What is Continuous Disruptive Innovation?

by | Oct 14, 2010 | Business Strategy

Disruption: In the world of business strategy and finance, this word is particularly meaningful. In a simplistic sense, disruption is defined as an innovation that improves a product or service in ways that the marketplace does not expect. Disruption can often be game-changing, forever altering the competitive balance within a market or industry. At Bridgesphere, we classify the concept of disruption into two primary strategies:

Disrupt, then Defend: The most common, often resulting in a finite period of value creation, sometimes followed by a period of value destruction (think: Yahoo, Blockbuster, Barnes & Noble)

Continuous Disruptive Innovation: Less common, but potentially driving sustained value creation (current examples include Apple & Google)

Firms that employ the strategy of “disrupt, then defend” are often companies that have developed, acquired, or otherwise exploited a disruptive product or service; then defended the resulting earnings and cash flows from traditional competitors. Companies that employ this strategy are not necessarily disruptive, themselves. They are typically not the fruits of disruptive management teams. Rather, they are firms who will have a finite period of “days in the sun”, or a period of value-creation which will benefit a select group of stakeholders who are able to impeccably time their investments.

Companies that employ the strategy of Continuous Disruptive Innovation are a much rarer breed. Continuous Disruptive Innovation is indicative of disruptive management teams who create tremendous value for the long-haul, ultimately achieving a meaningful period of sustained value creation.

Firms that achieve continuous disruption typically create platforms or networks that give rise to the development of a series of offerings, each creating further disruption within an industry. These “continuous disrupters” dramatically change the lives of consumers and the ways companies conduct business.

So how can corporate management teams identify companies that are employing the strategy of continuous disruption? Is the exercise entirely qualitative? We think not. In fact, as we explore two examples of Continuous Disruptive Innovation, we discern four key attributes that drive continuous disruption. These attributes are both quantitative and qualitative.  They can be measured and observed in our Value Creation Framework. Furthermore, these attributes are of a long-term nature, not merely financial or strategic signals that swing from quarter-to-quarter.

The Four Attributes of Continuous Disruptive Innovation

Companies that employ the strategy of Continuous Disruptive Innovation have certain financial & strategic attributes that ultimately drive value creation. Specifically, these firms:

  1. Invest in R&D at higher rates than competitors
  2. Achieve higher R&D productivity relative to peers
  3. Develop a platform or network that serves as the basis for a series of disruptive products or services that allow the company to enter new markets & reach new customers
  4. Are led by management teams who are willing to “think outside the box”, acknowledge the competitive landscape is constantly evolving & are willing to alter the direction of the business in response to new technologies or competitive threats.

Two recent examples of continuous disrupters are Apple and Google. We invite you to read these case studies to better-understand why disruptive management teams can enjoy long periods of success, while disruptive companies merely have a limited number of “days in the sun”.

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Christopher Catapano, Bridgesphere Strategic Planning

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