A framework for
Identifying and Evaluating
Disruptive Innovations
A framework for
Shuan Sadre Ghazi, Magnus Lindqvist
International master program in
Management and Economics of Innovation
Department of Technology Management and Economics
Chalmers University of Technology, Gotheburg, Sweden
December 2005
Disruptive innovation constitutes an important opportunity for growth in all firms. However, if ignored, it can turn to a severe threat. This implicates that there is a need for identifying and evaluating potentially disruptive innovations, which is the main reason for writing this thesis.
Conventional resource allocation and decision-making processes are seldom appropriate for addressing disruptive innovations. Because of the high growth ambitions of established companies, the initial small market size for disruptive innovations leads them to abandon potentially disruptive projects. Furthermore, the large overhead costs of established firms, make it hard for them to compete against the insurgents. By using the framework presented in this study to identify and evaluate new opportunities, disruptive innovations are more likely to become successfully developed.
In this thesis, we discuss and propose a definition for disruptive innovations. The definition is based on available literature on disruptive innovation, with a special focus on the importance of delivering value and business model innovation. In brief, a disruptive innovation is an innovation that either dramatically lowers the cost of products or services, while still offering a good enough performance, or delivers value along a new performance dimension compared to established products. The innovation typically attracts customers in a small segment of the market, but eventually grows and outcompetes established firms. With this definition as a basis, a framework for identifying and evaluating disruptive innovations is presented.
For identifying potentially disruptive innovations, the framework looks into technology, business model and market as three sources for innovation. A widened definition of the firm’s business, the circumstance based job-to-be-done approach, and the customer utility map, are considered important for identifying the potentially disruptive innovations. The last section of the framework is the evaluation, which is divided into the evaluation of disruptive potential and the evaluation of the actual process of disruption.
The framework is applied on SCA AB. By conducting interviews and workshops with employees, potentially disruptive innovations were identified. The experiences from the sessions and the subsequent evaluation enabled us to refine the framework and make necessary improvements. This way the quality of the proposed framework is validated. From the innovative ideas that were generated during the identification phase, two of the most interesting cases, eucalyptus and the low-cost business model of Procter & Gamble for diapers, are evaluated.
The experience and knowledge gained about disruptive innovations during the work with this thesis is also used to discuss the shortcomings of available literature. Moreover, based on our experiences in SCA, we give short recommendations on how SCA should handle disruptive innovations in the future.
© 2006 Shuan Sadre Ghazi ghazi[at]merit [dot] unu [dot] edu