Collider Talks #5 | It's Time To Understand Disruptive Innovation

Are you being disruptive? 

Disruptive innovation was first coined in 1995 by Harvard scholar Clayton Christensen. Clayton describes disruptive innovation as a process by which a product or service takes root at the bottom of a market and then relentlessly moves up, eventually displacing their established competitors. 

A disruptive innovation is not a breakthrough innovation that makes good products a lot better, but it transforms a product that was expensive and complicated and makes it so much more affordable and easier to access.
— Clayton Christiansen

New Zealand’s own serial disrupter and entrepreneur; Melissa Clark-Reynolds completed a six week Harvard course with Clayton Christiansen. Then jammed that six weeks of knowledge into two half day workshops held at Collider.

The best analogy that Melissa uses to help us understand disruptive innovation is with the demise of the once high and mighty Blockbuster.

Flashback to 1993, Blockbuster has over 3,000 stores worldwide and sold to Viacom for 8.4 billion dollars.

Skip to 1997 where a startup was born out of Scotts Valley, California called, Netflix. Netflix was not the online movie and TV streaming giant we know today, they were a humble DVD by mail business, whose revenue came from a membership subscription with no late fees.

When you get good you start offering your product with more and more features, you create a good opportunity for a startup to get in underneath. A startup can come in with less functionality but less price. Many users who didn’t need the rolls royce product and will opt for the cheaper and easier to use product
— Melissa Clarke-Reynolds

In 2007, Netflix delivered its billionth DVD and began to move away from its original business model of DVDs by introducing video on demand via the Internet. From 2006 - 2011, Netflix grew and DVD sales fell.

Blockbuster’s reaction to Netflix? They laughed.

Their market research led them to believe that their customers enjoyed coming into Blockbuster stores and searching the shelves for movies to take home, while also purchasing movie merchandise and confectionery. Blockbuster didn’t recognise the threat in Netflix’s simpler and more easily accessible business model.

Today there are only 300 Blockbuster stores worldwide and the market value for Netflix stands at $32.9 billion.

There is no such thing as innovative technology, just innovative business models
— Melissa Clarke-Reynolds

If you've got a quick minute, the following clip explains disruptive innovation in action in under 2 minutes:

If you've got more time, invest it in this clip of Clayton Christiansen himself explaining the theory: 

Ready for the deep dive? Chuck your headphones on and get comfortable as Clayton explains how disruptive innovation can explain why the economies of America, Japan and England have stagnated:

 

Caitlin Mackay is the MarComms gal for Collider and BizDojo Wellington. When she's not doing her best to comprehend the latest in innovation & market trends at the back of Collider workshops, she can be found finding sneaky ways to bring her cat, Manny, to work.