Every company which has to do business in a competitive marketplace, innovates. If it doesn’t, it finds that it is no longer in the marketplace — competitive or not. The Japanese even invented a term — and a method — to do this. They called it kaizen , or continuous improvement.

Every company takes pride in its innovations. These innovations not only save money or add to profits, they help build brand image with its stakeholders.

This is why you will often find that such innovations occupy a disproportionate share of the bandwidth whenever managements talk with stakeholders — whether to customers via advertising and marketing outreach, or to investors at shareholder meets and via annual reports.

So why is it, then, that some companies continue to find themselves being pushed out of the marketplace, their competitive edges eroded and their margins under increasing pressure? Why is it that every once in a while, a perfectly good, innovative, profitable company suddenly finds itself out of business, displaced by something completely unexpected?

Welcome to the world of disruptive innovation.

Disruptive innovation, a term first coined by Harvard Business School professor Clayton Christensen in his book The Innovator's Dilemma , describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up, eventually displacing established competitors. In fact, Christensen originally termed this “disruptive technology” but updated it in his next book to “disruptive innovation”. He rightly felt that technologies by themselves are not disruptive, but the uses to which they are put are the real disruptors.

The Congress and the BJP found this out — to their cost — in the recent Delhi elections. The idea of corruption being against public good is nothing new. The BJP and the Congress, and indeed all political parties, have chapter and verse about it in their manifestos. The idea of anti-corruption as a political stance is also not new. Jayaprakash Narayan used it back in the 1970s, successfully. However, the Aam Aadmi Party used it in a disruptive way, while linking it to its own innovation of crowd funding elections — and captured the imagination of the electorate.

Unexpected threat

The trouble with disruptive innovation — as opposed to mere disruptive technology, which often dies a premature death because of the innovator’s inability to sustain it in the marketplace — is that often, one cannot see it coming.

At a recent conference for chief information officers of companies, technology intelligence and consultancy IDC’s Sandra Ng pointed out one such example of a disruptive innovation which had the capacity to disrupt the market for two completely different companies, both, in themselves, market leaders and technology innovators of no mean calibre.

The innovation she cited was Google’s ‘smart lens’, a soft contact lens with an inbuilt sensor and a chip which can monitor the glucose level in your tears and wirelessly transmit that information. With the help of other, innovative apps, this information could be used for everything from sugar control in diabetics to optimising workout routines for athletes. And, correct your vision.

At one stroke, two innovative market leaders — healthcare major Johnson & Johnson, leaders in blood glucose monitoring systems, and Coopervision, leaders in soft contact lenses — found their business being threatened, and from a completely unexpected quarter. After all, most of the world still thinks of Google as a search engine and free email company!

This is the marketplace of tomorrow, Ng warned. Everything online, everything and everyone being watched, a world of borderless connections and things talking to things.

IDC calls this the ‘third platform’ of the information technology world. If the first platform was created by giant mainframes, and the second by a world wide web of servers and clients, the third is based on mobility, the cloud, big data and analytics, and ‘social’ business, where the borderlines between, creator, intermediary and consumer blur into one.

Third platform

According to IDC’s India head Jaideep Mehta, the third platform is full of services such as Reuters Market Light, which takes information directly to farmers (and disrupts media intermediaries), or Lenovo’s social media feedback platform, which is disrupting even product development. Mehta argues that the ‘third platform’ will change the skills requirement for 95 per cent of IT roles over the next three years.

The question, is, what do you do about not falling victim to the next iPad or Netflix or Google Lens? One solution, suggests Ng, is to look for ‘internet’ partners — who can provide web- and mobile-based apps and use the environment to provide ‘social contextualisation’ of your business. Mehta feels that companies also need to invest in understanding their customers better, and learn to identify and cater to unmet demand.

Outplay the disruptors

But beyond all this, companies, particularly Indian corporates, need to redefine what they mean by innovation. It is not for nothing that most of the breakthrough innovations to have emerged in this country have been of the jugaad type. The organised sector has been woefully inadequate when it comes to path-breaking innovations of the kind which transform balance sheets.

Innovation is no longer all about kaizen . Innovation is about learning to expect the unexpected.

As the Aam Aadmi Party has demonstrated, this doesn’t require special technology, or even tons of money. All it needs is the ability to spot the gap in the field.