The disruptive economic model

Disruptive innovation is a term that has risen from the relative obscurity of economics books and lecture halls to become a daily term in the workplace, mostly used in awe or abject fear, depending on where you work.

Disruption and innovation are even two of the favourite words of Prime Minister Malcolm Turnbull, who wishes to see our country innovate its business and education sectors and disrupt the business environment we are living in. His vision—warmly welcomed by many sectors of industry and particularly start-ups—is an agile, creative, and forward-thinking country, not a reactionary one. And in that vision we can see some core fundamentals underpinning the business models common among true disruptors.

Disruptive innovation is a term coined in the now-famous book, The Innovator’s Dilemma by Clayton Christensen. The crux of the book is apparent from its descriptive subtitle: When new technologies cause great firms to fail. In the book, Christensen argues that many companies that have suffered a dramatic decline have fallen not due to bad decisions or mismanagement, but because they have simply continued to make money and keep customers happy. Hence the dilemma in the title: doing the right thing could be the exact wrong thing to do.

Disruptive innovations are not amazing new technologies that enhance products, they are innovations that make products and services more accessible and affordable, thus putting them in reach of a much larger customer base.

Christensen, on his website, describes it as "… a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors."

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