Oftentimes, we think innovation is all about new ideas and methods. Of course, innovate comes from “in” (into) and “novus” (new). By extension, we assume that innovation is about creating better products and services. After all, why should we innovate if we are not making things better?

However, in the real world, innovation can also mean creating new markets or networks that did not exist due to various reasons. This is what Clay Christensen describes in his book “The Innovator’s Dilemma.”

Disruptive innovation does not challenge the leaders directly.

Disruptive innovation does not challenge the leaders directly. Instead, it creates a new market adjacent to or below the current one. What sets it apart is that it eventually displaces the established players and products by constantly improving and challenging the leaders.

You can read about many examples of disruptive innovation on Wikipedia. Here are a few that build the rest of the narrative:

When Toyota entered the US market, they did not compete directly with the Big Three. Instead, they focused on the lower tiers at affordable prices and steadily expanded their presence and portfolio. Today, Toyota is #1 in car sales. You can see a similar pattern emerging all over again in the electric car segment.

When digital cameras came to market, they were quite inferior to film cameras. Nothing worked well enough to challenge the quality of film cameras and processing. The sensors were not great, batteries did not last, and the memory cards were not fast. But the technology steadily improved, and in the mid-2000s, digital cameras moved past the tipping point—there was no turning back.

When manufacturing moved to China, it was to leverage cheap and abundant labor. It took 20 or so years for China to become known as the world’s factory. Fast forward another 20 years, and it is almost impossible to challenge Chinese manufacturing. Now, it is not a question of cost or quality—it is about process and skills. While building up from nothing, their factories were new, and their processes & tooling could be reengineered and modernised. It will take another generational leap to challenge the current manufacturing techniques and advantages.

Now consider Generative AI. I would argue that this technology is in its nascent period of disruptive innovation. It provides a seemingly cheaper alternative to human labor. Though the technology is exciting, it is highly unreliable but steadily improving.

In my opinion, the most compelling argument is that it enables a new process—one that will enable new ways of working and give an advantage over old systems and tools. It could be newer ways of writing software, searching for products, doing commerce, or communicating to the market.

We have not reached the tipping point yet, and once we cross it, there will be no turning back.