In his talk with Startup Grind, Clayton Christenson Identifies three types of innovation that businesses use.
- Disruptive
- Sustaining
- Efficiency
Disruptive
Disruptive Innovations make products affordable and accessible by creating growth in the marketplace, the business and jobs. These need a lot of capital however and are not guaranteed instant success largely due to consumer hostility. However, further improvements to this innovation will satisfy more customer demands.
Sustaining
It is important to continually make good products better because if you don’t, then the business margin will fall and the business will end up dissolving. These are done by sustaining a current innovation in your company.
By continually improving the products you create little net growth.
Efficiency
These will eliminate jobs but it increases free cash flow. This is a more efficient way of doing things.
The relationship between Disruptive and Efficiency has been cut off by financial doctrines designed by professors in business schools.
Although this may be the case, as long as disruptive innovations are creating jobs and efficiency innovations is creating an increased free cash flow, the relationship between the company and economy will work.
To listen to Clayton Christenson’s full talk, check out the video below:
