Marketplace disruption and innovation disruption are a fact of life,

they're happening all the time.

Creative destruction is happening and disruptive innovations are happening.

So we're going to take a look at what actually happens

in disruptive innovations and what are they really mean?

How do they work?

And disruptive innovations basically open up new ways for

customers to use new products and new services.

And typically they are low technology products or services and

they meet needs that customers often don't know they need to be met.

But they are put out in the marketplace by

innovators who understand that those needs need to be met.

And so, some of the disruption are that dominant players tend to focus on

sustaining innovations and so that's something that's going on all the time.

And new firms tend to introduce disruptive innovations because they can't

compete with the dominant players in the marketplace, and

disrupted products and services tend to improve over time.

And so they improve in a way that meets needs in the marketplace

that the dominant players aren't paying attention to.

And so this is a look at a diagram of the disruptive innovation trajectory.

It's Clayton Christensen's idea and in a nutshell,

the blue and

green lines basically show the progression

of a product improvement or an innovative improvement.

And if you're on that track, you're always going to be competing against

the dominant firms who have the ability to sustain that innovation.

And so what disruptors try to do is to say, we don't want to get on that track.

We want to create a totally different track.

And we want to create something that is interesting and important to customers,

but it's something that the dominant firms aren't offering.

And so that's what's represented by the red line.

It's performance that customers can actually use, and usually that

performance that customers can actually use is in a product that costs less.

And is more readily available and

it's something that the dominant players aren't offering.

So, this is something different than the dominant players are offering,

it's usually less costly, and is something that people actually need.

And so, what’s happened is that the disruptive innovations really come in

under the radar of what dominant firms are providing in terms of their products.

Here we compare some examples of incumbents, or

dominant players, and disruptors.

Microsoft Office is the incumbent and Google Docs would be the disruptor.

Intel is the incumbent and ARM Chips are the disruptor.

And cable TV, I guess, is the incumbent and

Google Chromecast or a streaming video is the disruptor.

Delta Airlines is the standard airline, it's the incumbent,

whereas Southwest has been a disruptor, because it's done something different,

what people really need.

Classic example of an incumbent and

a disruptor is the tax service of H&R Block and the online,

self-developed service for doing your taxes in TurboTax.

And so these are disruptors, these are providing things that people want,

that people need that the dominant firms or the established firms are not doing.

So, here are some examples, the very rich and

abundant example that it has a timeline from

top to bottom and has a range of market entry and

market appeal from the low end,

on the righthand side to new markets on the lefthand.

And you can begin to see these are integrators who have come into

the marketplace and they're all kinds of new innovators.

Seiko Digital Watches, MCI, and Sprint, at that time.

ToysRUs was an innovator and a disruptor.

Circuit City, when it was introduced, was an innovator.

Home Depot was an innovator.

Staples was an innovator.

Even at its early entry, personal computers,

all kinds of personal computers were innovators and disruptors.

And so, in different ways, many of these businesses and

their activities were disruptors, because they did something new and different.

And so you can find examples of many, many disruptors in the marketplace.

And so, we're going to take a look at one particular industry here to try and

show some examples of disruption.

And we're going to look at the health care industry.

Something I think pretty much everybody can relate to and understand.

And so, we look at disruptive innovation players,

where majority of these include things like technology firms,

even nurse practitioners, and medical generalists serving

the least-to-moderate-demanding tier of patients.

And so that's the key thing.

The least-to-moderate-demanding tier of patients.

They are the customers who have, let's say the least amount of demand.

They can accept a wide variety of things.

And so the disruptive actions that happen is where

disruptors actually confront dominant players to gain market access and

we're going to show you a way in which this happens.

So at one level, you have healthcare

solutions that are really at the simple tier, rule-based diagnosis and treatment.

That's very simple and very clear and it's almost evidence based management,

where you can build on what you already know and you can predict or

point out what a diagnosis is based on the history and the research that's been done.

And you can prescribe a treatment.

So it’s very simple, you don't have to go to a doctor to do that,

you can almost self administer that and for simple ideas.

A middle tier was where there is pattern recognition, diagnosis, and treatment.

So you need some expertise there but

not necessarily, you don't need to go to a hospital for that.

And then at the complex tier is where you have problem solving diagnosis and

treatment with collective experience of team judgement.

So you might have elements of clinics or hospitals or places like the Cleveland

clinic or the Mayo clinic, that have specialized teams, or Hopkins,

where they have specialized teams that are capable of employing their team judgement,

their expertise in solving problems that are of greater concern.

And so, what we have is looking at this disruption framework here,

we can see where the two lines, the two arrows really are on the top arrow,

you have a performance trajectory where the current technology

is driven by, what we call sustaining innovations.

These are the dominant firms, the incumbent firms are using sustaining

innovations, using current innovations that they already have, and

they're continuing to employ them.

And down at the bottom, is you have another arrow which is really

the arrow that is driven by disruptive technologies and

disruptive innovators, where there is a different performance.

It's not as great as the other performance,

if you look at the performance level scale.

But it is overtime, it gradually improves and

then you see that band, the tan band,

that is representing the range between the most

demanding customers at the top and the least demanding customers at the bottom.

And so what happens is that lower arrow of new performance trajectory

of disruptive technologies and disruptive innovators,

works its way into that band of customers, that is a main stream market.

And what happens is that, what the dominant firms are doing are offering

services that the most demanding customers and the least demanding customers,

I won't say don't care about, but not enough of them care about.

And so the main part of the market is that tan band through there and that

band is being penetrated by destructive technologies and destructive innovators.

And so that's really what's happening in the healthcare disruption world.

In the lower right hand corner, you see the least demanding

customers really care about things like infectious disease prevention,

diabetes monitoring, outpatient surgery, and focused care institutions.

And on the top, what you see is at the high end of performances,

you have technologies and firms and

hospitals and medical institutions that

focus on complex diagnosis and complex surgery and highly advanced technology.

And not everybody needs that.

And so, what happens is that the disruptive firms burrow

into that large segment of the market of demanding customers.

So the takeaways for

disruptive innovations is to recognize that disruptive innovations

actually dramatically change the way customers respond.

They don't necessarily have to be locked into the main firms, the dominant firms,

the incumbent firms and the offerings of those incumbent firms.

And disruptors can actually realign the positions of competing businesses.

And by introducing a disruption,

competing businesses have to change the way that they compete.

And disruptions open the door to new innovative forms of business

that actually reach customers in new and different ways.

How do disruptive innovations change the marketplace?

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