Disruption Is Not a Question of Technology, but of Business Model

We hear a lot about “disruptive technologies”, but what makes an innovation disruptive is not usually its technical dimension, and the distinction often made between radical innovation and incremental innovation is not so pertinent. Indeed, we can observe two examples to illustrate this point.

First, radical innovations, those that bring forth significant technological changes, do not always have a disruptive impact. The existing players adopt them quickly and easily and hence use them to reinforce their dominant position. This is the case of the mobile phone for traditional telecom players. A mobile infrastructure is different from a landline infrastructure, as it has for example, antennas. Yet the management of a mobile network and a landline network are relatively similar: they both imply very high fixed costs and a large number of clients to be billed every month based on their consumption. It is not surprising then that the landline operators have managed with ease to expand to the mobile phone field: for them, the technology was not disruptive, but sustaining. We can also observe that for the same reason, certain mobile operators like Bouygues Telecom in France have developed their landline network with similar ease.

Second, disruptive innovations are not always radical innovations, that is to say they do not necessarily involve any technological change. This is the case with low-cost airlines, which used the exact same resources, (technology, airplanes, and pilots) as traditional airline companies. However the former disrupted the market to such an extent that even 60 years after the beginning of the disruption, the traditional airlines still have difficulties digesting the change as demonstrated by Air France with its low-cost affiliate, Transavia. Renault’s Dacia Logan, a low-cost car, uses very standard technology, but corresponds to a business model that is different from Renault’s classic business model. Renault initially had difficulties in managing two different business models, encountering internal and cultural resistance among its employees. Because of these difficulties in managing two business models under the same roof, Renault successfully created an entirely new entity for the Dacia Logan.

To better manage innovation, therefore, it is very important to distinguish between sustaining innovation and disruptive innovation, as suggested by innovation specialist Clayton Christensen. Sustaining innovation, whether technologically radical or not, is that which is made in conformity with the business model of the company. Disruptive innovation, again whether radical or not, is that which disrupts the company’s business model. It is the one that is really challenging to organizations.

2 thoughts on “Disruption Is Not a Question of Technology, but of Business Model

Leave a Reply