Managing Innovation: Disruptive Innovation at Funding Circle - Report

This report provides an in-depth analysis of disruptive innovation theory and its practical application, using Funding Circle as a case study. It begins with an introduction to innovation and disruptive innovation theory, defining its principles, processes, and evaluating its benefits and limitations. The report then provides background information on Funding Circle, including its business models and historical development, and applies the disruptive innovation theory to analyze its evolution. The analysis includes a business model canvas of Funding Circle. Finally, the report explores the potential for future development based on the principles of disruptive innovation theory, offering insights into how Funding Circle can sustain its competitive advantage in the evolving financial landscape. The report covers the historical context and future strategies of Funding Circle, showcasing the role of disruptive innovation theory in its growth and development. The report aims to provide a comprehensive understanding of how this theory has shaped the company's operations and its potential for future success.

Managing Innovation Chosen Theory Id
Descriptive Innovation And Chosen
Organization Is Funding Circle

Table of Contents
INTRODUCTION...........................................................................................................................1
Disruptive innovation theory...........................................................................................................1
Definition, procedures and principles of disruptive innovation theory.......................................1
Evaluation of theory....................................................................................................................3
Application of disruptive innovation theory in historical development-.........................................5
Company background.................................................................................................................5
Historical development...............................................................................................................6
Application of disruptive innovation theory in future development................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Innovation refers to the concept of bringing new ideas and thoughts which changes the
integrity of the business and products to promote the products in new form. The main aim of
adapting the innovation in business is relating to improving the overall performances of the
business and promoting the products in market through enhancing the reputation and goodwill at
larger level (Tidd and Bessant, 2018). The business mainly adapt the innovation in relation to
adding some new particles in the existing products to bring better solution. Through this manner,
it results in meeting the new requirement of the customer and enhances the stability of the
business for longer way.
In respect of choosing the disruptive innovation theory which stated that the new market
is created through bringing the innovative ideas in the business and also enhancing the values
and belief of the person to track the new customer towards the business.
Disruptive innovation theory
Definition, procedures and principles of disruptive innovation theory
Meaning-
Disruptive innovation theory is an innovation that develop a new value network and
market and eventually disrupts an exciting market and value chain, displacing well-established
market leading companies, alliances and goods. The term was first analysed and defined by
American scholar Clayton M Christensen in 1995 (Al-Imarah and Shields, 2019). All the
innovation are not disruptive even when they are revolutionary. For instance, the initial auto-
mobiles in 19th century were not considered as disruptive innovation, the reason behind it that
early auto-mobiles were expensive and luxury products, people would not be able to buy it, and
they cannot disrupt market for horse drawn vehicles.
In simple words, disruptive innovation theory creates a new place by offering a different
set of values, which finally overtakes a current market. It predicts that when an entrant handles
current competitors head on providing better services and products, incumbents will accelerate
their innovations to defend business. For example, when new technology arises in market,
disruption theory of innovation can direct strategic choices. This concept has proved to be a
strongest and powerful way of thinking about innovation and creation driven growth. Many
organizations and leaders of small firms praise disruptive innovation theory as their guiding star.
It defines the way in which new entrants in a current market place can disrupt established
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companies. It gained even more prominence in past two year as firms like Etsy, Lyft and Uber
have emerged with a aim of changing their respective sectors (Christensen and et.al., 2018).
Process of disruptive innovation-
As discussed above, disruptive innovation happens when smaller firm effectively and
successfully challenges, well-developed businesses, by offering services and products that
appeal to nice part of market (Radnejad and Vredenburg, 2019). By following this disruptive
innovation theory procedure companies can gain competitive benefits. The concept of disruptive
innovation highlights that with evolving tastes consumers and changing time, their demands as
well as needs also increase over period that pushes firm to come up with something that is novel
and path breaking in terms of ideation. And this needs a shift in trajectory of technological
advancement or developments.
With the new set of services and goods planned, executed and designed for changing
needs and requirements of consumers have a new set of aspects and value features that is far
much better than current technology of goods. Commoditization and disruption go hand in hand
and firm that overshoots would not be able to win and go further.
Principles of disruptive innovation-
Let go of the past-
In order to success and grow business, companies learn from past and think towards
innovation, living in the clutches of past can hamper imagination of person and relegate them to
thinking small (Eight Principles of Disruptive Innovation, 2014).
Encourage courage-
By encouraging themselves and other people, innovation can be created in effective
manner. A person or innovator never in still of reinvention by making other people afraid to
express their thought and ideas.
Embrace failure-
An applicant carefully nurture ideas through numerous adjustments and trials to bring
them to innovate. They need to encourage and inspire everyone on team to think of failure as
important sustenance for creation.
Do the opposite-
Person who have experienced spire of success can dared to zig while every person else
zags. In order to innovate services as well as innovative idea, individual need to think opposite
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and do as same, because it makes them able to push themselves throughout boundaries, it is
critical to stand out from competitive environment.
Imagine possibilities-
To reinvent business and gain all the benefits around external environment, person or
company need to be willing to imagine possibilities that no one can ever think to get. It help to
obtain high market position and drive towards innovation.
Put themselves out of business-
To develop creative idea firm had to put personal matter out of business and focus o
innovative ideas that help to raise its funds and profit margin rather than before.
Reject limits-
Do not consider limits and boundaries, person need to continuously flow their work and
jump over the resistance which they met while thinking towards innovation, unwavering and
unleashing belief that they will prevail.
Aim beyond-
To create innovative and creative idea, person need to conduct a lot of research, known
more about idea that they need to innovate and then use that comprehension to work their path
forward.
Evaluation of theory
Many companies consider disruptive innovation theory as significant for bringing
benefits to community and consumers, as it produces a better offering at a lower price while at
the same period spurring additional developments or improvement and creating new value
beyond early iteration of service and products. But this theory is in danger of becoming a victim
of their own success.
Benefits-
Despite wide dissemination, its core concepts had been broadly misunderstood and their
usual tenets frequently misapplied. Disruptive innovation theory provide many benefits as it take
a share of market can deliver progress opportunities to firms adapted to and complied with
leading new trends. It will be benefits both customers and competition by offering the best and
quality service, more available and additional things and cheaper goods. Disruptive innovation
theory permits small organizations and start-ups to compete with big as well as corporate firms
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by establishing and progressing new market segments of their business. New and creative ideas
can be protected and patented as intellectual property.
In some cases, large firms will make lucrative deals or provide cash sums to incorporate
these innovative start-ups into their business model, it helps to make them go away (Ritala and
Aarikka-Stenroos, 2016). Along with it, organization can also benefit in many of ways through
sustaining and creating a process that look for disruptive innovation. Both workers and
consumers feedback or review can generate new ideas. Staff may have ideas on better
technologies or procedures that will maximize efficiency, buyers can cater insights into what
different markets are seeking for. It helps companies in market expansion through new
innovations and creations, also supports to develop a culture that turns businesses culture into a
association that embraces modification more than avoiding them. With the help of implementing
this theory in business, management can prepare their firm to anticipate innovation that could
become competitors. It will give businesses a better sense of whether, where and when they
must help investments into their own strategic improvement as well as development of potential
disruptive innovations. Despite fact that making disruptive innovation will be challenge, it does
not mean that there is nothing can do to prepare for it, it just needs to approach it differently.
Disruptive innovation will be approached in an effective and interactive manner, market
disruption does not happen overnight, it requires patience (Thames and Schaefer, 2017).
In context of Funding circle, by using this theory firm gain many benefits as they can
strengthen decision making process rather than before. It will help to improve accuracy as well
as eligibility checks. With the help of this theory, firm can overcome from losses and improve
their cash flow, that will increase or generate more profits to company.
Limitations-
The issues with conflating disruptive innovation theory with any breakthrough that
modified a sector competitive patterns or structure in that various types of innovation needed
several strategic methods. Furthermore, it requires a different strategy for firms to be highly
progressive and successful in market. Procedure and strategies have to be centred on unexpected
issues, opportunities and growth ration more than being focused and intended on understanding
that what goods and what does not work, as it can be said that it impact on firm negatively.
In addition with the limitations of disruptive innovation theory, to figure out better
market and what consumers really need is very difficult to find out and judge, it may consume a
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lot of time and efforts as well, and hence many a period, the innovation fail in market that
directly affect profitability. Furthermore, due to nature of this theory such as determining new
markets that are either low and high end, huge revenues and profits cannot be attained very soon.
And organization tend to get very impatient for its businesses to provide and serve profits
quickly.
On of the major limitations to capitalizing on new thoughts and ideas is establishment
and comply with regulations regarding new services or goods. Disruptive innovation is a big
challenge to traditionally and big structured corporations, often enough these enterprise see
disruptive innovation as a biggest threat.
Application of disruptive innovation theory in historical development-
Company background
Funding circle is global lending marketplace which permits the public to lend money,
investors in this firm lend directly to small businesses in US, UK, Netherlands and Germany.
This company is launched in 2010 and has originated more than 8.7 Billion of loans to than
81,000 companies creating an estimated 116,000 jobs. Organization ignite chances for investors
and businesses by providing a better deal for everyone. There are different types of business
models available, that company can use. Funding circle organization use internet based model
as they considered as online marketplace that enables investors to offer money or capital direct
to small and medium-sized organizations (Kaiwartya and et.al., 2016). Internet base model
means that companies or businesses which operates online with the help of using internet. This
organization determines loan rates provided based on loan term and risk category. By using this
model, firm and investors use their online account to effectively and easily lend of hundreds of
enterprises seeking to borrow. They make loan applying procedure simple by complying with
internet based model, the online procedure takes 10 minutes and applicants receive as judgement
within 24 hours or typically within 2 days. With the help of internet base model, company is
able to control their income, they can enjoy freedom to set own working hours and gain tariff.
In context of business model canvas, Funding circle company offer new services to its
consumers with existing one, they provide cash back service in order to gain attention of new
customers towards business. It can be defined as new and creative idea that provide benefits to
organization in term of profitability and consumers retention. By offering this service to small
and medium businesses, Funding circle convince its potential clients to come in and make that
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facilities. In addition with it, firm contribute in difficult situation due to coronavirus they provide
funds those lenders who cannot been able to withdraw money to deal with situation. Company
lent more than 3.6 Billion.
Historical development
By viewing the previous condition of the Funding circle regarding paying loans, bank is
cutting the rate of providing loan to the customer and thus reducing the time period of repaying
such loans. In such manner, the small business facing difficulty in sustaining and earning profits
for particular time period. By examining such situation, peer lending concept is discovered in
which they provide loan on the bases of examining the needs of the lender (da Silva Lopes,
Casson and Jones, 2019). Through this manner, they approach to investor to provide the
particular rate of loan in respect of earning limited profits through the returns. The development
by reviewing the past services result in making changes in the company policies. As lots of
competitors are raised in market which are dealing in such type of services and also attracting
the customer interest towards the innovative ideas.
Thus, by examining the company services which they are provided to the lender through
the investor's money results in making changes in terms of securing their money for the
particular time period (Van Lancker, Wauters and Van Huylenbroeck, 2016). The innovation
theory which is related to the disruptive innovation is applied in relation to applying the
innovative ideas in respect of graphical advertisement through which they present the company
services in right manner.
In context of firm, Funding circle to gain its competitive position and sustain for longer
in market, create new and innovative idea with existing services, that help in its further
development and current business functions. Disruptive innovation theory in relation to firm can
apply in term of new idea that is quite beneficial for them. According to theory, creation and
innovation of new idea saves existing market position as well as value. By offering cash back
services firm retain its consumers and gain the attention of new one, which help to gain
competitive advantages.
Application of disruptive innovation theory in future development
In context of managing the future development of the funding circle, if they not innovate
or bring any innovative ideas in business, they not sustain the business in market for longer way.
Funding circle is such type of company which provides opportunity to the investors to lend
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money to small companies to manage their business in better manner. They play the role of peer
to peer lending. The loan rate which is they set is through the action procedure and also carries
the inflation rate in the market regarding changing in prices. But this procedure is not useful for
the longer time period (Tõnurist, Kattel and Lember, 2017). Thus, in such manner, to retain the
customer interest towards such procedure, it is necessary to bring innovative ideas at work place.
By viewing the market structure regarding receiving and paying loan, the new ideas
which is established is relating to receiving good cashback after lending money to the small
business. As this procedure is useful in managing the business integrity during the time of
inflation. This is also one of the disruptive innovative ideas which results in building new
connectivity with the customer through getting the guaranteed cash back offer (Bason, 2018). As
the cashback offer is already existing in the market but it depends upon the luck and also less
amount is received to them, but in respect of enhancing the business, the customer are getting
good return after they invest the particular amount of cash in small companies or medium-sized
business.
The another innovative ideas which is adapted by business in respect of viewing the
current situation in world is related to coronavirus. As this is the current issues which is faced by
the investors, lenders and customer regarding settling the business. As the growth of the business
is attained through the foreign clients or expansion of the business. But due to such diseases, the
business is stopped and also facing higher losses in managing the business (Ax and Greve,
2017). By these aspects various companies are dealing in providing relaxation or helping the
company to manage their funds. In context of funding circle, they apply the disruptive
innovation theory in respect of carrying the significant increase in business by providing loan to
the companies. The innovation which they undertook is to provide loan to the business at lower
rate. By this manner, they help the potential borrowers to gets in touch with the existing
borrowers to manage their business in right manner.
The innovative ideas which is attained in these aspects is relating to managing the risk
model and the credit policies which they are provided to lender to manage their accounts with
the investors (Nicholls, 2018). As during this time period, usually companies not bring any
innovative ideas in country as they itself suffering with low funds but to enhances the business
during this time, results in more growth and goodwill of the business.
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The plans for funding circle business is to provide more loan to the small and medium-
sized business so that they manage the growth and economy of the country in better way. As due
to changes in time, the banks are committing more fraud and misleading of the entries and also
restricting the money of the customer in their accounts. Thus, in respect of attracting the
customer interest though getting timely acceptances of loans, funding circle carry the major
importances in the business (Archibald and Archibald, 2016). The ideas which is used by the
funding circle in respect of supporting the business during the natural calamites results in getting
higher reputation in the market. As most of the companies plan to support during this time
period but in respect of providing loan at lower rate or extending the time period of returning the
loan is not provided by anyone. Thus, by applying the disruptive innovation theory, in new
places where the situation is worse than the other countries, this plan is useful in managing the
business integrity and also recruit the employees to gain major advantages in business.
CONCLUSION
From above analysis, it has been concluded that disruptive innovation theory provide
several benefits to companies, as it help to gain competitive benefits, increase profit,
productivity and generate more revenues. By following the principles and processes of this
theory, organizations either small or large sustain for longer within marketplace. By
implementing disruptive innovation theory in effective manner, it can be said that ventures
enhance their performance level and innovate new ideas that gain the attention of consumers and
retain potential clients for longer. From above analysis, it has been evaluated that Funding circle
solve their issues face when consumer do not pay back loans on time.
 To make business operations easily and smoothly, company recommended providing
fixed time frame with each loan.
 In order to retain consumers, they must create new ideas regarding services, after
conducting market research because it helps while thinking towards innovation.
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REFERENCES
Books and Journals
Al-Imarah, A. A. and Shields, R., 2019. MOOCs, disruptive innovation and the future of higher
education: A conceptual analysis. Innovations in Education and Teaching
International. 56(3). pp.258-269.
Archibald, R. D. and Archibald, S., 2016. Leading and Managing Innovation: What Every
Executive Team Must Know about Project, Program, and Portfolio Management. CRC
Press.
Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes. Management Accounting Research. 34.
pp.59-74.
Bason, C., 2018. Leading public sector innovation: Co-creating for a better society. Policy
press.
Christensen, C. M and et.al., 2018. Disruptive innovation: An intellectual history and directions
for future research. Journal of Management Studies. 55(7). pp.1043-1078.
da Silva Lopes, T., Casson, M. and Jones, G., 2019. Organizational innovation in the
multinational enterprise: Internalization theory and business history. Journal of
International Business Studies. 50(8). pp.1338-1358.
Kaiwartya, O and et.al., 2016. Internet of vehicles: Motivation, layered architecture, network
model, challenges, and future aspects. IEEE Access. 4. pp.5356-5373.
Nicholls, A., 2018. Managing educational innovations. Routledge.
Radnejad, A.B. and Vredenburg, H., 2019. Disruptive technological process innovation in a
process-oriented industry: A case study. Journal of Engineering and Technology
Management. 53. pp.63-79.
Ritala, P. and Aarikka-Stenroos, L., 2016. Disruptive innovation in ecosystems: Path-creation
and institutional barriers. In ISPIM Conference Proceedings (p. 1). The International
Society for Professional Innovation Management (ISPIM).
Thames, L. and Schaefer, D., 2017. Industry 4.0: an overview of key benefits, technologies, and
challenges. In Cybersecurity for Industry 4.0 (pp. 1-33). Springer, Cham.
Tidd, J. and Bessant, J. R., 2018. Managing innovation: integrating technological, market and
organizational change. John Wiley & Sons.
Tõnurist, P., Kattel, R. and Lember, V., 2017. Innovation labs in the public sector: what they are
and what they do?. Public Management Review. 19(10). pp.1455-1479.
Van Lancker, J., Wauters, E. and Van Huylenbroeck, G., 2016. Managing innovation in the
bioeconomy: An open innovation perspective. Biomass and Bioenergy. 90. pp.60-69.
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Eight Principles of Disruptive Innovation. 2014. [Online]. Available through:
<https://www.industryweek.com/innovation/article/21963160/disrupt-or-be-disrupted-
eight-principles-of-disruptive-innovation>
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