What 40 Years of Research Reveals About the Difference Between Disruptive and Radical Innovation
Disruptive innovation research describes a process in which new entrants challenge incumbent firms, often despite inferior resources. This may happen in two ways. Entrants may target over-looked segments of the market with a product considered inferior by incumbent’s most-demanding customers and later move up-market as their product improves. Or, they may create markets where no market exists and turn non-consumers into consumers. Importantly, the research landscape we mapped out suggests that disruption is not about technology alone, but rather the combination of technologies and business model innovation.

Radical innovations, on the other hand, stem from the creation of new knowledge and the commercialization of completely novel ideas or products. Research on radical innovation therefore focuses on the types of organizational behavior and structures that explain and predict the commercialization of breakthrough ideas.

To be disruptive, a business must first gain acceptance in the low end of the market, the segment by and large ignored by incumbents in lieu of more profitable high-end customers. A prime example is Netflix. The initial mail-order movie rental business was not appealing to a large group of Blockbuster customers. It appealed to a niche of film nerds. Only with the rise of technology, including eventually the ability to stream over the Internet, was Netflix able to grow its business and eventually offer on-demand movies and TV to a huge audience, conveniently and cost-effectively. It was the initial encroachment from the low-end of the market that made Netflix disruptive. A focus on a larger market segment initially might have induced a fighting response by Blockbuster. Gaining a low-end foothold allowed Netflix to move upmarket with a completely different business model that was eventually attractive to Blockbuster’s core customers. The Netflix case also shows that disruption may take time. Netflix was founded in 1997; Blockbuster went bankrupt in 2010. Now, Netflix is targeting other entertainment providers and is set to disrupt yet another part of its industry.

While disruptive innovation is inextricably linked to variations of business models and low-end market encroachment, radical innovation is reliant on organizational capabilities and individual and organizational human capital. Whereas incremental innovation — e.g. a razor company’s fifth razor blade — helps firms to stay competitive in the short-term, radical innovation focuses on long-term impact and may involve displacing current products, altering the relationship between customers and suppliers, and creating completely new product categories. In doing so, firms often rely on advancements in technologies to bring their firm to the next level. Even in its 181st year of existence, John Deere has revolutionized the agriculture industry through the creation of the most encompassing eco-system for agricultural products.

As early as 2012, the company saw the potential of big data in the agriculture industry. Customers who bought John Deere equipment were able to connect their equipment with several software packages that were later combined into the open myJohnDeere.com platform. Innovation like this requires, among other things, technological aptitude. (Of course, radical innovation can lead to business model changes, too, as in the case of John Deere’s transition to a platform-centric business model. But unlike in disruptive innovation, technology comes first.) Not surprisingly, our topic model suggests that radical innovation are related to topics such as organizational culture and capabilities, social and human capital, and project management. Radical innovations completely transform the way firms engage with the marketplace, and they require completely new technical skills and organizational competencies by firms pursuing this path.
Innovation  radical  disruption  disruptive 
5 weeks ago
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