13
domain. In addition to developing creative economy and innovation policies,
NESTA impact includes, but is not limited to, health, education, and the arts.
In today’s world, the need to innovate spans the entire continuum from private to
public sector – profit-seeking and nonprofit organizations. At its core, innovation is
a way of life, an attitude based on continuously challenging the status quo, rather
than merely reacting to changes in customers, regulations, competitors, and markets.
1.6 Disruptive Innovations
Perhaps one of the greatest misunderstandings about innovation comes from the
concept of “disruptive innovation.” When it works, it can allow smaller, less-funded
organizations to disrupt the market share of established, incumbent ones (Christensen
et al. 2015). Although there are certainly large organizations able to drive smaller
organizations out of business, when disruption occurs, it can allow a proverbial
David to overtake Goliath.
Products or services in and of themselves do not represent disruptive innovations, however. The concept refers to the trajectory of a product or service along the
value curve rather than about a discrete product or service. Disruptive innovations
need not be breakthrough innovations. Instead, they consist of products and services
that are simple, accessible, and affordable (Dillon 2020).
1.6.1 How Do Disruptive Innovations Unfold?
Incumbent organizations usually focus on improving the value delivered to their
most demanding customers. This follows the logic that these customers are the most
profitable. The result is that the needs of only a fraction of users are met. Other
customers are left inadequately served (incumbent’s sustaining trajectory in
Fig. 1.1). These overlooked and/or non-consuming customers represent a significant
opportunity to provide more than expected value at a (relatively) low price.
Since incumbents tend to focus on the most profitable, high end of the market,
they usually fail to defend the least profitable segment as vigorously. This allows
new entrants – the disrupters – to move up-market, improving value and quality
while keeping the features that enabled them to challenge the incumbents (Entrant’s
disruptive trajectory in Fig. 1.1). Innovations tapping into non-consumption are particularly relevant in developing countries, since they represent a means to alleviate
poverty. They can open new markets, becoming the main building block toward
greater prosperity, as argued by Christensen et al. (2017).
Disruptive innovations originate either from the low end of markets or from tapping into products and services not yet consumed (Wunker and Farber 2019) (Box
1.4). One private sector example is low-cost air travel, a hugely successful disruptive innovation built upon addressing non-consumption (Taneja 2017). Many lowcost air carriers, such as Southwest in the United States, EasyJet and Ryanair in
1 The Quest for Innovation: Addressing User Needs and Value Creation
domain. In addition to developing creative economy and innovation policies,
NESTA impact includes, but is not limited to, health, education, and the arts.
In today’s world, the need to innovate spans the entire continuum from private to
public sector – profit-seeking and nonprofit organizations. At its core, innovation is
a way of life, an attitude based on continuously challenging the status quo, rather
than merely reacting to changes in customers, regulations, competitors, and markets.
1.6 Disruptive Innovations
Perhaps one of the greatest misunderstandings about innovation comes from the
concept of “disruptive innovation.” When it works, it can allow smaller, less-funded
organizations to disrupt the market share of established, incumbent ones (Christensen
et al. 2015). Although there are certainly large organizations able to drive smaller
organizations out of business, when disruption occurs, it can allow a proverbial
David to overtake Goliath.
Products or services in and of themselves do not represent disruptive innovations, however. The concept refers to the trajectory of a product or service along the
value curve rather than about a discrete product or service. Disruptive innovations
need not be breakthrough innovations. Instead, they consist of products and services
that are simple, accessible, and affordable (Dillon 2020).
1.6.1 How Do Disruptive Innovations Unfold?
Incumbent organizations usually focus on improving the value delivered to their
most demanding customers. This follows the logic that these customers are the most
profitable. The result is that the needs of only a fraction of users are met. Other
customers are left inadequately served (incumbent’s sustaining trajectory in
Fig. 1.1). These overlooked and/or non-consuming customers represent a significant
opportunity to provide more than expected value at a (relatively) low price.
Since incumbents tend to focus on the most profitable, high end of the market,
they usually fail to defend the least profitable segment as vigorously. This allows
new entrants – the disrupters – to move up-market, improving value and quality
while keeping the features that enabled them to challenge the incumbents (Entrant’s
disruptive trajectory in Fig. 1.1). Innovations tapping into non-consumption are particularly relevant in developing countries, since they represent a means to alleviate
poverty. They can open new markets, becoming the main building block toward
greater prosperity, as argued by Christensen et al. (2017).
Disruptive innovations originate either from the low end of markets or from tapping into products and services not yet consumed (Wunker and Farber 2019) (Box
1.4). One private sector example is low-cost air travel, a hugely successful disruptive innovation built upon addressing non-consumption (Taneja 2017). Many lowcost air carriers, such as Southwest in the United States, EasyJet and Ryanair in
1 The Quest for Innovation: Addressing User Needs and Value Creation