Sales & Marketing Series: "Marketing Disruptive Innovation"

Article by Andrew Rudin, MS

“I just saw our software demo,” I said to my company’s VP of Sales. “I can see how its features will be valuable for our customers.” “It’s disruptive!” he replied proudly, without enlightening me about what that meant or why it mattered. In fact, any accolades were moot, because the company suffered sustained financial losses, and in the process it churned the VP of Sales, the majority of his sales force, and most of the senior management team. What went wrong? I’ll get to that in a moment.

What makes an innovation disruptive, anyway?

An innovation is disruptive when it impacts the hegemony of the market-leading company, companies, or prevailing technologies for a specific market. Among the many examples of disruptive products are digital photography technologies, which replaced photographic film. Netflix upended complacent market leader Blockbuster through an innovative business and logistics model, and forced them to relinquish a significant source of profits from late fee charges. And UPromise offered a unique way of saving for college to a segment of consumers who lacked the resources or discipline to invest regularly in traditional securities.

The term disruptive innovation was introduced by Clayton Christensen in an article entitled Disruptive Technologies: Catching the Wave. Christensen expanded on his idea by describing low-end disruption, in which a technology or a business model enables a less-expensive product version for a price-sensitive segment of a market (e.g., desktop publishing), and new-market disruption, which creates demand in markets untapped by the dominant offerings (e.g., the opportunity UPromise identified).

The magnitude of the disruptive impact resulting from innovation can take many years to develop, and the influence of many of the variables involved is unknown at the time the innovation is introduced. The market consequences from nascent innovations such as iPhone, Linux, and digital media file sharing, are still unknown.

What conditions must be present to create disruption?

1. The market for the product or service is experiencing, or is likely to experience, an increased rate of demand. This demand might be created by social, business, or regulatory change.
2. The economic outcomes in providing, acquiring, or adopting the product or service must be significantly better than the prevailing offerings.
3. The business model or core technology used for the innovation must be both fundamentally different from the prevailing offerings and sustainable.

Because there are many variables over long timeframes that influence whether a product or service will be disruptive, is it useful or even accurate to proclaim disruption as the Sales VP did? How could he have known about the disruptive outcome before the company sold its first product outside its core market? Is market disruption by itself a worthwhile business or product development objective? Or, does disruption occur as a byproduct of the successful achievement of other business objectives? Are there more fundamental questions that need to be asked, such as do customers care whether a product is disruptive? What relationship do product innovation, market demand, and marketing strategy have with market disruption? Do products that have potential to create market disruption have unique characteristics that require specialized strategies and tactics?

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Andrew Rudin is the Managing Principal of Outside Technologies, Inc. and specializes in sales strategy for technology companies.  He holds a BS in Commerce (Marketing) and a MS in Management Information Technology (MS/MIT) both from the McIntire School of Commerce, University of Virginia, where he serves on the Advisory Board for the MS/MIT program.  He is Certified in Production and Inventory Management (CPIM) through APICS.  As a Faculty Adjunct at National Louis University, he teaches Strategic Uses of Information Technology.  He can be reached at 703.255.3732, or arudin@outsidetechnologies.com

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