Technological advancement is the single most exciting thing that can happen in the business world today. It shakes up markets and makes business circles question which industries will succeed or fail when the time comes for new adoptions. Disruption across industries is diffusing at an unprecedented rate. And disruptive technology plays a key role in the process.
What is Disruptive Technology?
Disruptive technology refers to a technology whose application affects the way a market or industry functions. In some cases, the business models that adapt to new technologies generate new markets and values. This leads to the disruption of well-established companies.
Disruptive technologies occur less frequently but are more convenient to use in the long term. They initially might not even satisfy the demands of the high end of the markets, but once they appear attractive profit-wise, they surpass market expectations.
The internet is a classic example of disruptive innovation. When people used to the web for the first time, few predicted it would change the core of how we live.
A recent disruptive technology that originated from the internet is e-commerce. Nearly every product and service are available through e-commerce transactions, from music to plane tickets, to stock investing and online banking.
Disruptive Technology in Business
In businesses theory, disruptive technology follows the tradition of identifying radical technical change and the creation of tools for its use at a firm or even policy level.
Unlike small companies or startups, incumbent companies tend to focus on their most demanding costumers and don’t have the flexibility to adapt quickly to newer shifting needs. On the other hand, small companies can target overlooked customers and gain momentum as they explore new markets.
The major difference to remember is that large companies focus on improving efficiency and don’t have enough time to prepare for the appearance of disruptive technologies. Risk-taking companies tend to recognize the potential of disruptive technology and find ways to incorporate it into their business processes. These are usually young companies or startups.
In fact, some of the worlds’ largest companies by revenue have thrived after disrupting the markets and creating new values.
What Makes a Disruptive Technology Successful?
Technologies are not likely to be disruptive on their own. Change happens when a company or industry adapts the technology to cater to one piece of the customer value chain.
They pay attention to technology but also consumer behaviors and expectations. Given the ubiquity of mobile apps, for example, many startups are creating business models using technology as a foundation and a user’s need as the driving force. In fact, before boarding the tech train, companies should figure out if they’re capable of including the disruptive technology to their business model.
According to Harvard Business School professor Clayton Christensen, the following lead to successful disruptive technology:
- Enabling Technology: An innovation or invention that makes a product affordable and accessible to a wider population.
- Innovative Business Model: A business model that targets new consumers that didn’t buy products in an existing market, or low-end consumers (the least profitable customers).
- Coherent Value Network: A network in which suppliers, distributors and customers are better off when the disruptive technology prospers.
Examples of Disruptive Technology
Multinational company Amazon is a winner when it comes to disrupting technology. The online conglomerate used e-commerce to shake up the entire retailing industry. With a simple click of a button, consumers can order products at significantly lower prices than most competitors.
Besides taking over most retailing companies, Amazon has moved onto other industries that it can disrupt using its unique warehouse network. These include grocery markets, pharmacies and bookstores. Additionally, the company is a dominant player in the cloud computing industry and competes closely against Microsoft and Alphabet Inc.
Florida Tech Assistant Professor Dr. Robert Keimer attributes Amazon’s ability to quickly pivot as a significant contributor to their success:
“Amazon hasn’t been successful at everything – the Fire phone, for example – but I think what’s good about them is they’ll try something new and then they shift gears quickly if it doesn’t work.
“Things are moving so fast these days, so I think that companies that have disciplines in place, they execute well, even if they fail in a given direction, they can quickly turn around and do something different. If they’re able to execute, they’ll be successful.”
Another example of disruptive technology is how Apple brought together different technologies and a successful business model to introduce the iPod to consumers in 2001. The business model was able to balance the high price of its hardware and software with the offer of low-profit iTunes music for consumers.
Uber, an app that allows people to order a private or shared ride, made a significant disruptive impact on the taxi industry. In 2018, 95 million people used the ridesharing app monthly. Moreover, CNBC rated the Uber as the second most disruptive company in 2018.
Uber not only changed transportation, but it also gave rise to the “sharing” economy. This economic model is based on a person-to-person activity of acquiring, providing or sharing access to services. The success of Uber’s friendly online platform, as well as the rise of startups that use the “sharing” economy, are examples of how disturbance of the status quo can allow innovation to become widespread in the marketplace.
Emerging Technology Disrupters
Besides the disruption of the internet, there are more technological innovations that are predicted to transform business across industries.
Gartner’s 2019 Hype Cycle identifies five significant trends that can impact business, society and people over the next decade:
- Sensing and mobility: 3D sensing cameras, AR cloud, light-cargo delivery drones,
- Augmented human: Biochips, emotional AI, immersive workspaces, biotech (cultured or artificial tissue)
- Postclassical compute and commons: 5G, next-generation memory, nanoscale 3D printing
- Digital ecosystems: DigitalOPs, decentralized web, synthetic data
- Advanced artificial intelligence (AI) and analytics: Adaptive machine learning (ML), transfer learning, generative adversarial networks, graph analytics
Sometimes, disruption can be a hard subject to cover amongst firms and analysts, especially when they’re trying to predict the technologies’ efficiency, speed, convenience and profitability. But change, regardless of the uncertainty of the technologies’ life cycle, impacts business as well as the quality of life of people. As we enter a new decade, digital disruptions are bound to keep pushing companies out of their comfort zone and into a landscape of innovation.