Disruptive Innovation in Business Models

The provided document is an academic paper that delves into the concept of disruptive innovation in business models. The study begins with a discussion on Clayton Christensen's theory of disruptive innovation, highlighting aspects such as the changing market scenario and factors encouraging organizations to adopt this approach. Examples of companies that have successfully implemented disruptive business models are also mentioned. The document concludes by providing recommendations for companies looking to implement this strategy effectively.

Running head: ASSIGNMENT ON TECHNOLOGY MANAGEMENT
Assignment on technology management
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Introduction
The term disruptive innovation was introduced by Clayton Christensen in the year of
1997, in his book named ‘The Innovator’s Dilemma’. Christensen stated that the term is grossly
misunderstood and it is generally applied to those businesses, which are actually not disruptive.
Finally, in the year of 2105, Christensen with his co-authors broke down the concept of
disruptive innovation (Johnson, Christensen and Kagermann 2008). The theory suggests the
concept through which an innovation changes an existing industry. The changes are brought by
introducing the affordability, convenience, simplicity and accessibility where complication
exists. Initially, the concept of disruptive innovation is established in a market where the
members of the industry may consider it as unattractive however, the idea of the disruptive
innovation will gradually change or redefine the whole industry. A perfect example would be the
personal computer. Before the introduction of personal computer, mainframe computers and
minicomputers had been dominating the industry of computing. The mainframe computers and
the minicomputers were available at a price around $200,000. The computers required engineers
in order to operate it. The scenario was changed when Apple brought the disruptive innovation in
the computing g industry. It started selling the personal products in the year of late 1970s and the
year of early 1980s. Initially, the personal computer manufactured by Apple, was not able to be
compete with the mainframe computers and the minicomputers (Johnson, Christensen and
Kagermann 2008). The performance of the product of Apple was not as good as the mainframe
and minicomputers. However, the customers of the Apple Company did not swift to the
mainframe and minicomputers as they were very expensive to afford. Knowing that the
minicomputers and mainframe computers would not be able to as good as the mainframe and

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minicomputers, they stick to the company, which moved the company to bring innovation in
order to improve the customer experience. The gradual improvement of the innovation made the
personal computer more efficient as well as more affordable which had completely eliminated
the mainframe computers and the minicomputers from the computing industry. Christensen’s
theory of disruptive innovation is not limited to the industry of technology but it can also be
implemented to other sectors as well. According to Christensen, disruptive innovation not only
makes the products better but also makes the products more acceptable along with affordable.
This study mainly sheds light on how service industry brought revolutionary changes in itself by
adopting innovation. Hence, the study gave examples of some well known companies like
Amazon and Dominos as how they used innovation and brought change while setting examples
for other companies.
Christensen’s theory
The concept of disruptive innovation which is generally considered in the business sector
is completely different from the theory of Christensen. The term disruption is grossly perceived
as the interruption of the process. Whereas, the definition of the term disruption denotes
something new that enters in the industry and has the possibility of becoming successful.
Christensen elaborates the differences between the low-end disruption and the new-
market disruption. As per the statement of Christensen, the term low-end disruption eludes to the
businesses which enters at the bottom of the industry with an aim to serve average yet little better
than what the existing companies serve to their customers. These low-end disruptive businesses
lower the profit margin of the other existing companies and become a threat to the incumbents.
The existing companies in turn focus on achieving more profit margins within the industry.

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On the other hand, the new-market disruption eludes to the businesses which steps in the
direct competition against the non-consumption within the lower margin industry in the market.
Like the low-end disruptive businesses, new-market disruptive businesses also offer products
which are average yet better than the products offered by the existing brands. The primary
differences between the two kinds of disruption lie in the factor that new-market disruptive
businesses prioritize the undeserved customers while the low-end disruptive businesses aim to
the over served customer area.
Christensen’s theory described disruption as the process more than just a product or
service. While writing in the Harvard Business Review, he stated that it depends on time that
whether the new disruptive business model of the innovator will succeed or not. He then
exemplified Netflix. When Netflix fist came in the market, its strategy was such that did not pose
any threat to the Blockbuster at a first space. It started providing DVDS to its customer when it
first launched in the market. However, it could not satisfy the customers as the requirement of
the customers did not meet. The customers rather wanted get the newly released movies
instantly. However, based on the demand of the customers, Netflix improved its version and was
able to snatch away the customer hold of Blockbuster even before they could take adequate
measure to keep a hold on their customers.
When a disruptive business enters in the industry, it must be aware of the current market
trends and the customer requirement as well. It is not necessary that every disruptive business
will be successful in achieving the target market. The companies need to choose their rivals and
make plans accordingly in order to address the market trend. In order to bring the disruptive
innovation in the business, the companies need to understand first what the term is actually

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meaning. As mentioned earlier, disruption is no more limited to technological business. Any
business can make a way towards disruptive innovation.
Adoption of disruptive innovation
Most of the companies these days are adopting disruptive innovation in their business in
order to make themselves stand out. Changing their business models into disruptive model, the
today’s organizations mainly aim towards reaching out to maximum customer area. Within a few
years, disruption has become a common business word which implies change in terms innovation
in business. Disruptive innovation changes the fundamentals of a business. A complete new
approach towards business, disruptive business models have become the one of key component
that business heads strongly expresses their interest to (Furr and Snow 2015). From technical to
social and others, every business sector is on the verge of implementing disruption in their
business.
Regardless of industry, organizations are continuously competing with each other in
order to hold the market position as well as to increase it. It can be said that the competition is
the major aspect that pushes an organization to adopt disruptive approach in their business
models. The advancement of the technology opened up a complete new sphere in the business
world. Disruptive business model strongly rejects the traditional concept of business model
(Paap and Katz 2004). The principles which were being followed traditionally narrowed the
scope of business whereas the disruption based business model broadened the scope of business
by involving technology.
Disruption redefines the whole world of business as it is incorporates strategies based on
technology. Over the past few years, business disruption has become topic of discussion within

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the business world. Earlier which was a mere concept, now has changed into a reality that
companies experience on a daily basis (Lucas and Goh 2009). Globalization is considered to be
the root cause of disruption. The concept of disruption does not only allow the businesses to
grow in an ever increasing rate, but also decline the cost of business practice in a rapid manner.
Due to disruption concept, every day the external environment of business is changing. In order
to keep a match with the change, most of the companies change their internal business game by
various means.
Disruptive innovation and popular brands
The term disruption refers to innovation which can be implemented in many ways. For
example, revolutionary changes have been brought by Amazon Company when they introduced
Amazon Prime in the market. Most popular blockbuster movies as well as videoes are streamed
in the application called Amazon Prime (Forbes 2018). The Amazon Company offers both free
as well as paid version of the application to its customers. On one hand, audiences can watch
latest movies through the paid version. On the other, old yet blockbuster movies are streamed for
the customers who want to watch once again those blockbuster movies. As it brought changes in
the scenario of movies, it also has introduced innovative changes in the shopping industry
(Osterwalder and Pigneur 2010). Moreover all kinds of leading brands are available over the
online shopping website called Amazon. Through only a single application, the company is able
to deliver their products to the locations which is of the customers’ choice. In order to do this
changes in the shopping sphere, the company has introduced smart-connected gadgets in their
business.

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These innovations are called digitization through which Amazon not only possible fast
delivery of the products to their customers but also specially designed their websites with
modern technology through which the buyer are able to keep the track of their ordered products.
completely rejecting the traditional rules of shopping industry, which made the shopping
experience as well as the return of the products troublesome for the customers, the company
Amazon brought an ease to the return policy of the products so that the customer without any
hassle can return the purchased products (Reinventing Your Business Model 2018). Apart from
these, the company also made the payment procedure of the products easy for the customers
through implementing smart-connected gadgets, which provides the customers hassle free
payment experiences. Smart-connected gadgets and the digitization are thus similar in the
meaning. The main aim of adopting digitization or smart-connected gadgets is to reach out to
more consumers by using the technology to a greater extent (Zott, Amit and Massa 2011). The
company when made the way for adopting technology in business, it purpose is to go beyond the
traditional model of business strategies. The implementation of the smart-connected gadgets in
the business has been able to elevate the concept of innovation in business to more integrated
status.
In order to give a clear understanding of digitization, the Amazon Company can be taken
again as an example. Along with the industry of shopping, Amazon has brought considerable
changes in terms of innovation in the service industry also. With their integrated smart service
model, the company has been able to satisfy a greater number of customer bases all over the
world. Through the website and the mobile based application, the company made it possible for
the customers to give feedback directly about their products as well as about their services
(Porter and Heppelmann 2014). The customer service combined with technological innovation

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assists the customers regarding the issues of product information, process of delivery and many
more. Apart from these, their integrated customer service provides assistance to the customer if
they have negative experience regarding the delivery of the products.
Another example can be given which is of the popular fast food chain, Dominos. The
Pizza making company not only made the pizza delivery fast but has completely changed the
scene of delivery of the pizza by introducing disruptive innovation in their business. The internet
based website of the pizza making company enabled the customers to place their orders from
anywhere, any time. As compared to other pizza making company, it delivers pizza by a
minimum time to its customers (Zhu and Furr 2016). The technology of the smart-connected
gadgets, which has been used by the company can take orders, supervise the procedure of
making of the pizza and keep a track of the pizza delivery person. Meanwhile the technological
innovation has the capability to monitor the customer services as well (Glimore 2016). The other
technological adoption includes the company’s avaibility over the other food delivery
applications thus it can be said that the adoption of the innovation aims to reach out to maximum
number of customer base.
The other companies which have made use of innovation in their business, are Uber,
Airbnb, Facebook, Coke and many more. All these above mentioned businesses have
implemented disruptive innovation in their business in order to make themselves stand out.
Changing their business models into disruptive model, the organizations mainly aim towards
reaching out to maximum customer area. Within a few years, disruption has become a common
business word which implies change in terms innovation in business. Disruptive innovation
changes the fundamentals of a business (Gilmore 2016). A complete new approach towards
business, disruptive business models have become the one of key components that business

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heads strongly expresses their interest to. From technical to social and others, every business
sector is on the verge of implementing disruption in their business.
Key consideration
The companies before adopting disruptive innovation in their business must adhere to
some aspects. The first aspect before entering in the market should be kept in mind that, the
disruptive innovation can have adverse effect on business if not implemented properly. Often
business individuals do not have a clear understanding of what disruption actually means.
Disruption is often considered to be applicable for the businesses that deal with hardcore
technology (Gans 2016). Therefore the companies which have possibilities to be successful by
adopting disruptive innovation in their businesses often step back due to lack of clear
understanding of the concept.
Implementation of the disruptive innovation needs an effective research. Before
implementing disruptive innovation in business, a company must analyze what is the current
requirement of the industry. Innovation must be done as per the need of the customers. The
company must know the factors that the customers expect from the company so that they can
make the business plan based on innovation (Hang, Garnsey and Ruan 2015). In order to
understand the customer requirement the organizations must conduct a research on the industry,
from which it belongs.
The companies along with the above mentioned aspects need to be aware of the strategies
adopted by the rival companies in terms of disruption. It has been often observed that many
companies without knowing the rivals position implemented same strategy regarding the
disruptive innovation and could not become successful in fulfilling the requirements of the

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customers while the rival companies due to having an effective implementation of disruptive
innovation was able to pool a significant amount of revenue in the market (King and
Baatartogtokh 2015).
It is necessary for the companies to understand the differences between the low-end
disruption and the new-market disruption. The term low-end disruption eludes to the businesses
which enters at the bottom of the industry with an aim to serve average yet little better than what
the existing companies serve to their customers. These low-end disruptive businesses lower the
profit margin of the other existing companies and become a threat to the incumbents. The
existing companies in turn focus on achieving more profit margins within the industry (Sampere,
Bienenstock and Zuckerman 2016). At the same time, the new-market disruption eludes to the
businesses which steps in the direct competition against the non-consumption in the lower
margin industry in the market. New-market disruptive businesses also offer products like the
low-end disruptive businesses which are average yet better than the products offered by the
existing brands. The primary differences between the two kinds of disruption lie in the factor that
new-market disruptive businesses prioritize the undeserved customers while the low-end
disruptive businesses aim to the over served customer area.
The companies need to aware of the fact that disruption is the process more than just a
product or service. It depends on time that whether the new disruptive business model of the
innovator will succeed or not. When Netflix fist came in the market, its strategy was such that
did not pose any threat to the Blockbuster at a first space. It started providing DVDS to its
customer when it first launched in the market. However, it could not satisfy the customers as the
requirement of the customers did not meet. The customers rather wanted get the newly released
movies instantly (Yu and Hang 2010). However, based on the demand of the customers, Netflix

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improved its version and was able to snatch away the customer hold of Blockbuster even before
they could take adequate measure to keep a hold on their customers.
It is not necessary that every disruptive business will be successful in achieving the target
market. The companies need to choose their rivals and make plans accordingly in order to
address the market trend (Lepore 2014). In order to bring the disruptive innovation in the
business, the companies need to understand first what the term is actually meaning. As
mentioned earlier, disruption is no more limited to technological business. Any business can
make a way towards disruptive innovation.
Recommendations
Some recommendations are given in order to implement the disruptive innovation in
business.
 In order to avoid the adverse effect of disruptive innovation in business, a company must
be implanted it effectively.
 It needs experts to design the strategies as well as the business model based on the
disruptive innovation so that it can successfully serve for the interest of business.
 The companies need to choose their rivals and make plans accordingly in order to address
the market trend.
 In order to bring the disruptive innovation in the business, the companies need to
understand first what the term is actually meaning. Disruption is no more limited to
technological business. Any business can make a way towards adopting disruptive
innovation.

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 The companies need to aware of the fact that disruption is the process more than just a
product or service.
 Disruptive innovation depends on time that whether the new disruptive business model of
the innovator will succeed or not.
 It is necessary for the companies to understand the differences between the low-end
disruption and the new-market disruption.
 The term low-end disruption refers to the businesses which enters at the bottom of the
industry with an aim to serve average yet little better than what the existing companies
serve to their customers.
 The new-market disruption eludes to the businesses which steps in the direct competition
against the non-consumption in the lower margin industry in the market.
Conclusion
To conclude, it can be said that disruptive innovation or digitization in the business
model is being rapidly adopted by most of the large companies all over the globe. The term
disruptive innovation was introduced by Clayton Christensen in the year of 1997, in his book
named ‘The Innovator’s Dilemma’. Christensen stated that term is grossly misunderstood and it
is generally applied to those businesses, which are actually not disruptive. Finally, in the year of
2105, Christensen with his co-authors broke down the concept of disruptive innovation. The
theory suggests the concept through which an innovation changes an existing industry. The
changes are brought by introducing the affordability, convenience, simplicity and accessibility
where complication exists. Initially, the concept of disruptive innovation is established in a

12ASSIGNMENT ON TECHNOLOGY MANAGEMENT
market where the members of the industry may consider it as unattractive however, the idea of
the disruptive innovation will gradually change or redefine the whole industry. The paper begins
with discussing the disruptive innovation theories of Clayton Christensen. In the discussion,
several aspects regarding Christensen’s theory have been discussed. Additionally, the study
reflects on the current scenario of market adoption of the disruptive innovation while
highlighting the factors that encourage the organizations to adopt this approach. In addition to
that, several companies who have adopted disruptive business model in their business have been
mentioned as examples of disruptive innovation in business. The paper further states the key
factors that a company should consider before implanting the approach of disruptive innovation
its business. Finally the study concludes by giving some recommendation so that a company can
successfully implement it in order to generate more revenue.

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