster's customers rented movies on impulse, and watched them the same day. However, as the technology improved, Netflix shifted to streaming videos online, which I'm sure you can imagine, became appealing even to mainstream customers. At this point, Netflix was also able to provide a wide selection of high-quality movies and TV shows. So customers could access what they wanted to watch, more conveniently, and at a low cost. Disruption had occurred. Now I've gone into what a disruptive innovation is in depth. I'd like you to consider what its benefits are. Which benefits did you think of? Disruptive innovations provide better, cheaper products, and more accessible services. Effectively, the product or service becomes more open and affordable to a much larger population. In summary then, disruptive innovations allow a smaller business to challenge an established business. It helps provide products and services for more people, at a fraction of the cost. So based on what what you have learnt, do you think mobile phones are a disruptive innovation? What about Uber or McDonald's? Customers from a variety of industries have benefited from disruptive innovations. What about healthcare? How do you think global health care could benefit from disruptive innovations? What challenges might be associated with this? Consider this as you engage further with disruptive innovations.
