Predicting disruptive innovation: Which factors determine success

Disruptive Innovation theory explains how industry entrants can defeat established firms and quickly gain a significant share of their key markets, in spite of the fact that incumbents tend to be significantly more experienced and better resourced. The theory has been criticized for being underspecified: whilst the general mechanics of the phenomenon of disruptive innovation are clear, it has not been established which individual variables are essential to the process and which ones are merely ancillary. As a consequence, to date it has not been possible to build a predictive model on the basis of the theory managers can use to assess the disruptive potential of their own and their competitors' innovation projects. In this research project the predictive power of each of the main variables that are mentioned in the literature has been assessed on the basis of a qualitative analysis of five real world case studies. Only variables for which information can be collected using publicly available data before disruption happens have been retained. By clarifying the detail of disruptive innovation theory, this study has been able to address a key issue in the debate, namely, whether products that are more expensive and more complex than the market standard can ever be classified as 'disruptive innovations' or whether they should always be regarded as 'high-end anomalies'. In this study two distinct disruptive innovation strategies have been identified based on the current phase of the product life cycle, the current focus of mainstream demand and the market segments first targeted when coming to market. The first strategy entails growing an existing market by moving the focus of demand on to a secondary market driver as soon as customers begin to lose their willingness to pay a premium for upgrades in the performance areas they historically used to value. Early on in the product life cycle, disruptors can conquer the mainstream market 'from above' with products that are different and more reliable or more convenient but not simpler or cheaper. The second strategy creates a new separate market by offering a radically new type of additional functionality. Over time the new market replaces the old market. These products are likely to be expensive because of their small production run and difficult to use because they are the first models of their kind. High-end customers constitute a natural foothold market for these products as they are wealthy and highly skilled.