The Value of Disruptive Innovation vs. the Value of Incremental Innovation

By: Rob Hoehn

Most startups hope to disrupt their markets by delivering a novel idea or a more-suitable functionality—frequently at a lower price. Disruptive Innovation may be how your company arrives, but ultimately, as competition grows and your business and brand evolves, you will need incremental innovation to stay relevant.

How does incremental innovation serve your business?

Whether we’re talking about the tech, auto, or food industry, most companies utilize incremental innovation to stay relevant and competitive in the market. Incremental innovation focuses on an existing product or service and makes upgrades and small improvements as the company sees fit. This is why you see an iPhone every 6 months and a new formula in your breakfast cereal every other year. Incremental innovation is not always groundbreaking, but it’s far more common than you think. “The majority of innovation (around 70%) is incremental innovation.” Companies like Coca-cola, Gilette, and General Electric are household names for a reason. They rely on incremental innovation they were able to evolve their brand, create line extensions, and tap into new trends.

What is disruptive innovation?

A disruptor doesn’t just take a seat at the table, it remodels the dining room.

What do Netflix, Skype, and Pandora all have in common? They are all examples of disruptive innovation. The term disruptive innovation was first defined by Clayton M. Christensen in his book, The Innovator’s Dilemma. Disruptors go beyond the upgrades of incremental innovation and instead create new markets for a new branch of customers. A disruptor doesn’t just take a seat at the table, it remodels the dining room.

When Netflix arrived on the scene, it was the first entertainment company to offer DVD by mail and later on-demand streaming service. Its DVD rental competitor, Blockbuster, had never considered this market outside of their retail store model. And, in response to the new market, Blockbuster responded with its own version of the Netflix model but at a price that couldn’t compete. Several years after Netflix launched, Blockbuster filed for bankruptcy. Netflix succeeded because it considered a new market by retiring the current business model (retail only) and exploiting an old technology (DVD) to serve a new category of customers who preferred to select, receive and/or stream entertainment all from the comfort of their home.

Am I a Disruptor?

In a recap of the disruptive innovation concept written by Christensen and in his colleagues in the Harvard Business Review, he defines disruption as “a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses…by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price.” It’s important to remember that disruptive innovation isn’t merely revolutionary. Christensen again points out that disruptors either create a new market or address the needs of a less-demanding customer with a “good enough product.”

If you’re a new start-up with less resources, chances are that you have the bandwith to disrupt the market because you have the insight to identify which markets are either unrepresented or under-represented. Disruptive Innovation may be how your company arrives, but ultimately, as your business and brand evolves you will need incremental innovation to stay relevant.

To learn more about disruptive innovation, download our infographic on the subject.

By Rob Hoehn