Disruptive technology is a new way of doing things that can cause problems for established businesses. It often enters an existing market at the bottom of the value network and displaces products, companies, and alliances that were once dominant.
It is important to understand disruptive innovation in order to protect your business against it. Here are some ways to do this.
It’s a new way of doing things
Disruptive innovation is a new technology that alters the way consumers, businesses or industries operate. It supersedes older systems or habits because it offers superior attributes. It often emerges from smaller companies, and eventually cannibalizes the larger companies’ market shares.
Examples of disruptive technologies include e-commerce, online news sites and ride-sharing apps. Other examples are cloud services, which allow files to be saved on the internet and accessed anywhere without the need for external storage equipment, and nanotechnology, which will allow stronger, lighter and tougher materials to be generated.
Some companies try to disrupt their industries by making revolutionary products that are difficult to compete with, but it’s more effective for smaller businesses to find ways of improving existing products and business models. This can be a more profitable strategy than trying to change general notions of how an industry should function. For example, Salesforce created a new revenue model by offering its customer relationship management software over the internet on a subscription basis instead of selling it in bulk.
It’s a new business model
The process of disruptive innovation transforms expensive or sophisticated products or services that were only available to a certain market segment into simple and affordable options for bottom-tier consumers. This process differs from sustaining innovation, which improves existing technology for current customers. It also includes developing new markets and value networks that benefit upstream and downstream business partners.
Examples of disruptive innovations include augmented reality, cloud storage, and nanotechnology, which is the study of matter at very small scales. These technologies allow for stronger, lighter, and tougher materials to be generated. They can be used in a variety of ways, from cars to windowless cabins on ships.
Many times, disruptive innovations are misunderstood. For example, electric cars are often seen as disruptive, but they aren’t. Early Tesla cars were high-end products and not affordable to the masses, so they did not disrupt the automotive industry. On the other hand, Netflix was a disruptive innovation that replaced traditional movie rentals with its online-streaming service.
It’s a new product
Often, disruptive technology is created by startups rather than established companies. This is because established players usually focus on incremental improvements to existing products and services and cater to their largest customers. Disruptive technology supersedes an older process or product by offering a superior version with lower costs and features. This allows the new technology to enter a smaller market segment, which incumbents cannot serve due to lower profitability. Eventually, the technology becomes more refined and supplants the incumbent in the higher-end market segment.
The wheel, light bulb and the automobile are examples of disruptive technologies. The development of steel mini-mills and transistor radio are also disruptive innovations. A disruptive innovation can be a new or modified product or business model, or it could be a technology that changes how a company does business.
To be disruptive, a new technology must have practical applications and be affordable for mass consumption. For example, a digital download service that renders CDs obsolete meets this criteria. It is also important that the new technology creates a significant change in product value.
It’s a new market
Disruptive innovation is a process that creates a new market by making a product or service more affordable for a larger population. It is an essential element of growth for businesses and can improve the quality of life for consumers. Harvard Business School professor Clayton Christensen coined the term in 1995.
Most established companies have large research and development departments and quickly adopt any technological advancement that seems superior. However, this can make them overlook new markets or technology that might eventually disrupt their industry.
An example of disruptive technology is Netflix, which introduced a subscription-based movie streaming model that disrupted the Blockbuster video rental industry. This company’s strategy was to target segments that the established players had ignored. For example, it targeted online shopping and offered lower prices than its competitors. It also used helpful technology and a new business model. As a result, it achieved widespread adoption and eventually disrupted the entire industry.