17TH SEPTEMBER, 2020

What Is Disruptive Innovation?

Disruptive innovation is everywhere

When talking about innovation, “disruptive” has been the buzz word for some time. Tech giants and scientific communities band the word round with pride, but what exactly is it and how does it relate to Irish businesses? Is it just about upsetting major industry players or something more?

Disruptive innovation: the concept

Way back in 1995, Clayton M. Christensen first used the term “disruptive innovation” in his paper for Harvard Business School. But we wasn’t just talking about brand new exciting innovations to make existing products better. Let us explain.

Innovation occurs all the time, every day in every industry across the world. But to be “disruptive”, an innovation has to be so fresh and new, so entirely transformative, that it was previously assumed to be virtually impossible. An entrepreneur comes along and invents a simple, affordable solution that’s not only economically accessible to vast numbers of people, but it actually opens an entirely new market. Such disruptive innovation turns the industry on its head, often overthrowing long-established market leaders up until that point.

Disruptive innovations often gain footing at the bottom of the market. They’re cheaper and often underrated at first, but at the cost and usability advantages become more apparent, these products suddenly take off. They end up appealing more to the public than their more expensive competitors.

Examples of disruptive innovation

The iPhone

There’s no doubt that the Apple iPhone has had a massive and enduring impact on the mobile phone industry around the world. Launched back in 2007, it changed the way we communicate forever, giving rise to a whole new generation of smart phones and tablets. No longer were we stuck at a laptop or PC - now we had mobile internet access like never before. Plus of course it gave rise to ‘apps’ - and a whole new generation of app developers.

Cryptocurrencies

Cryptocurrencies are digital currencies in the own right that are not linked to any bank or financial institution. They exist in no physical form, so no coins or notes, and popular ones include Bitcoin, BitGold and Ethereym.

What makes cryptocurrencies disruptive is the blockchain technology that sits behind them. They’re also quite volatile, with massive highs and lows in value over very short timeframes.

Digital photography

Digital photography is an excellent example of disruptive innovation, because it not only represented a brand new technology but a whole host of new bits of kit that went with them (photo printers, SD cards etc). Digital photography also sped up the demise of one of the most established global market leaders, Kodak.

Video on demand

Even just a decade ago, the idea that you could stream your favourite TV programmes and watch them on any device, including your TV, would have seemed crazy. But now it’s here, the ability to stream content in this way has disrupted the market forever. In fact, in 2019, over 13 million homes in the UK have one or more streaming subscriptions, according to recent statistics.

Video on demand has also had a disruptive effect on advertising, giving rise to a whole new revenue stream for advertisers and sponsors. It has shifted the balance in rights and meant that SMEs and start-ups can advertise much more economically than on traditional TV channels.

Communication platforms

The way most of us have communicated over the years has been face-to-face, phone or email. But nowadays, and certainly since COVID-19 came along, services like Microsoft Teams, Zoom and Slack have transformed the way offices function.

Cloud based and simple to use, they facilitate virtual conferences, meetings, file sharing and instant messaging. They also allow for flexible working, where worked can be access 24/7.

With thousands of us set to work from home for the foreseeable future - and perhaps forever - these communication platforms have transformed the way we live and work remotely.

Ride-sharing services

Whether you agree they’re run, ride-sharing services like Uber have completely changed the way we get around. Gone are the days when you need to search for a taxi company in a city you’ve never been to before, or fumble around for your last 20p. These companies allow you to book and pay for a taxi service using the app, any time and from anywhere.

Uber particularly has had good and bad press over the years, but it’s more popular than ever. Customers especially know that they’re in a safely licensed cab and are not being ripped off.

Has your company invested in innovative disruptive technology lately?

Then R&D Tax Credits can help towards the cost.

The R&D Tax Credits scheme is a tax incentive administered by Revenue that Irish companies can claim to reflect money they’ve spent on research and development. It works by giving companies back as much as 25% of their R&D expenditure back, either as a reduction in their Corporation Tax or as a cash lump sum for loss-making businesses. This 25% is offered in addition to the standard Corporation Tax deduction rate of 12.5% (yes this scheme really is generous!)

Essentially, if your organisation as created a brand new product, service or process, or has substantially upgraded one already in existence, then R&D Tax Credits will very likely be awarded.

Claiming R&D Tax Credits via the Tax Cloud

The Tax Cloud portal (devised by Myriad Associates) is as online platform that allows businesses to make an accurate, hassle-free claim for R&D Tax Credits. It’s outstanding value and simple to use, and of course our team of experts are on hand every step of the way. It’s totally self-service and you can complete it at a pace and time to suit you.

There’s nothing to pay upfront either, plus the Tax Cloud portal integrates with Xero making claiming R&D Tax Credits easier than ever.

Start your R&D Tax Credit claim now

Give the Tax Cloud portal for businesses a go today or ring our Dublin-based R&D tax specialists on +353 1 566 2001. If you’d prefer, you’re also welcome to send us a message and we'll call you back.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
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Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
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