Disruptive Innovation Part 1

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Last week we recorded our first SABA LIVE presentation, which focused on the topic of Disruptive Innovation. Such a broad theory cannot be fully explained, nor its application understood, in a 20-minute video presentation. Even with our open discussion that followed recording, we are just beginning to touch the tip of the iceberg. This blog is a continuation of the discussion as we dig deeper into how DI applies to our local churches and our decision making. This blog will be presented in 2 parts. Here is a quick summary:

Part 1

What is it?
* A Definition
* The Theory
* One Example
* Church History Example

 

What is it?

Disruptive Innovation is an interesting theory with important applications not only in the business world but in many other areas of life. This blog will focus on explaining Disruptive Innovation and making application to the dynamics of the local church and organizations that assist the local church.

 

A Definition
A Disruptive Innovation involves “a new product, service, or idea that radically changes an industry or business strategy, especially by creating a new market and disrupting an existing one."[1] This process occurs continually yet can go undetected and overlooked much of the time.

 

The Theory
Disruptive Innovation is a theory that has been popular for at least two and a half decades. It was first proposed by professor and author Clayton Christensen in a 1997 Harvard Business School book titled, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail.[2] Christensen put forth the rationale that great companies can do great things under great leadership yet still fail to maintain the market share.

Disruptive innovation is the theory that a new innovation, such as a product, service or idea, finds a small niche market and comes to life. On its startup the new product, service or idea is unappealing and insignificant to the larger market.

In other words, the new product, service or idea finds a foothold in the marketplace but is not attractive to the majority. The new product, service or idea starts small but over time, with improvements and adjustments, begins to grow in popularity. Given enough time and development, the new innovation becomes a competitor to the larger influencers and redefines the industry.

By focusing on the unmet needs of those the market leader is overlooking, the disruptive innovator finds a small foothold in the market and begins offering an alternative product, service or idea with less sophistication. The disruptive innovator continually improves the product, service or idea until it gains momentum in the marketplace. Eventually, the new innovation is a viable and credible alternative to the market leader.[3] This in turn causes the market leader to rethink the product, service or idea and make changes to meet the competition. Such disruptive innovation is beneficial for the overall market and for the customers.

Expanding on the idea, the current market leaders offer their products, services or ideas to a larger customer base as they seek to continually sustain the influence of their products, services or ideas. They do so to attract higher paying customers and sustain their market share. The market leader continues to add more and more add-on features to their product, service or idea, which in most cases, customers do not want or really need. By focusing on the unmet needs of those the market leader is overlooking, the disruptive innovator finds a small foothold in the market and begins offering an alternative with less sophistication. The disruptive innovator continually improves the product, service or idea until it gains momentum in the marketplace. Eventually, the new innovation is a viable and credible alternative to the market leader.[4] This in turn causes the market leader to rethink the product, service or idea and make changes to meet the competition. Such disruptive innovation is beneficial for the overall market and for the customers.

In summary, the basic “theory goes that a smaller company with fewer resources can unseat an established, successful business by targeting segments of the market that have been neglected by the incumbent, typically because it is focusing on more profitable areas.”[5]"As opposed to disruptive innovation, sustaining innovation, seeks to improve existing products. Meaning, it does not create new markets or values, but rather merely develop existing ones."[6]

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One Example (a billion-dollar example)
The Dollar Shave Club. In January 2011 the “Dollar Shave Club was founded by Mark Levine and Michael Dubin.”[9] Like most men, the two founders were frustrated with the high cost of shaving razors. So, in order to provide an alternative solution to the costly and painful experience of purchasing razors, Levine and Dubin began a start-up company with a new idea. The basic premise of their company was to provide five razors a month for only $1 a razor. This meant that five razors could be purchased for five dollars a month as well as having them shipped directly to a home address. In a first shipment, the purchaser received a free razor handle. The purchase price and shipping convenience gained traction. This was a distinctly new idea in a market dominated by large companies. This was a David verses Gillette situation. After gaining a following, the Dollar Shave Club began to offer other items. Currently, their basic razor, called The Humble Twin, is a monthly five razor pack of twin blades for the low price of $4.[10]

The new Dollar Shave Club company started small, with an innovative product and a focus of taking on the big high-priced brands like Proctor & Gamble’s Gillette. Currently, Gillette has many types of razors that offer a variety of features such as heated handles, different shapes, and numbers of blades. Gillette’s razors come in no less than 17 varieties.[11] At the time of this writing, the “Heated Razor Starter Kit and Shave Plan by GilletteLabs” costs $275 and even ships free! In the first months starter kit, you receive a heated razor handle, a magnetic charging dock, and 2 refill cartridges. 3 months later receive four refill cartridges.[12]

The Dollar Shave Club and Gillette are a great example of the theory of Disruptive Innovation. Here is why. In 2010 Gillette held a 70% share of the world’s market share for razors. In 2018 Gillette still held a 54% share of the same market. The Dollar Shave Club was purchased in 2016 by Unilevel for 1 Billion dollars.[13] What started as an idea from two guys at a party discussing their frustration with expensive razors, now is a 1-Billion-dollar business. Disruptive Innovation at work.

 

A Church History Example
One great Disruptive Innovation in church history was Sunday School. “Robert Raikes and Thomas Stock first established a Sunday school for the poor and orphaned in Gloucester in 1780. Although there were earlier Sunday schools, Raikes and Stock have become the recognized originators. Their efforts led clergy and laypeople to establish similar schools throughout England, thus setting in motion the Sunday School Movement. By 1800, 200,000 children were enrolled in English Sunday schools, and by 1850, this number had risen to 2 million.”[14] Raikes and Stock responded to their context with a great idea.

 

Part 2 - coming soon . . . .

* Insights on the Theory

* Why it Matters

[1] https://www.dictionary.com/browse/distruptive?s+t

[2] https://www.amazon.com/Innovators-Dilemma-Technologies-Management-Innovation/dp/1633691780/ref=sr_1_1?crid=2U77XY7MOYGPT&keywords=innovators+dilemma&qid=1576529835& sprefix=innovation%2Caps%2C196&sr=8-1

[3] https://www.christenseninstitute.org/disruptive-innovations

[4] Ibid.

[5] Ibid.

[6] https://www.weforum.org/agenda/2016/06/what-is-disruptive-innovation/

[7] https://www.researchgate.net/figure/Four-elements-of-the-theory-of-disruptive-innovation-King-and-Baatartogtokh-2015_fig1_320596158. Uploaded by Christopher Moon @ https://www.researchgate.net/profile/Christopher_J_Moon

[8] https://en.wikipedia.org/wiki/Disruptive_innovation

[9] https://en.wikipedia.org/wiki/Dollar_Shave_Club

[10] https://www.dollarshaveclub.com/get-started/blades?dsc_source=dsc&dsc_medium=side_nav

[11] https://gillette.com/en-us/products

[12] https://gillette.com/en-us/products/gillette-labs/heated-razor-by-gillette/subscription-plan

[13] https://fortune.com/2016/07/19/unilever-buys-dollar-shave-club-for-1-billion

[14]  http://digital.library.mcgill.ca/sunday/hist1.htm

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