People often conflate the terms “disruption” and “innovation,” lumping them into a single category to define changes in the business world. As you’ll see, this catch-all mentality does a disservice to both terms. In this article, let’s explore the differences between disruption and innovation to gain a clearer understanding of how ideas affect the business world.
What Is Innovation?
How the business world defines innovation isn’t far off from its everyday, vernacular definition. An innovation refers to an emerging idea – a new concept, new product, new method or mode of production. The commonality here – as you can probably see – is newness.
However, innovation isn’t necessarily disruptive. It can simply be a new idea that takes hold without ever rocking the boat for incumbent organizations.
Take microfinance, a typical example people reach for to explain non-disruptive innovation. When Grameen bank introduced zero-collateral micro-loans to help halt the cycles of poverty in developing nations, it was an entirely new concept. But did it overturn, upset, revolutionize or even affect the traditional loan systems offered by incumbents? No. The innovation struck off in a market all its own.
What Is Disruption?
Disruption occurs when an innovation fundamentally reshapes its industry. More precisely, disruption is “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.” That’s according to the ultimate authority on disruption – the man who coined the term – Clayton Christensen.
To understand disruption, you can look at textbook cases (like Uber or Airbnb). But let’s explore a much more recent example: Nobul.
Nobul is a real estate digital marketplace that uses a proprietary algorithm to vet and match real estate agents to consumers. Real estate agents can then compete for a consumer’s business by offering competitive rates, etc. Essentially, the platform swings the balance of power in real estate transactions toward consumers – a disruptive change for the once-stalwart real estate industry.
And that appears to be the goal for the real estate digital marketplace. Nobul CEO Regan McGee recently told Medium, “We are the tip of the spear of disruption. We’re finally giving consumers power in this industry. Real estate transactions have the single largest fees people pay and the average person pays those fees 11 times in their lifetime. For us to be disrupting this market is extremely exciting.”
Similarities and Differences
It’s understandable why there’s confusion around the two terms; they often overlap and intersect.
As Caroline Howard puts it, writing for Forbes, “Disruptors are innovators, but not all innovators are disruptors – in the same way that a square is a rectangle but not all rectangles are squares.” She offers a concise (albeit convoluted) way of saying that innovation is the tent term, whereas disruption belongs to a more rarefied class of innovation.
As mentioned above, innovation refers to the emergence of new ideas. The changes precipitated by those ideas might be revolutionary, or they might simply constitute incremental improvement. In the former case, you can call the idea “disruptive innovation,” or simply disruption; in the latter case, people tend to call these new ideas “non-disruptive innovations,” “incremental innovations,” or simply your bog-standard “innovations.”
Hopefully, this article clears up some confusion around the terminology and offers readers a more accurate picture of how the marketplace of ideas impacts the business world – and the world at large.