How to Build a Disruptive Business Model

The theory of disruptive innovation, first introduced in a 1995 HBR article, endures as a way to make a complicated and expensive product simpler and more affordable. Think about how Netflix disrupted video rental stores with video streaming.

But the originator of disruptive innovation, the late Harvard Business School professor Clayton Christensen, argued that disruptive innovation isn’t just about simplifying technology — it also requires a new business model to deliver the solution cost-effectively.

“If you’re actually trying to create a new business model because the world is changing on you, then you don’t want to leverage what’s already in place,” he told IdeaCast guest host Sarah Cliffe in 2008. “The reason why entrant companies so readily beat the incumbents is [that they don’t] have anything that exists that they are tempted to leverage, and so they just create what needs to be created.”

The episode also explains why it’s important to build a disruptive business model that avoids falling into the trap of marginal costs, which can be the difference between success or failure.

Key episode topics include: innovation, disruptive innovation, business models, technology, value proposition, marginal costs, new products, incumbents, new entrants, computer industry, IBM.

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

• Listen to the original HBR IdeaCast episode: Reinventing Your Business Model (Nov 2008).
• Find more episodes of HBR IdeaCast.
• Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at HBR.org.