Almost every new start-up that emerges from one of the many incubators these days claims to “disruptive”, meaning it considers itself an element that provides a “new order” for the market its in. Although this is a common claim used by company executives, it proves to be rather incorrect upon closer inspection.
In general there are 2 types of “disruptions” and each has to be measured differently. However, a possibility exists that a product is disruptive in either way, resulting in the necessity for success being measured differently.
1.) A New Market Disruption
A new market disruption occurs if a product is not consumed with an existing category. Products or services can be cheaper, have a higher geographical availability, a new availability in different languages or cater to customer who could not consume the product before due to non-existent availability, but can now access the product.
Hence, the claim to be disruptive is true, if the majority of customers are not (or could not be) served by the existing companies in the market in a specific category. A maybe good example, from the European Market, are low budget airlines and the development of an entirely new travel market for budget customers, who have not undertaken flight travel before. Airlines offer flight connections to destinations, which compete with those of train or bus companies, without taking away existing clients from other established airlines. This new “budget” segment has not been served by any other airline before and thus in this case a new market disruption occurred.
2.) Low End Disruption
A low end disruption occurs if a product or service wins over the low budget clients of an existing market by means of lower prices and changed / lesser quality.
This could be the case if the market leader produces a product that exceeds the desires and needs of the market. A customer will analyze the cost / benefit situation and prefer a lower quality product without perceiving it as negative, because the price and maybe limited characteristics are in sync with the planned use of the product.
An example for low end disruption are the commonly used GPS navigation devices for vehicles. A whole industry has lost its market share within just 1 year, because someone came up with the ingenious idea to develop a mapping app for smartphones, costing just a fraction of a GPS system.
If a product or service is truly disruptive, no technical, contractual, linguistic or price barriers exist and a rapid market acceptance occurs. Of course, a lucrative business model can evolve over a long period of time, however in this case it would not be disruptive.
The above mentioned example might as well take place in an e-commerce setting. However, the claim to be disruptive, as commonly used by many executives for marketing reasons, is not always true as we just learned. Just because a product is just cheap, doesn´t make it automatically disruptive.
Is disruptiveness absolutely necessary?
A company and its products or services do not necessarily need to be disruptive in order to be successful. Why should they? It might as well be successful, competing with established businesses by just doing things better. For example a better design, better service, better infrastructure or an enhanced methodology, just to name a few possibilities…