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 do 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 forces of 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 disruptive products and services tend to improve over time, and so they improved 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 disruptor is trying to do, is to say we don't want to get on the 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 the performance that customers can actually use. And usually that performance that customers can actually use is in a product that cost less and is more readily available and is something that the dominant players aren't offering. So this is something different that the dominant players are offering, it's usually less costly, and it's 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 a standard airline and 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 is the tax service H and R Block and the online self-develop service for doing your taxes in TurboTax. 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 of 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 right-hand side to new markets on the left-hand side. And you can began to see these are innovators who have come into the marketplace and they're all kinds of new innovators. Seiko Digital Watches, MCI, and Sprint at that time. Toys R Us was and 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. So you can find examples of many, many disrupters 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 healthcare industry, something I pretty much everybody can relate to and understand. And so we look at disruptive innovation players. Where the 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 the 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. It's very simple and very, very clear, and it's almost almost evidence-based management. Where you can build on what you already know and you can predict or point out whether diagnosis is based on the history and the research has been done and you can describe the 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 of 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 judgment, their expertise and solving problems that are of greater concerns. 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 if over time, it gradually improves. And from then you see that band, the tan band that is representing a 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 mainstream market. And what happens is what the dominant firms are doing are offering services that the most demanding customers and the least demanding customers, I wouldn'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 disruptive technologies and disruptive 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, diabetic monitoring, outpatient surgery, and focused care institutions. And on the top, what you see is at the high end of performance is you have technologies, and firms, and hospitals, and medical institutions. That focus on complex diagnoses, 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 innovation 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.
