What 40 Years of Research Reveals About the Difference Between Disruptive and Radical Innovation
“If you went to bed last night as an industrial company, you’re going to wake up this morning as a software and analytics company.” Jeff Immelt, former CEO of General Electric
The second wave of digitization is set to disrupt all spheres of economic life. As venture capital investor Marc Andreesen pointed out, “software is eating the world.” Yet, despite the unprecedented scope and momentum of digitization, many decision makers remain unsure how to cope, and turn to scholars for guidance on how to approach disruption.
Disruptive and radical innovations are complex phenomena, but they are important to distinguish from one another. While Marc Andreesen expects many industries to be disrupted by software, with new firms overtaking incumbents, technology may at the same time enable the incumbents to radically transform their businesses, especially with new customer-centric business models embedded in product-service-ecosystems. Many examples highlight how radical innovation may help incumbents to insure against disruption. For instance, Daimler is using their Car2Go strategy to secure market positions against the Uber’s and Lyft’s that may become disruptive to their core business model. Daimler as of recent even announced a partnership with BMW to join forces and to build a joint mobility platform and eco-system.
For disruptive innovation, the key to organizational renewal may lie in the needs of the customers, whereas for radical innovation, it may lie within the capabilities of the incumbent firm itself. To mistake one for the other may in fact do more harm than good.