In the build up to this weeks Changing Media Summit 2013, disruptive digital innovation has been a hot topic. The term, first coined by Clayton Christensen of Harvard Business School, describes the process in which ‘a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors’. Since the 1990s there has been a succession of digitally disruptive and ‘game changing’ enterprises. These have been rapidly debasing traditional business models across the media, entertainment, retail, financial and education sectors. In a report by the BBC, Saul Klein from Index Ventures comments:
‘Our long-term belief is that there is no sector that will not end up being changed by a combination of the Internet and software’
So what are the key features that make a digital innovation disruptive? So far common features of such innovations include:
- The opening up of products and services to customers at the lower end of the market who don’t necessarily require all functionalities offered by current products
- Business models which work from a grass-roots perspective, facilitating new, non-corporate interactions between individuals in these new markets
Kickstarter and Airbnb are two of the most successful examples of such innovations. Kickstarter has revolutionised the funding of new ideas, products and services; allowing innovators to bypass the financial sector in securing backing for new ideas, through individuals willing to pledge money through the site. So far Kickstarter has been responsible for the launch of 90,851 new products and services worth over 500 million dollars. Airbnb is a platform allowing people to book rooms at other people’s houses, as advertised on the site; it has been described as an innovation ‘turning spare rooms into the world’s hottest hotel chain’ (Austin Carr). In Airbnb’s fourth year of operations it facilitated over 10 million bookings worldwide and is currently surpassing the Hilton hotel chain in terms of the number of rooms filled. However, it is naïve to think that it has been plain sailing for all disruptive innovators, Über cars is a notable example that has generated considerable controversy (see here for more details).
It is clear that the acceleration in such developments over the last 5 years is no coincidence. With website and app creation becoming progressively more accessible, and an increased distrust of global corporations since the financial crisis, these types of innovations seem to be part of a natural progression. So should these innovations be seen as a threat or an opportunity? Many companies have taken a fearful stance towards such innovations, however as Genevive Shore (Chief Information Officer and Director of Digital Strategy at publishers Pearson) argues:
‘digital disruptions push companies forward to be more radical in our approach to digital, and more courageous’
In a recent report by the BBC, the greater benefits of a focus on creativity and digital development are evident; in tough economic times the digital and creative sectors have shone through. According to the study, this is currently the UK’s fastest expanding sector, contributing over 6% of Britain’s GDP and employing over 2 million people (read more here about the thriving technology sector). So it is clear that this growth in disruptive innovation is good for business and the UK economy, spurring companies to think innovatively to remain at the cutting edge. As Lisa Arthur of Forbes Magazine argues, it is clear that companies must face and embrace these ‘powerful and incredibly motivating’ innovations head-on.