What is Disruptive Innvoation?
Disruptive Innovation is not about making good products better products. It is about making a product that is affordable and accessible to underserved customers or not served customers.
Let’s understand through an example:
In the 1990s, Siebel was the leader in CRM on-premise market. It built CRM software for large enterprises with more than $ 500 mn revenue. Hence, CRM was affordable and accessible only to Large enterprises. The problem was that small and medium enterprises could not afford CRM due to high license costs and the high cost of operating, hosting and maintaining the CRM on-premise. So, these Small and medium enterprises were underserved or not served at all.
In 2000, Marc Benioff launched Salesforce on the cloud and targeted small companies. This is a classic example of Disruptive Innovation as the product is targeting non-consumers. The cost of Salesforce on demand was only $65/user/month. This makes it affordable to small enterprises.
This product CRM on demand has disrupted the CRM industry completely and incumbent like Siebel was not able to respond and could not protect themselves from being displaced.
Today, Salesforce is the leader in the software industry and Siebel is nowhere.
Salesforce built the CRM on-demand software which was very much affordable for small and medium enterprises. Gradually, Large enterprises also adopted CRM on demand and the market shifted to CRM on demand.
These are characteristics of Disruptive Innovation:
- It breaks the regular flow or continuity of something.
- It targets the non-consumers
- It decimates the market share of large incumbents in a few years.
- It is about making a product that is accessible and affordable to non-consumers or underserved customer segments.
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