Why is “disruptive innovation” an art of subtraction? | Dahe Talk (中文在後)
Ever since I first heard about Clayton M. Christensen’s concept of “disruptive innovation” as a student, I’ve been fascinated by it. Even though the theory was put forward in his book “The Innovator’s Dilemma” in 1997, it still applies to many modern industries.
However, many people often misunderstand this term, thinking that any cool technology can be classified as “disruptive innovation.” To be honest, this is a big misunderstanding.
Before explaining “disruptive innovation,” I would like to talk to you about the three types of innovation. According to Clayton M. Christensen pointed out in “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty”, innovation can be divided into sustaining innovation, efficiency innovation, and market-creating innovation.
- Sustaining innovation mainly optimizes existing solutions in specific markets, such as improving product quality and performance, aiming to sell more products to the same group of customers in existing markets.
- Efficiency innovation, also known as “process innovation,” aims to reduce production costs and increase profits by optimizing production and management methods while maintaining the same target customers and business model.
- Market-creating innovation is to create a brand-new market and establish a new business model. However, this new market specifically serves “customers who cannot find suitable products in the existing market.” These customers may not be able to afford existing high-end products or may not be able to find products that solve their pain points in the existing market. Through “market-creating innovation,” the originally complex and expensive products can be afforded and used by more people.
Suppose we divide an industry into three sub-markets according to the requirements for product performance, which are Market A, Market B, and Market C.
“Sustaining innovation” means the product improvement within any concentric circle (could be Market A or Market B) in order to sell more to the same target customers. For example, smartphones with faster processors, larger memories, and more lenses are all examples of “sustaining innovation.”
“Market-creating innovation” is to popularize products or services that were previously exclusive to certain customer groups in the past, and to target another customer groups who could not afford them before. For example, when an enterprise is willing to develop a new product to meet the need of a niche market like Market C, it is a form of “market-creating innovation”.
For instance, the emergence of budget airlines has disrupted the business model of traditional airlines. Budget airlines deconstruct what traditional airlines offer. In addition to the same security, other services such as meals, seat selection, luggage consignment, and in-flight entertainment are all additional purchases, aiming to make basic transportation needs affordable for more people.
Likewise, online travel agencies (OTAs) have undermined the business model of traditional travel agencies. OTAs break down the tour packages sold by traditional travel agencies. For example, customers can purchase flight tickets on Expedia or Skyscanner, book hotels on Booking.com, Airbnb, or AsiaYo, and purchase travel itineraries on platforms such as KKday and Klook. All of these are considered “market-creating innovation”.
Furthermore, in some cases, these “market-creating innovations” may even evolve into “disruptive innovation,” redefining the market landscape and becoming the new mainstream of the market.
For example, in Figure 1, Company A continued to move forward on the same growth trajectory, providing better high-end products that eventually exceed the needs of mainstream customers, resulting in performance oversupply.
In Figure 2, Company B carried out “market-creating innovation” and found a niche market by reducing complexity, then continued to innovate on niche products.
As shown in Figure 3 above, once the performance of the niche products provided by company B can intersect with the needs of the mainstream market in the future, we can call it “disruptive innovation”, and the niche products will gradually erode the profits of high-end market enterprises.
The main reason for the emergence of disruptive innovation is that the degree of progress made by technology companies (the slope of the solid line) is often greater than the degree of growth in customer demand (the slope of the dotted line), leading to the upward counterattack of niche products. Conversely, when the market demand and product performance improvement trajectories are mutually parallel, there is no disruptive innovation.
On the other hand, compared to startups without burdens of the past, mature companies usually tend to abandon markets with unclear demands and concentrate R&D resources on high-performance mature products that can sustain profitability. The dilemma that these mature companies encounter when considering whether entering niche markets or not gives startups good opportunities to attack.
In my view, I’ll say that disruptive innovation is an art of subtraction. If we keep it simple, consistent, and constantly striving for progress, we have a better chance to break new ground in the long run and become the new market leader.
Before the end, in addition to Clayton Christensen’s “The Innovator’s Dilemma” and “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty” mentioned in this article, I highly recommend another of his books “How Will You Measure Your Life.” It’s a book that has deeply influenced me. It seems to be about business, it’s about life though!
從學生時代第一次聽到哈佛商學院教授克里斯汀生（Clayton M. Christensen）所提出的破壞式創新（Disruptive Innovation）後，就深深被這個概念所吸引。即便這理論自1997年從他的著作《創新的兩難》提出後已二十多年，但套用到現代許多的產業依舊適用。
在解釋「破壞式創新」前，我想先跟各位談談創新的三大類型。根據Clayton M. Christensen在《繁榮的悖論》中所提，創新可以分為持續性創新（Sustaining innovation）、效率性創新（Efficiency innovation）以及創造市場的創新（Market-creating innovation）。
看圖會更好懂。假設我們把一個母產業依照對產品性能的要求分成三個子市場，分別是Market A、Market B以及Market C。
「持續性創新」的意思是指在任何一個同心圓內（可能是Market A，又或者是Market B），為了對圈內的同一批目標客群銷售更多、更高價的產品所進行的產品創新或改良。例如，更快的處理器、更大的記憶體、更多鏡頭的智慧手機都算是「持續性創新」。
又像是，旅遊業OTA平台（Online Travel Agency）的商業模式也影響了傳統旅行社的市場地位。OTA將過去傳統旅行社所賣的套裝行程進行分解，例如現在買機票可以上Expedia、Skyscanner，訂酒店或民宿可以去Booking.com、Airbnb、AsiaYo，旅遊行程則可以上KKday、Klook等平台上購買。這些都算是降維打擊的「創造市場的創新」