Breaking down disruption: what it means for your business

The idea of disruption in business was spawned by Harvard Business School’s Clayton Christensen in his 1997 book, 'The Innovator's Dilemma'. He talks of disruptive innovation, which essentially involves making significant changes to unearth new types of customers, and relentless growth that eventually shakes up big business. His theory further says that all disruptors are innovators at the core. Innovation alone isn’t disruption, but when it comes to disruption, it always contains innovation.

Innovation typically makes things better. It streamlines a process or production, creates new opportunities to lower price, and improves the end product or experience. But disruption allows you to potentially grow bigger because it’s changing the current state of play completely and creating an all-new customer opportunity.

If it sounds exciting and inspiring, that’s because it is. Business has seen significant change in recent times, with confident new players in the market, different ways for customers to pay, and fresh technology to drive initiatives. 

When faced with disruption, businesses have three options:

1. Try to capture and retain existing customers (stay in the same space and aim to dominate)
2. Transition and adapt to reach both existing and potential new customers
3. Become disruptors themselves and forge new paths and opportunities.

Who’s doing it well?

There are examples of businesses successfully doing all three.

Capture and retain: Uber

People need taxis as transport. But Uber saw an opportunity in the transport market and fulfilled it. Identifying core frustrations and dissatisfaction in customers and embracing technology to deliver a better product (simplicity, personalisation and payment alternatives) is the key to Uber’s business wins, with feedback fuelling its development.

Uber continues to adapt and grow with new initiatives (including the launch of UberEATS). They’ve also harnessed two of the main disruptors in their space (Google Maps and the share economy) and used them to drive further towards success.

Transition and adapt: Netflix

Originally a DVD rental company, when streaming began to disrupt the current market, Netflix changed their business model as early adopters of a new way of consumption. This, explains Christensen, is one of the founding principles of disruption – targeting customers overlooked by your competitors.

The very idea of the original Netflix was disruptive too: transforming the way people rented and returned videos. Co-founder and CEO Reed Hastings was inspired to create the company when thinking about his $50 late fee for Apollo 13, as he arrived at the gym for a workout. Scanning his card, he realised the gym’s business model could be applied to the video rental market.

Reed thought outside the box initially, then focused on customer needs and market trends when he disrupted his own business later. Today, Netflix is worth approximately $54 billion.

Start small at a place nobody is expecting you and make your mark.

Disruptive leaders: Airbnb

Airbnb is the quintessential example of a small business idea experiencing rapid growth via disruption. Two friends kicked it off when they couldn’t pay their rent and realised a conference in town meant no hotel rooms were available. What started as a $100 a night idea turned into a $13 billion success story five years later.

What Airbnb did particularly well was identify a sentiment in modern culture – that people enjoy the experience of purchasing a product or service from another person, rather than a faceless corporate. The peer-sharing aspect of the company was the foundation to its growth and the trust and reliability of the brand.

Chip Conley, strategic thought leader and change agent at Airbnb, said at the 2016 C2 conference that innovation follows three rules:

1. Innovation doesn’t happen without foreshadowing
2. Innovators address a human need that isn’t being met and that over time
3. The establishment embraces innovation that was once disruptive.

“Once people realise that the wave is good, the establishment says ‘Let’s ride that wave’ but other people who got on earlier will get farther,” Conley explained at the Nordic Business Forum.

Approach your work with an open mind to encourage creative and innovative thinking

Why small business can do it best

Smaller businesses are actually positioned perfectly to embrace disruptive innovation. With less employees and infrastructure, the ability to be nimble, reactive and flexible is inherent. You also don’t necessarily have to reach for the stars. Low-end disruption that sees your small business take a comparatively large number of customers away from big business might be the very definition of success for you. (It’s how Airbnb began, after all.) Start small at a place nobody is expecting you and make your mark.

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