Disruptive vs Sustaining Innovation

How come so many established companies are often disrupted from their dominant market place by smaller companies? The theory of disruption, known as the process “whereby a smaller company with fewer resources is able to successfully challenge established incumbent business” stated Clay. When a company established itself in a dominant market place, it is very good at resolving the needs of its mainstream customers. Sustaining innovation, which is the steady rate of performance improvement, is how established companies typically reinforce their market dominance. Each year, a new update makes it easier and faster for their customers. While Disruptive products or innovation looked at overlooked segments and create new emerging market. It starts at the lower end and target forgotten market by established firms and turn non-consumers into consumers. The product is made more accessible by sacrificing performance early on. Gradually, disruptive products  improve their rate of performance and move into newer markets. As the product move up the marketplace with a rate of performance comparable to established products, it becomes appealing to mainstream customers who are then willing to change to newer products.

To put it simply, “low-end disrupters come in at the bottom of the market and take hold within an existing value network before moving upmarket and attacking that stratum. By contrast, new-market disruptions take hold in a completely new value network and appeal to customers who have previously gone without the product” stated Clay. In general, disruptive products tend to be unattractive for established companies early on due to their lower profits margin, costs of productions and rarely guarantee a return on investment. However, it  is primordial that managers recognize the difference between disruptive and sustaining innovation. That is the only way to help their firms remain competitive. Furthermore, the theory of disruption teaches us the value of looking into untapped market and of having a long term vision for our product. With time, we can eventually compete with established products.