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Many companies focus their innovation efforts on big ideas, thinking they will disrupt their industry. Others focus on adding more and more features to existing products until they have achieved functional superiority, holding onto the mistaken belief that this will ensure they achieve market dominance. Neither is the case.

Innovation in the business world usually involves some sort of technology, right? Not necessarily.

According to Clayton Christensen—who coined the term, disruptive technologies—few technologies are intrinsically disruptive in character. Instead, he recognized that a business model already enabled by these technologies is what creates the disruption. Christensen would go on to call this theory of disruptive innovation the “technology mudslide hypothesis,” or the idea that companies, and even entire industries, fail due to their inability to keep up with change.

What is Disruptive Innovation?

Companies often innovate faster than their customers need, so the product becomes more and more “feature-rich,” which often translates into an expensive product. These products may be too complex for customers to use all the features, and the features may be functionality the customer neither wants or needs. Companies persist in this endeavor, though, because it has been their traditional route to success and because they hope it will help them achieve success at their market’s higher end.

Because the sophisticated product is too complex or expensive for customers at the low end of the market to use, this segment of the market may be underserved. This is where disruption happens.

Small, nimble companies enter the market with less expensive and less complicated products designed to appeal to companies who have been shut out of the high end. These disruptive companies operate on smaller margins or in strictly segmented market spaces. At first glance, the product may not appear attractive, especially when compared to traditional products.

These small, nimble companies continue to operate at low margins but continuously expand their feature set and the market segments they address. Before the market incumbents have begun to take notice, the disrupter has “eaten their lunch.”

So, what can companies do to avoid falling to the steady advance of disruptive innovators?

Step One: Be Aware

Be aware of what’s happening on the fringes of your market. You may be at the top of the market, but customers too small to afford your offering have many of the same needs your customers do. How are they solving their problems? The answer may be your future competition.

Step Two: Recognize Good Enough May be OK

Know your customer. How has their business been changing? Is this competitive feature something they need, or is it merely something your competitor hopes they’ll need?

When it comes to product enrichment, you shouldn’t try to swallow an elephant, but don’t rest on your achievements either. Just because the market leader has added some new bells and whistles, don’t feel like you must match their offering. If your product serves the needs of your target customers, it may be OK. Don’t price yourself out of the market by adding too much. Just enough may be just right.

Step Three: Remember that Complacency is Your Enemy

You may not need to match the market feature for feature to retain your market share, but it’s important to keep pace with the evolving needs of all your customers. Don’t just focus on the largest customers. They will drive you to add features that most of your other customers may not need. 

And don’t just focus on your own customer base. Talk to customers you didn’t win. What was it about the competitor’s product that made them the winner? Then talk to companies in your target industries who aren’t looking. Why are they content with their existing solution?

The Trick is to Stay Alert

Disruptive innovation will happen in your industry. If not today, then next week or next year. You shouldn’t be taken by surprise, and you should have a long-term strategy in place that will let you ride the waves without going under. Refresh your strategy at least once a year—more often may be better in some industries—to ensure you are as prepared as possible for your industry’s future.