Understanding disruptive innovation and sustaining innovation

At a glance

• Sustaining innovation is when a company or organization produces a more satisfying customer experience than existed.
• Disruptive innovation means offering something novel, be it a product, service or business model, to an overlooked market segment. Because of its competitive nature and benefits to customers, disruptive innovation has potential to overshadow the work of sustaining innovation.
• Gain a solid foundation in business through an online business program at University of Phoenix.

Innovation is critical for long-term business success, particularly if you’re an entrepreneur. This means companies have to come up with new ideas or improve current ideas in ways that make customers’ lives easier. This might take the form of a new product, a service or even a new way of looking at an old problem.

In his work The Innovator’s Dilemma, professor Clayton Christensen underlines the importance of improvement by identifying how a company can fail even if it does all the right things. Sustaining innovations — technologies that improve performance — can fail when disruptive innovations offer more affordable or creative solutions.

What is sustaining innovation?

An example of sustaining innovation is a product that provides a more satisfying customer experience than previous products and improves product performance. This occurs when companies create products that outperform the competition in their market. The product’s vendor achieves higher profits as customers recognize the product’s value.

Sustaining innovations are often built gradually, such as when products grow more effective to meet customer demands. For example, customers might request that companies add a new feature to an existing product. In other cases, companies might proactively develop a product based on their assumptions about what their customers might find useful.

A sustaining innovation represents the natural progression of a product as it generally becomes more useful for customers, thereby prolonging the product’s life span in the market.

Examples of sustaining innovation

Sustaining innovation exists wherever companies improve products to satisfy customer requests or to keep pace with competitors. Here are a few notable examples:

• Added smartphone features like better cameras, increased battery life, larger screens and enhanced processing power
• Automotive features like remote start or self-parking
• Credit card features like cash-back options, airline miles and points for grocery purchases

Many sustaining innovations don’t represent a complete overhaul of a product or service. Instead, they’re often controlled changes meant to improve the consumer experience in a specific way. While they won’t create an entirely new market, sustaining innovations help solidify a company’s standing in a particular industry.

What is disruptive innovation?

Unlike a sustaining innovation, a disruptive innovation offers a product, service or business model to a niche market that has been overlooked. Although disruptive innovation isn’t always for niche markets, whichever market it’s in, it’s meant to reset industries through solutions that are impactful for customers, resulting in a competitive advantage. Often, companies become disruptors by creating entirely new products, or a more cost-effective approach, by repurposing old technologies.

In many cases, disruptive technology also makes an existing product or service available to a new market. It might reduce the cost of a traditionally expensive item, for instance, allowing more people to enjoy it.

Examples of disruptive innovation

More than anything, disruptive innovations can render previously successful companies obsolete by offering a new product or way of doing things. Here are some examples:

• A popular streaming service popularized the at-home movie rental model for the mainstream market, which took a substantial chunk of the market from movie theaters and made video rental stores a thing of the past.
• A company that allowed people to rent out their homes offered travelers a cheaper option for lodging while simultaneously allowing homeowners to profit in a traditionally hotel-led hospitality space.
• One company, originally launched as an online bookstore, quickly devalued physical storefronts and changed how all products (not just books) were sold and purchased around the world.
• A popular music streaming company changed the music industry, offering mainstream customers unlimited licensed music for a flat fee, which was a clear upgrade over per-song purchases.

These and other disruptive innovations did more than add on to an existing popular product. They changed the way entire markets operated, allowing customers to experience products or services in a new way.

The role of technology in disruptive innovation

To qualify as disruptive, innovative products or services can be made available to new markets or offered at a lower price. Technology is critical in helping companies achieve both these goals.

Technology is often the main reason companies can reduce the cost of a particular product or service. For example, a new manufacturing process might help reduce costs, improve productivity or reduce the size of a company’s production line. These lowered costs can make certain products — once available only to higher-paying customers — now available to a much wider audience.

Many companies depend on technology for disruption. To meet new demands, technology can help companies create products at a faster rate. The right technology can also assist in marketing and distributing products and services after they have been created.

Time-saving, cost-cutting technologies are in high demand across virtually every industry. Christensen’s original definition of a disruptive innovation — those that satisfy market demand with lower costs — relies on technology from the start.

There are many organizations that no longer aim to create sustaining innovations. Instead, they search for technologies that help them lower costs, improve manufacturing and apply current products to entirely new market segments.

Disruptive vs. sustaining innovation

Disruptive innovations don’t overwhelm markets the moment they’re introduced. On day one, a potential disruption can actually result in worse overall market performance, since it’s a cheaper version of an existing product. However, with improved reception and adaptation, disruptions can replace sustaining innovations entirely.

To preserve any remaining market share, sustaining innovators are forced to rethink their business model. Companies that sell sustaining innovations might restrict their target market to focus on their most loyal customers only. They might also attempt to make further changes to their products — in ways that mimic some of the best features of the now-popular disruption.

Sustaining innovators that fail to compete with disruptive innovation may face a quick exit from the market. For example, a popular movie rental corporation with brick-and-mortar storefronts famously was late to adapt to DVDs by mail and, later, streaming. By the time executives realized how much their core market had changed, profits had fallen too steeply to recover.

How to develop a disruptive business model

While the business model for disruptive innovation can be successful, creating one can be challenging.

Here are some tips for creating a disruptive model that could potentially help reset your market:

• Outline your disruptive mindset: Create a firm list of priorities and choose a leadership style that allows you to lead your organization toward a disruptive innovation.
• Keep close tabs on your customers: Survey your customers to catalog their habits, likes and dislikes, trends and buying habits.
• Audit new technologies: Stay on the lookout for modern technologies that can help reduce costs, improve productivity, eliminate manufacturing errors or accelerate time to market.
• Work proactively: Introduce your new product or service before you’re competing with another potentially disruptive innovation.
• Constantly monitor your competition: Watch the other players to match what they’re doing and anticipate their next moves.
• Solidify your foundation in business management: Pursue a business degree to improve your skills in fields like business operations, management and leadership.
• Follow your industry’s leaders: Keep up with subject matter experts in your industry who are thought leaders[1]  and identify emerging trends that might affect the success of your disruption.
• Leverage data reporting and analytics: Harness business analytics and intelligence to inform your business decisions and make the most of both customer and market trends.
• Evaluate your company’s positioning: Conduct a SWOT analysis to identify your organization’s strengths, weaknesses, opportunities and threats.

These and other techniques can help your company position itself to create a disruptive innovation and maximize its market value.

Business and data science at University of Phoenix

If you’re looking to learn more about online business programs or data science degrees that prepare students with skills for a variety of career paths, consider a degree at University of Phoenix. Whether you’re looking to build fundamental knowledge or advance your skill set, there are plenty of degrees and certificates to consider.

• Marketing Certificate — This program teaches how to cultivate a leadership style that fosters employee performance, design product development strategies that deliver value to consumers, and improve organizational systems while reducing resistance to change.
• Associate of Arts with a concentration in Business Fundamentals — From management to accounting, skills learned in this program are essential for anyone looking to advance in their business education. 
• Bachelor of Science in Business — Knowledge of the ins and outs of running a business can spell the difference between success and failure in a competitive business world. 
• Bachelor of Science in Data Science — Gain fundamental skills and knowledge needed to analyze, manipulate and process data sets using statistical software. Learn ETL (extract, transform, load) processes for integrating data sets for business intelligence use. Focus on data mining and modeling, data programming languages, statistical analysis, and data visualization and storytelling.

• Master of Science in Data Science — Analyze, design and manage data sets and models used to optimize functionality and scalability and improve business system performance. Learn database design, data processing and warehousing, data queries and interpretation, business intelligence, and statistical methods and how to apply data science strategically to improve business decision-making.
• Master of Business Administration — Prepare for leadership roles in an organization. This degree program can get graduates ready for careers as business managers, operations directors and more.
• Master of Management — Take your understanding of business organization and management to an advanced level. This degree program is perfect for those with experience in the workforce who are looking to take on greater leadership roles. 
• Doctor of Business Administration — Expand your understanding of organizations, work environments and industry. This program invites participants to delve into cutting-edge research in the field of business and develop skills for solving complex organizational problems.