Tirta Puteri Lestari
Over the past two decades, disruptive innovation has been debated in the business world. Most people’s stigma about business today is about aggression and fear: beating the competition, stealing market share, destroying or being destroyed. Innovation is often seen as disruptive by the public. And the public assumes that innovation can potentially disrupt a market and that this has a painful impact on society. However, these fears bias one important fact about innovation :
Misconceptions of Innovation and Disruption
Based on the concept of disruptive innovation by Joseph Schumpeter, disruptive innovation is the innovation that creates new markets, disrupts or damages existing markets, and eventually displaces existing markets. Just like people who prefer to subscribe to Netflix rather than renting DVDs from Blockbuster until it disrupts the DVD rental market. Or people who respond well to the emergence of online transportation that disrupts most public transportation workers, such as public transportation (Angkot), taxis, and also ojek. The emergence of Netflix and Online Transportation is an example of how innovation can be disruptive. Disruption clearly shows the exchange of positions between the winners and the losers. Although the disruptor is crowned the winner in the media, buyers and investors flock to it, and the euphoria and privilege of disruption force painful cost adjustments for society.
Based on these two cases, it is not uncommon for people to still be skeptical about innovation and focus on things that are considered to disrupt or even destroy a market. From another perspective, innovation can create new markets. This shows that there is great potential to create new jobs, and this will certainly encourage economic growth without any party feeling disadvantaged or disrupted, this is what is called nondisruptive creation.
Nondisruptive Creation: An Alternative Path to Growth
The prevailing believe that disruption is the only path to innovation needs to be challenged. Market-creating innovation doesn’t always have to be disruptive. In fact, there are numerous examples of nondisruptive creation that have had a significant impact on growth, jobs, and society.
An example is microfinance, which has transformed the lives of the world’s poorest by providing financial services to those who were previously deemed unsuitable borrowers. Muhammad Yunus, the founder of Grameen Bank, pioneered microfinance, enabling individuals to create micro-businesses and improve their standards of living. This nondisruptive creation has become a multibillion-dollar industry with a remarkable 98% loan-repayment rate and tremendous potential for future growth.
Sesame Street, a beloved children’s television program, also exemplifies nondisruptive creation. By leveraging the power of television, Sesame Street created a new industry known as preschool edutainment. This ground-breaking show taught children essential skills while entertaining them, without displacing traditional educational institutions or parental involvement. Today, preschool edutainment is a multibillion-dollar industry with a global reach, improving early childhood education worldwide.
These examples demonstrate that nondisruptive creation can lead to the establishment of new industries, growth, and employment without causing harm to existing markets, players, or jobs. By embracing this alternative path to innovation, businesses can unlock immense potential for economic and societal progress.
Nondisruptive creation and Industrial Growth
The Industry 4.0 era emphasizes the importance of developing nondisruptive creation in the future. Advances in AI, smart machines, and robotics are significantly changing the landscape and gradually replacing many existing human jobs. Studies estimate that smart machines alone could replace about 20 million manufacturing jobs worldwide within a decade, including more than 1.5 million jobs in the United States. In addition, various industries, including law, medicine, accounting, real estate, and journalism, are also at risk of losing a significant portion (20% to 40%) of their jobs due to technologies such as AI, blockchain, 3D printing, robotics, and automation.
To address the workforce affected by these changes, new job opportunities need to be created. It is a challenge for companies, governments, and society to develop new markets without displacing existing ones. This need is an economic and moral imperative, that increasingly emphasizes nondisruptive creation.
Nondisruptive creation is not the only answer to the challenges we face; other solutions are also needed. However, nondisruptive creation plays an important role in addressing these challenges and should be part of a comprehensive solution.
The Characteristics of Nondisruptive Creation
The impact of nondisruptive creation can be distinguished from the impact of disruption at three levels. The micro level focuses on individual organizations, the meso level on groups or their interactions, and the macro level on the economy or society.
Generates growth through the displacement and expansion of existing market space
Generates growth through the creation of new market space beyond existing industries
Produces a win-lose outcome Winners: the disrupter and consumers. Losers: disrupted organizations and their employees
Produces a positive-sum outcome Winners: the nondisruptive creator and consumers. Losers: none evident
Incurs social adjustment costs from shuttered organizations, lost jobs, and hurt communities Short-term growth comes with social pain, although the net gain in growth over time is positive
Nondisruptive creation encompasses several key characteristics that set it apart from disruptive innovation. Understanding these characteristics can help businesses identify opportunities for market-creating innovation without resorting to disruption.
- Technology-driven or Innovative Combination
Nondisruptive creation can stem from either new or existing technology. It may arise from scientific inventions or technological breakthroughs. However, innovation can also occur without groundbreaking technology, relying instead on new combinations or applications of existing technology. Sesame Street, for example, leveraged the power of television to create a new industry without relying on a new technological invention.
- Applicable Across Geographic Areas and Socioeconomic Levels
Nondisruptive creation transcends geographic boundaries and socioeconomic standing. Whether the originate in developed markets or target the bottom of the pyramid, market-creating innovations have the potential to benefit people from all walks of life. Microfinance, and Sesame Street were initially created for developed economies but have since made a significant impact in various regions, catering to diverse socioeconomic backgrounds.
- Creation of New Markets and Employment Opportunities
A fundamental aspect of nondisruptive creation is the establishment of new markets and employment opportunities. These innovations generate economic growth and create jobs without causing harm to existing industries or players. By identifying and capitalizing on unmet needs, businesses can tap into untapped markets, fostering growth and prosperity.
Embracing Nondisruptive Creation: Complementing Disruption
Nondisruptive creation offers an alternative path to market-creating innovation, complementing disruption rather than replacing it. By recognizing the immense potential of nondisruptive creation, businesses can diversify their innovation strategies and unlock new avenues for growth.
While disruption has its merits and has undoubtedly transformed industries, it is not the only route to success. By embracing nondisruptive creation, businesses can create new markets, jobs, and profitable growth without causing social harm or displacing existing players. This approach allows for the harmonious coexistence of innovation and societal well-being.
In conclusion, the notion that innovation must be disruptive is a misconception. Nondisruptive creation holds immense potential for businesses to foster economic growth and societal well-being simultaneously. By embracing this alternative path to innovation, businesses can unlock new markets, create jobs, and drive profitable growth without causing harm to existing industries. It’s time to expand our understanding of innovation and explore the diverse possibilities that nondisruptive creation offers.
This article was adapted from the Harvard Business Review article “Innovation Doesn’t Have to Be Disruptive” (https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive)