Disruptive technology and how it alters entire industries
What is Disruptive Technology?
Disruptive technology is an innovation that particularly alters how customers, industries, or companies operate. It sweeps away the systems or habits it replaces because it has recognizably superior attributes.
Recent DT includes online news sites, e-commerce, GPS systems, and ride-sharing apps.
The automobile, television, and electricity service were disruptive technologies in their times.
Clayton Christensen is a Harvard Business School professor who first developed the idea of disruptive technologies in his 1997 book The Innovator’s Dilemma. He argued that no single company could successfully compete with innovative companies from the technology sector, no matter how large or powerful. He coined the term “disruptive technology” to refer to new products, processes, and business models that are better, cheaper, or faster than the existing alternatives. The Innovator’s Dilemma was a bestseller and further popularized the idea of disruptive technologies. It has since become a buzzword in startup companies aiming to create a mass appeal product.
Entrepreneurs often dream of creating a company that’s critically important to society — a maker of spaceships, a bringer of immortality. But in industry after industry, countless small businesses are quietly making the same kind of impact. They may not have invented the latest fad diet or the next billion-dollar social media platform. But these entrepreneurs have created something far more valuable: innovation systems. Even those startups with limited resources can seek technology disruption by creating an entirely new way of making something.
Established companies manage to focus on doing best and seek incremental progress rather than revolutionary changes.
This provides an opening for disruptive businesses to target watched customer segments and earn an industry presence. Established companies cannot often adapt quickly to new dangers. That allows disruptors to grow and cannibalize more consumer segments.
Disruptive technologies are challenging to prepare for because they can appear unexpectedly.
The Potential of Disruptive Technology
Risk-taking companies might recognize the potential of disruptive technology in their operations and target new markets that can incorporate it into their business processes.
Many established companies are behind in a world of rapid change and advancing technology. The giants of industry adapt to this new reality that appeared replaced by companies better suited to meet customers’ needs. Banking is one such industry that has been slow to embrace the benefits of disruptive technologies. An example is the widespread availability of credit scoring models that rely on data from third-party sources.
These are the innovators of the tech adoption cycle. Other companies might take a more risk-averse place and adopt an innovation only after seeing how it functions for others.
Blockchain as an Example of DT
Blockchain is a distributed ledger that is decentralized, meaning anyone entity or central authority does not controls it. This makes it more secure than traditional databases. Blockchain transactions are in “blocks,” linked together and secured using cryptography. The blocks are “chained” together to create a linear, chronological record of transactions that can’t be altered or deleted. It uses peer-to-peer consensus to record and verify transactions, removing manual verification.
Blockchain technology has massive importance for financial institutions like banks and stock brokerages. For example, a brokerage company could execute peer-to-peer trade confirmations on the blockchain, releasing the need for guardians and clearinghouses.
Investing in DT
Many investors seek out companies that create or adopt disruptive technologies. These technologies often change how we work, live, or do business. When investing in companies that make or adopt disruptive technologies, it’s essential to understand the risks involved. Some disruptive technologies take years to be adopted by consumers or businesses or are not adopted at all.