What Is Disruptive Technology?
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Disruptive technologies can be said to be time-relative. Some technologies might be revolutionary at some point in time, but at a later time, they might become the standard. Nevertheless, such disruptive innovations are essential for businesses that try to hold or gain a significant market share.
Key Takeaways
- Disruptive technology refers to any product or service innovation that can alter the market to a great extent and bring revolutionary changes to consumer behavior and habits.Major disruptive innovations have always taken over the market. However, such innovations are primarily associated with startups rather than established and reputed companies.It has many advantages and disadvantages for both customers and disruptive technology companies. The main benefit is that it makes life easier for customers and helps increase companies’ profits. The disadvantage is that it can be risky and subject to security and safety concerns.
Disruptive Technology Explained
Disruptive technology is like a powerful force or a blow in the market that replaces existing norms and practices. It is often considered revolutionary and is adopted by most people eventually. Some examples include smartphones, internet banking, etc.
Internet banking was initially subject to many security concerns, and many people were reluctant to use it. However, the norm has shifted to mobile banking, and many people have accepted it. But perhaps the most recent of the lot is the blockchain disruptive technology. It has facilitated anonymous transactions and formed the base for cryptocurrencies, another disruptive innovation during its launch.
Disruptive innovations are important because companies that do not adopt it will start losing the market and eventually have to shut down their operations. Also, interestingly, most disruptive technology companies are startups, which might be so because disruptive innovation can be a highly desirable market entry method.
Types
Disruptive technology can be classified based on its origin – low-end and new-market disruptions. Low-end disruptions enter the market and initially target less profitable customers using a low-cost model. Gradually, they climb up the ladder and target the most profitable customers through disruptive innovation.
On the other hand, new-market footholds create a market themselves. They identify potential customers and their requirements and turn them into loyal customers. For example, before the introduction of blockchain, there wasn’t a medium to make anonymous transactions. Hence, a requirement was identified, and innovation was launched.
Examples
Let’s discuss some examples of disruptive technology.
Example #1
Consider a hypothetical example of a tech startup, X. It partnered with a travel and entertainment company, P, to develop virtual reality (VR) software that allows people to visit any place around the globe in real time. VR is increasingly used for entertainment purposes – sports and games, meeting people online, etc. As a result, the partnership between X and P was seen as a disruptive innovation.
Example #2
Here’s recent news from Forbes regarding emerging disruptive technology and how employees cope with it. Loss of jobs due to technology disruption is prevalent among middle-level executives in companies. Automation, AI, IoT, etc., are some factors. But new studies show that even top-level executives are now in fear of being replaced.
A new survey showed that 72% of executives in 2022, compared to 51% in 2021, worry about losing their jobs due to disruptive innovations. The stark increase in figures over one year may be a cause of concern for the workforce.
Further, 94% of the executives surveyed plan to change their business model in the next three years. This is because of rapid technological shifts in the market. The companies have realized that it might be a loss to their businesses if they do not move ahead of the crowd.
Advantages And Disadvantages
Disruptive technology can benefit both the consumers and the companies introducing them. The same goes for demerits too. Let’s discuss these in detail.
Advantages
Emerging disruptive technology makes the life of consumers easier. It makes daily tasks faster, efficient and reduces the effort required. For example, online banking enables people to transfer and receive money anytime. Some technologies even reduce the cost involved.
It can help companies profit, gain market share, and enhance customer loyalty. Especially for startups, disruptive innovations can do business and increase their valuation. The producers of existing tech can also take a moment and analyze measures to improve their products.
Disadvantages
The main disadvantage of disruptive innovation is that it might become controversial and have security or safety concerns. For example, critics argue that VR technology might make it difficult to differentiate between the real and virtual worlds. Another example is blockchain technology which powers the dark web.
As for businesses, such innovations can also break a business. Introducing a whole new system can be risky. And except for a few early adopters, the innovation might not be welcomed or have a late pick-up. But by then, if it’s too late, the business would’ve already made a loss. Another demerit is that there are fears of job losses due to disruption.
Disruptive Technology vs Sustaining Technology
Before differentiating between disruptive and sustaining technologies, let’s first understand the latter. Sustaining technology is employed by businesses that want to offer their highly-profitable customers the best products or versions of existing products. The primary motivation behind this is to earn higher profits and hence, a loyal customer base.
Sustaining innovation, thus, is aimed at customers who do not mind spending more for a better-performing system, whereas disruptive innovations are aimed at the market as a whole. Again, it is a section of early adopters who popularize an innovation.
Also, the business models of these two types of innovations are significantly different. The sustaining technology is built on a high-profit and possibly high-cost model, while the disruptive technologies are built on comparatively low-cost, low-profit models.
Recommended Articles
This article has been a guide to What is Disruptive Technology and its meaning. We explain its types, examples, advantages & disadvantages, & comparison it with sustaining technology. You can learn more about it from the following articles –
Popular disruptive innovations include the blockchain, the internet of things, internet and mobile banking, artificial intelligence, voice assistants, etc. Since such technologies are time-relative, even televisions and computers were disruptive when they were first introduced.
Smartphones are an excellent example of disruptive innovations, as they improve navigability, accessibility, and connectivity to a level never imagined before. GPS, video communications, and 24X7 networking are some features that make the smartphone disruptive.
The IoT, or the internet of things, is a perfect disruptive innovation as it is changing dimensions and crossing many technological borders. Therefore, it has wide applications and is especially useful in virtual healthcare.
The nature of a disruptive technology depends on its applications and the attitude of its user. It has many benefits, and its purpose is to make our lives easier. But at the same time, it is prone to misuse and can be used in undesirable and unethical ways.
- Creative DestructionBullwhip EffectFinancial Innovation