Disruptive innovation

From Wikipedia, the free encyclopedia

A disruptive innovation is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology.
The term is used in business and technology literature to describe
innovations that improve a product or service in ways that the market does not expect,
typically first by designing for a different set of consumers in the new market and later by
lowering prices in the existing market.

In contrast to disruptive innovation, a sustaining innovation does not
create new markets or value networks but rather only evolves existing ones
with better value, allowing the firms within to compete against each other's sustaining
improvements. Sustaining innovations may be either "discontinuous"^[1]
(i.e. "transformational" or "revolutionary") or "continuous" (i.e. "evolutionary").

The term "disruptive technology" has been widely used as a synonym of "disruptive innovation",
but the latter is now preferred, because market disruption has been found to be a function usually
not of technology itself but rather of its changing application. Sustaining innovations are
typically innovations in technology, whereas disruptive innovations change entire markets.
For example, the automobile was a revolutionary technological innovation,
but it was not a disruptive innovation, because early automobiles were
expensive luxury items that did not disrupt the market for horse-drawn vehicles.
The market for transportation essentially remained intact until the debut of the
lower priced Ford Model T in 1908.^[2] The mass-producedautomobile was a disruptive innovation,
because it changed the transportation market. The automobile, by itself, was not.

Types of Innovation[1]

Sustaining An innovation that does not affect existing markets. Evolutionary An innovation that improves a product in an existing market in ways that customers are expecting. (E.g., fuel injection) Revolutionary (discontinuous, radical) An innovation that is unexpected, but nevertheless does not affect existing markets. (E.g., the automobile) Disruptive An innovation that creates a new market by applying a different set of values, which ultimately (and unexpectedly) overtakes an existing market. (E.g., the lower priced Ford Model T)

Source: http://en.wikipedia.org/wiki/Disruptive_innovation