GREAT article from my favorite innovation thought leader, Clayton Christensen: After 25 years studying innovation, here is what I have learned
Why do great firms fail, especially at the hand of smaller and less resourced upstarts? The answer:
Disruptive innovations. These are innovations that are less expensive and poorer performing than existing products on the market. Disruptive innovations are often targeted at customers for whom products on the market are either too complicated or too expensive.
Where does lasting prosperity come from? The answer:
Market-Creating Innovations. These are innovations that transform complicated and expensive products into products that are simple and affordable so that many more people in society can access them. In some cases these innovations are disruptive, but in every case the new markets that are created serve as a strong foundation for sustained economic growth. Market-creating innovations do exactly what the term implies: they create new markets. But these are not just any new markets; they are new markets that serve people for whom either no products existed or existing products were not accessible for a variety of reasons, including cost or the lack of expertise required for their use. Market-creating innovations include transforming complicated and expensive products into ones that are so much more affordable and accessible to an increased number of consumers who are able to buy and use them.
In some cases, such innovation can create entirely new product categories.
For example, when Henry Ford developed the Ford Model T, he made the car simple and affordable for millions of Americans that so many people were able to buy the product. The new market Ford created led to many other markets that provided a solid foundation for growth and prosperity in America.