Suppose you’ve been keeping up with any articles covering hot new tech-based services or apps over the past several years. In that case, you’ve likely encountered the word “disruption” being thrown around a lot, especially for companies in Silicon Valley. You may have also heard it applied to concepts within your own business! Despite this, it’s also entirely possible that, like many others, you don’t fully understand what disruption is or means or how you can use it to improve your services and products.
Thankfully, our team of experts here at TaxRobot is happy to help explain the basics you’ll want to understand about disruption, what it means, and how you can leverage it. Below, we’ll explore what disruption is, some key examples of what disruption is and isn’t, and then cover some key takeaways that you should note about how disruption and innovation relate to one another.
Related: How Startup Technology Companies Qualify for the R&D Tax Credit
What Is Disruptive Innovation, and Why Is It So Important?
Also sometimes referred to as disruptive technology, disruption refers to any innovation within an industry that triggers radical and long-lasting changes to how companies operate. The concept was introduced in 1995 by Clayton Christensen in a Harvard Business Review article. According to him, disruptive innovation occurs when new market entities intentionally target overlooked corners of industries by creating new business models or designs that are more convenient, affordable, or efficient than those currently offered.
Disruptive innovation contrasts with sustaining innovation, which are the innovations and modifications produced by incumbent businesses as they struggle to stay relevant with and maintain customers. It’s essentially a new technology or practice that supersedes an older product or process by possessing superior, apparent attributes. Disruptive innovations are essential for market advancement because they allow startups or new businesses to establish themselves within an industry alongside older companies. This is because startups are typically the source of new disruptive technologies.
However, it’s important to remember that the term shouldn’t necessarily be applied to any new business or startup that attempts to change or challenge an industry since that undermines what disruption actually is and its importance.
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Key Examples of Disruptive Innovation for Startups to Note
Now that we’ve explored what disruptive innovation is and why it’s so essential, let’s cover some of the more famous examples of the practice that have taken the world by storm in the modern era.
You may never have thought of Wikipedia as a disruptive innovation, but the website largely upended the need for people to rely on physical encyclopedias to obtain specific information. These books were written, published, and used for centuries, and more were constantly produced as information became outdated and new discoveries were made. Instead of spending thousands of dollars for a few hundred pounds of hardcover volumes, you can now find out almost everything you could ever want to know with a quick search on Wikipedia. You can even learn about disruptive innovation!
2. Netflix & Other Video Streaming Services
Netflix, Amazon Prime, Hulu, and other streaming services are a continuing source of disruptive innovation within the entertainment industry. They all but destroyed the need for video rental stores and kiosks and allowed customers to cancel their cable subscriptions. These services have rapidly changed how we think about and consume media in only a few short years.
Forget sending letters or making phone calls; millions of users across the globe can now chat, call, and video chat with people for free because of Skype. The service has served as a critical replacement for other mainstream forms of communication and has significantly altered how many of us approach communication as a whole, especially in the current day and age of remote work.
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Key Examples of Innovations and Businesses That Aren’t Disruptive
Finally, let’s quickly note a few innovations and companies that may seem disruptive at first glance but aren’t for specific reasons. These include;
Though it may seem like Google would naturally qualify as disruptive, it wasn’t actually the first search engine. It was just the first one to prove and leverage the value of online searches and information and the first to make a lot of money through the power of online advertising. It essentially took an existing idea and improved on it significantly, leading to the eventual spawn of several new industries.
Though it’s often used as an example of disruptive innovation, since it did replace traditional taxi services for many people across the U.S. and some international regions, it doesn’t technically meet all of the classifications for being disruptive. It didn’t capitalize on low growth margins or open up a new type of market. Like Google, it took an existing concept and improved upon it by upgrading it with modern technology, making it more convenient and less expensive.
Related: 5 Best Startup Business Tips You Need to Know
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Key Takeaways, and Final Thoughts
Disruptive innovation is a method by which businesses and companies- typically startups- can profoundly affect how other companies within a market operate due to the introduction of superior, cheaper, and more convenient technologies. While not all innovations need to be disruptive to find success, they do help companies rise in the ranks of market success.
Our experts at TaxRobot sincerely hope the above guide has helped provide you with all the information you were looking for regarding the basics of disruption. If you’d like access to even more helpful information about startups, taxes, and other important topics, please consider exploring our wide selection of top-quality educational resources. Also, don’t forget to learn about our specialized AI-powered R&D tax software that can help your business start earning bigger refunds this year.
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