I have seen debates in the philanthropic sector taking place about “disruption.” On the one hand, you have professionals who are saying that disruption is happening, and on the other side, there are those who counter this by saying this is simply a term people like to use, which is current and trendy. This second group of people dismisses “disruption.”
What does disruption really mean?
According to Harvard Business School professor, Clay Christensen, in his book The Innovator’s Dilemma, there are two types of disruption:
1. New-market disruption – where a new product meets the needs of a market that was not previously being served. In business, including the nonprofit sector, this consists typically of potential customers, or donors, who are too expensive to acquire.
2. Low-end disruption – offers a less expensive and more convenient alternative to what previously existed.
So, to bring it into real terms, Salesforce is a great example of both. Many of us know there was time where only a handful of CRM companies were selling their systems to businesses for millions of dollars in licensing fees. For nonprofits, a few companies, which consolidated after the disruption began, were selling their CRM systems for tens of thousands, if not hundreds of thousands of dollars.
Salesforce was able to open up a new market by offering a very good CRM system at a lower price point to companies that had been previously spending millions of dollars on licensing. Specifically as it relates to the social sector, it moved to gain market share on the low-end from competing companies by offering licenses for free through its Salesforce Foundation. It also partnered with companies like Convio, which was eventually bought by Blackbaud, and originally built its own CRM platform on Salesforce technology.
Simply, disruption is creating and innovating a new way of thinking and doing business. It brings efficiencies that previously did not exist, often through technology. By definition, disruption is innovative.
“Innovation” is a term you’re probably hearing a lot about these days as well. Typically, the terms “disruption” and “innovation” are spoken about together in today’s world. However, there is a distinction.
Innovation in business can mean the invention of a product or service that did not previously exist. It can mean adapting the so-called widget and creating a better widget. It can also be a change to a business model.
So, for example, let’s discuss the concept of social entrepreneurship, which I have written about in the past. The idea of a business being created to also impact and positively benefit society, as opposed to existing solely to make a profit, has been around for generations. In modern times, however, “social enterprise” started becoming a more concrete and disciplined idea in the latter third of the 20th Century. And it’s been in the last part of that century and now in the early 21st Century that we are seeing more and more businesses that are formally known as “social enterprises”.
Modern day social enterprise is an innovation that sometimes pursues both goals of profit and social impact and measures success in each of these areas.
Disruption is innovative in business. However, not all innovation is disruptive in nature.
What is disruptive innovation?
“Disruption innovation” is a term that was first coined by Professor Christensen in 1997. The idea is that an “innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo.” This new idea, way of doing business, product or service then redefines a sector.
Author of the upcoming book, “The Rise and Fail of Charities In the 21st Century: How The Nonprofit World Is Changing And What You Can Do To Be Ready”
© 2015 Wayne Elsey and Not Your Father’s Charity. All Rights Reserved.