Wednesday, April 30, 2008

Disruptive Innovation

Apologies for including a jargon here; but Disruptive Innovation(DI) has always interested me. What is DI and why is it on this blog.

DI is the act of innovating which disrupts/stops the current of way of doing things and introduces a radically new way of doing the same things - for the better. It differs from Incremental Innovation (II)as II aims to bring about continuous and small changes to the existing setup without requiring drastic changes. An example could be. Designing faster trains is Incremental Innovation whereas going from trains to airplanes is Disruptive Innovation.

Why is this discussion here? Most of the problems, that we talk about, facing our society are part of a vicious circle and are intertwined with other equally trying problems. Incremental Innovation may fail to make much headway in this case. Disruptive Innovation would seek to break the vicious circle and proceed.

E.g. Incremental Innovation would seek to increase the size of classrooms every year to accommodate more children. Disruptive Innovation to change the way children learn. Maybe, it will come up with something like internet/satellite based learning which will not require the children to be in classroom to learn. They can learn while they are working or when they are at home. Thus drastically reducing the costs in terms of energy, time and of course, money.

Main reason why this discussion is here.
This initiative seeks to make lenders out of ordinary people and that too at a starting amount of Rs 1000 and their multiples. This money is then channeled to the the borrower. Among other things, it achieves a lower operating cost by using the internet as a medium (it does not do away with the traditional person-to-person interaction), it allows ordinary people to lend any amount that they are capable of lending(of course with a minimum amount which is not prohibitive), it provides reliable avenues for the borrower to borrow. A win-win situation I would say.

I remember reading about such an initiative in one of the Stanford KnowledgeBase mails and fished this link out. Find the site of Kiva here and read the article on Stanford KnowledgeBase.

During the course of my search for related information, I also came across dhanaX. It seems to be on the same lines as RangDe and Kiva. I do not want to speculate more on which is older, RangDe or dhanaX as I do not find it important.

The above discussion was mainly about micro finance lending institutions. I am sure disruptive innovations already happening or waiting to happen in other fields.


ranjit nair said...

Nice point on Microfinance and pretty interesting links buddy.

Though I don't think any of them is a Disruptive innovation. Your effort on the point that we need such disruptive efforts is great though.

My understanding is that in DI, the stress is on the word 'Disruptive'. The innovation has to disrupt/stop the working of the old methodology (you hv mentioned this already). I guess Aeroplanes are an invention , not an innovation . Agree ? And moreover, they didn't stop trains,so they weren't disruptive.

There are some nice examples of such innovations in the wikipedia entry of DI. Interested folks can have a look.
I like digital photography the best of it. It literally has made film rolls vanish into thin air. And to add to the list, I think even iPod/flash mem based music players is one, it has made sure that walkmans/discmans are passe.
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Aish said...

Hmmmm..I agree with you and do not :-).

The aeroplane example came to my mind when I was writing this post. But continuing my stream of thoughts, disruptive innovation brings about an innovation. Does not necessarily mean that it will stop other things. There was a transition period between digital cameras and the traditional ones. This period may vary depending on affecting factors.

In case of aeroplane, look at the usage of aeroplane vs trains in US. The graph would surely be in tilting "continuously" in favour of airplanes. At this point please discount the fact that there are some areas that are accessible by trains only and other special cases.

What say?

ranjit nair said...

Yep, if you look at it from a very high level. Yes, Agreed.