In 1997, Harvard Business Professor Clayton Christensen coined the term “disruptive innovation” in his book The Innovator’s Dilemma. For Christensen, disruptive innovation is any technological development that changes the status quo of the current market and its available products. Through disruptive innovation, customers are offered something that’s simpler, more convenient, more easily accessible, or otherwise more affordable than current offerings.
Disruptive companies fundamentally overturn existing business models and create new markets. Disruption can take two forms:
New market disruption:
This occurs when a new niche of customers is created from market segments that have been ignored by most other businesses. For example, Ryanair, the low-cost airline, created an entirely new market of budget travelers, not by stealing customers from competitors, but by offering routes no one else did at prices that competed with train and bus services.
This occurs when a business steals customers from a competitor, usually by providing a cheaper and more efficient way to provide the same product or service. By the time the competition takes notice of a mass customer defection, it is too late for them to respond effectively to the disruption. Consider Netflix. Initially, the company’s service wasn’t appealing enough to attract customers away from competitor Blockbuster. But, as Netflix steadily improved its streaming technology and perfected its pricing structure, Blockbuster’s customers began to defect in droves, eventually forcing it into bankruptcy.
In both cases, the key to truly effective disruption is constantly understanding what customers want and need, and then reliably delivering it in a unique and compelling way. For smaller businesses, it is especially important they do this to appeal to new customers, giving them reasons to leave bigger providers.
Listening to Customers is Key
Companies that successfully innovate and create disruption are often those that are best at gathering customer feedback and using it to find a competitive advantage. Here’s why.
They gather feedback after every customer interaction
They recognize that feedback, positive or negative, provides much-needed insights into the customer’s experience. They stay in touch with the problems and issues customer face, which can change a lot faster than most businesses think. After some initial reluctance to gather customer feedback, computer manufacturer Dell, for instance, was perceived as a company woefully out of touch with its customers. But once it started to listen and act on customer feedback, Dell made important improvements to its services, increasing its competitiveness in the marketplace.
They ask actionable questions and act on the feedback
After all, there’s no point in asking for feedback if it is not going to be used. When a company receives negative feedback it should be internalized and used to make improvements. Likewise, when it receives positive feedback, it must keep improving and not rest on its laurels. Uber’s entire business model is centered on gathering immediately actionable feedback, which has helped to make it an especially disruptive and popular service.
They make feedback an integral part of business metrics, regularly reviewing the latest feedback scores.
They understand that it is difficult to improve sales and revenue if the customer experience is in decline and that customer feedback calls attention to problems fairly quickly. For example, having been written off as a “rudderless ship” due to poor customer service, Best Buy embraced customer feedback, rebuilding its reputation by developing a more customer-centric business model. Although many thought the retailer was on the road to bankruptcy, today Best Buy is looking to a more optimistic financial future.
Staying Ahead of the Curve
Businesses have always come and gone but, today, many seem to fall into bankruptcy with increasing frequency. Such is the result of the massive market disruption which seems to be taking place everywhere. The reality is that disruptive innovation is propelling some businesses to succeed while destroying others, even companies once considered too big to fail, companies which, too often, have been unable to let go of outdated business models.
Everywhere we look, disruptive innovation is occurring faster and with more frequency. The ability of a company to keep up with these changes will determine how, or if, it will survive. To avoid the same unhappy fate which has befallen so many others, businesses today must continuously evaluate their performance and adjust their direction based on frequent customer feedback.