"Innovation" has become the business buzzword of the 21st century. It's used to describe everything from new products to restructured business models. But the leading movers and shakers in business recognize that the true challenge is the concept of disruptive innovation.
Innovation refers to a new product or service that comes on the scene and winds up fundamentally changing the market. Companies that pioneer (or survive) a disruptive innovation in their industry thrive in the new market; those that don't are rendered obsolete.
Today, we typically see three broad categories of disruptive innovation:
1. The new kid on the block
The easiest way to survive a new force in the market is to help pioneer it. Apple's iPod player and iTunes music service took advantage of a sea change in the way consumers accessed music. By offering songs in digital formats at a reasonable price, Apple pioneered innovative technology to harness consumer dissatisfaction with the old music industry distribution model and disrupt the entire category.
CD manufacturers and brick-and-mortar record stores were the ones that needed to innovate. Those that didn't were relegated to a niche market for vinyl enthusiasts or they disappeared altogether while iTunes changed the consumer music industry forever.
2. Quick and agile
When streaming video emerged, young, nimble video rental companies, such as Netflix, recognized the need to innovate and landed upon a formula for success. Though industry giants like Blockbuster had clearly established market dominance, they were too slow to respond to the changing market.
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