How to be a Disrupter
You've got a business model that larger, well-established rivals sneer at. Plus, you've developed a product that sacrifices pure performance for lower prices but is substantially more flexible. Sounds like a classic recipe for disruptive success, right?
Not for Internet phone pioneer Vonage, whose stock price sank close to 60% in the six months following its May 2006 initial public offering. Our research shows that companies that follow the tenets of disruptive innovation can sharply increase their chances of success.
Yet Vonage's struggles are a poignant example of how seemingly disruptive beginnings don't always translate into happy endings.
How can you ensure that your disruptive doesn't turn into a disappointment? Companies hoping to maximize the chances of realizing their innovative potential should seek to "fumble forward" down the disruptive path while constantly assessing how all competitors will respond to their approach.
What is disruptive innovation?
Across the sweep of history, companies have used disruptive innovation to transform existing markets and create new ones. As described in our books, The Innovator's Solution and Seeing What's Next, disruptive innovations trade off pure performance in favor of simplicity, convenience or affordability. Disrupters target customers who find existing solutions too expensive or too complicated. They offer "good enough" solutions at a lower price.
An emerging player in the advertising industry—Spot Runner—fits the disruptive pattern nicely. Spot Runner targets small companies that have historically found advertising on television complicated and expensive. Spot Runner's clients can use stock footage, along with Spot Runner's Web-based interface, to piece together a television advertisement. Then they can use Spot Runner's proprietary algorithms to place the ad on a local cable channel.
The resulting ads aren't visually stunning, but they are cheap and simple. And powerful incumbents—the big advertising firms on Madison Avenue—aren't motivated to respond, because Spot Runner is targeting non-consumers, companies that wouldn't have used television advertising if the cheaper product hadn't been available.
This pattern has played out in dozens of different industries, and powered phenomenal success stories like Southwest Airlines, YouTube, the University of Phoenix and Wal-mart.