Gaining traction and accelerating with a differentiated approach in the emerging AI market

The AI market is still nascent, so how does one breakthrough and accelerate to get ahead in this ‘race’? Sifting through fact, theory, and history, discover more about what it takes to lead in innovation and the importance (and irony) of innovating within an emerging market.

Melody Roth

May 21, 2024

Theories of Innovation: Disruptive Innovation and Creative Destruction

The Christensen Institute articulates the concept of disruptive innovation as:

“[…] a process by which a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors.” [1]

The disruptor in innovation, in this sense, can be inferred as not only the product but also the forces that surround it.

But Christensen’s is not the only perspective encapsulating what market disruption and innovation are.

Austrian economist Joseph Schumpeter first coined the term “Creative Destruction” in the 1940s. He initially attributed this concept to innovations in industry; particularly, the incremental but stark improvements in the manufacturing process which increase productivity and revolutionize away from economic systems of old. This “mutation”, as he put it, is characterized as a natural and necessary phenomenon, borne from dynamics within the market itself. A common, contemporary example of this is Netflix’s creative destruction of the disk rental, television taping, and traditional media production markets–with the subsequent rise of streaming as an alternative, novel result. [2]

We at Arhasi believe that disruptive innovation should not only be within the AI solutions themselves, but also in the way with which we deliver them.

Principles of Creative Destruction

Schumpeter indicates several key components of creative destruction, but those especially pertinent to the disruptive innovator are:

Innovation as a Driver of Economic Growth: Innovation is central to economic progress. New technologies, processes, and products spur economic growth by increasing productivity and efficiency. As firms and entrepreneurs innovate, they create new industries and business opportunities.
Obsolescence of Old Technologies: The emergence of new technologies and methods inevitably renders existing ones obsolete. This leads to the decline or disappearance of industries, jobs, and businesses that are unable to adapt to the new market conditions.
Entrepreneurial Activity: Entrepreneurs play a crucial role in creative destruction by introducing innovations that disrupt established markets. Their willingness to take risks and challenge the status quo is essential for the dynamic process of economic change.
Reallocation of Resources: Resources (labor, capital, and materials) are reallocated from declining industries to growing ones. This reallocation is necessary for the economy to adapt to new technological paradigms and maintain growth.
Economic Resilience and Adaptability: An economy's ability to adapt to change is crucial for long-term success. Creative destruction fosters resilience by encouraging continuous adaptation and evolution in response to new innovations and market conditions.
Creative Destruction as a Cyclical Process: Creative destruction is not a one-time event but a continuous, cyclical process. As new innovations emerge and disrupt markets, they too will eventually be replaced by subsequent innovations.
Market Competition: Competitive markets are crucial for creative destruction. Competition forces companies to innovate and improve, leading to greater economic dynamism and better outcomes for consumers.
Role of Government and Policy: Government policies can either facilitate or hinder the process of creative destruction. Policies that promote competition, innovation, and education, and that support workers during transitions, are crucial for maximizing the benefits of creative destruction.

What We Believe it Means to be a Disruptive Innovator

Artificial Intelligence itself is an obvious display of creative disruption, as a recent product of technological evolution. With this in mind, what is it that AI startups and companies need to innovate within AI’s emerging market?

Apart from the above principles, what innovators need to innovate is how they approach AI within this market. Ironic as it may be, they must establish how they disrupt not merely by their solution but also in how they operate within this environment. One way to do this is by examining what part they want to play in the AI economy—be it supplier, user, partner, etc.

To extend our earlier example, Netflix did not simply change their product from mail-order rental DVDs and CD-ROMs to an online streaming platform. They redesigned their business model, along with their subscription plans and licensing procedures, as such a change demanded.

With respect to the environment, one challenge to creative destruction is regulation. It is important for the disruptive innovator, market, and regulators to remain in lockstep with compliance. At Arhasi, our solutions are designed with integrity from inception, so organizations can adopt GenAI with ease.

Arhasi is your trusted partner through every step of the way, at any level of maturity. We can help you reimagine your AI-minded organization to complement you beyond the solution itself, so you can disrupt and innovate freely and securely.

[1] Christensen Institute

[2] Investopedia