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Disruption Is Not About Startups And Their Strategies

When an incorrect use of the term can turn out to be worse than disruption itself

30Nov

'Disrupt or be disrupted' has become a mantra among many businesses. Startups often use disruption to label their strategy or apply it to their products when they pitch to investors. From incumbents to the smallest businesses, the term is now overused to the extent that it has almost lost all meaning.

The first lesson - disruption shouldn't and can't be applied for the sake of a trend, it simply doesn't make sense. Disruptive projects, disruptive products, disruption guides, and even degrees in disruption - these have nothing to do with innovation but have a lot in common with hype. The classic definition of disruption was coined by Harvard Business School Professor, Clayton Christensen in his book The Innovator's Dilemma, and before using disruption in a lexicon, it's worth having an understanding of its meaning and what is behind it.

Disruptive innovation is the process by which technologically straightforward services and products target the bottom end of an established market, and then move their way up the chain until they overtake the existing market leaders or create an entirely new market.

From this definition, it's unclear how so many companies virtuously put themselves on the 'disruptors' list, whilst not having anything to do with it.

The theory was never addressed as a guidance on how to create a disruptive company but described an impact and the consequences disruption has on incumbents, in addition to how new markets emerge. Disruption occurs when there is a gap in the market, due to incumbents ignoring their low-end customers in favor of more profitable opportunities, consequently, putting themselves in a vulnerable position. So Christensen's target audience is not eager startups who chase the glory of Airbnb or Netflix but established organizations who often forget how easily they can be eliminated by companies like Airbnb and Netflix.

Even though it may be tempting to label Uber, Snapchat, Spotify or Palantir as disruptors, they are nothing more but companies with good innovative ideas, working business strategies, and a strong knowledge of their audiences. If a company successfully enters the market, and even if it revolutionizes an industry to some degree, it still doesn't tick all the boxes to be called a disruptor. Moreover, companies shouldn't want to be labelled like that.

In order to be successful and rapidly grow revenue and market share, there is no need to create new markets, destroy other companies, work your way up from the low-end of the market, and intentionally searching for someone's business mistakes. Companies never know how they disrupt until it happens. The phenomenon is more of a potential outcome, rather than something businesses can plan. Regarding startups, the advice would be to analyze existing markets, come up with a good product, create a worthy business plan, and do research on a customer base - if you disrupt, the market will let you know.

Regarding incumbents, finding out more about disruptive innovation theory is vital to avoid the devastating consequences of disruption. Large organizations should never underestimate smaller players, especially if they offer good products, particularly if they do so in a rapidly growing market. When incumbents manage to spot this kind of activity in advance, many don't hesitate to 'borrow' the ideas from smaller innovators or simply acquire them. Even though 'borrowing' doesn't sound like a 'good guy' strategy, if potential disruptors are not eliminated at the bottom of the market, it's highly likely they will take the opportunity and destroy those who have been sitting at the top.

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