What are disruptive technologies and how do they enable organizations to change their business processes radically?

We have textbook solutions for you!

The document you are viewing contains questions related to this textbook.

Information Technology Project Management

Schwalbe

Expert Verified

The term 'disruption' can ignite fear in the hearts of small- and medium-sized business operators when, in fact, they are best poised to flourish and thrive from the opportunities that disruption – especially disruptive technology – presents.

The smaller and more nimble the business operation, the easier it is for them to change and adapt compared to their multinational counterparts. Up-front investment in disruptive technology is also smaller and the cost-to-benefit ratio reduced.

To understand how businesses can manage and embrace disruption, let's first look at the concept itself.

What is disruptive technology?

Harvard Business School's Clayton Christensen first coined the term 'disruptive technology' in his 1997 book, The Innovator's Dilemma. When exploring why and how successful businesses still lost market leadership, the results of his cross-industry study led him to conclude that they shared a fundamental similarity: they failed to capitalise on new waves of technology.

Christensen separates new technology into two categories: sustaining and disruptive. While sustaining technology relies on incremental improvements to an already established technology, disruptive innovation has a greater impact by tapping into, or creating, brand-new markets by providing an industrial advancement that attracts new types of customers.

A good example of an original disruptive technology was Alexander Graham Bell's "electrical speech machine", which we all now know as the telephone. The next wave of disruptive technology was the mobile phone, as it created an entirely new market without replacing an existing demand.

Examples of disruptive innovation

Netflix is often quoted as an excellent example of contemporary, innovative disruption. Initially targeting a niche market, Netflix did not try to introduce a service or product that served every customer. Instead, it focused on an audience that was being neglected by existing providers. Netflix removed the storefront obstacle (driving to rent and return a video) by offering a mail distribution service. Introducing disruptive technologies is feasible for smaller, entrepreneurial start-ups for precisely that reason: they don't serve the entire market. Netflix then went on to leverage developing web technologies and faster internet speeds to create yet further disruption through their online subscription model. Now searching through rows of DVDs is a thing of the past.

Other examples that show how innovative technology created new customer markets include:

The internet - with billions of users worldwide, has there ever been a bigger technological disruption?
Social media - by disrupting telephone, email, event planning and creating real-time connections between individuals, Facebook, Instagram, Snapchat and others have changed the communication landscape.
The cloud - enabling the 'work from anywhere, anytime' paradigm, cloud computing, supported by laptops and portable devices, has disrupted an entire workforce generation.

In the Industry 4.0 era, there are so many exciting examples of innovative, disruptive technology: renewable energy, artificial intelligence, bitcoin, 3D printing – the list goes on. However, what does this all mean for small- and medium-sized business? How can they ensure they remain relevant through the ‘fourth industrial revolution’?

Business success in a disruptive era

Understanding and meeting the ever-changing preferences, demands and needs of customers is at the heart of what is often referred to as continuous transformation.

According to experts, businesses who want to remain viable must be willing at a systemic level to adapt to and embrace the inevitable – change. Change strikes at the heart of business culture, nurturing a philosophy of encouraging new ideas and innovative thinking.

Ray Wang of Constellation Research says the challenge faced by many small businesses when addressing the issue of adapting to new technologies and addressing customer engagement is that they’re not moving fast enough.

"Even Amazon’s not moving fast enough," says Wang. "Now you can see exactly what’s going on because they’re competing with global players like Alibaba, JD. All these people are working at that pace. And it’s because of that pace that’s happening, people are wondering hey, can we compete? Can we compete fast enough?"

"The short answer of it is that there’s a lot of work that’s going to be required, a lot of heavy lifting for folks to make those shifts,“ Wang continues.

“One way to do it is to create separate entities. More than just innovation labs, but create separate entities and bring them back in the fold. The other way is to really try to change the company fast enough across the board culturally. Both ways work, you really just have to think about where your leadership style is and what parts of the business are you willing to disrupt."

How can these technologies support small business growth?

A recent article by the online technology site, Good Audience suggests "organisational leaders should disrupt themselves before the technology disrupts their business". Understanding the power of innovations such as information technology or artificial intelligence can increase business opportunities and growth.

Looking at the role of artificial intelligence (AI), expert RL Adams defines a truly artificially intelligent system as one that "can learn on its own".

"We're talking about neural networks from the likes of Google's DeepMind, which can make connections and reach meanings without relying on pre-defined behavioural algorithms. True AI can improve on past iterations, getting smarter and more aware, allowing it to enhance its capabilities and its knowledge."

In his article 10 Powerful uses of Artificial Intelligence, Adams notes that AI is all around us. "From voice-powered personal assistants like Siri and Alexa to more underlying and fundamental technologies such as behavioural algorithms, suggestive searches and autonomously-powered self-driving vehicles boasting powerful predictive capabilities, there are several examples and applications of artificial intelligence in use today."

Embracing AI developments can have profound effects on productivity, innovation and customer service at the small business level.

Intuit's Alex Chriss recommends these five instant applications of AI to help power small- and medium-sized business and help them stay ahead of their competition:

1. Automate back-office tasks

Every business has time-consuming, repetitive administrative jobs. Why not put AI to use so you can focus on more strategic and business-oriented tasks?

2. Make smarter business decisions

As an 'independent advisor', AI tools can be used to analyse data and unearth insights that can be used to help inform important business decisions.

3. Deliver highly personalised customer experiences

Think Netflix and Amazon recommendations - how these can provide a more enriching, intuitive and profitable customer experience. Machine learning, an advanced form of AI, uses algorithms to learn from past experience and glean hidden insights from data without programming.

4. Gain customer insights for product development

Using AI to analyse customer data can also shed light on patterns of customer behaviour and future predictions. This behaviour can help inform decisions about the direction of product development that is going to meet future customer demands.

5. Employ a virtual personal assistant

By using voice-powered Siri (Apple) or Alexa (Google) in day-to-day business life as virtual assistants can help solo or smaller business operators plan and schedule their calendars and send reminders via email, to make optimal use of their valuable time.

While some of these innovations may seem too radical to implement now, a recent Forrester study found half of the surveyed businesses were considering implementing AI. Small- and medium-sized business owners should be no exception.

Disruptive technologies, including AI, have proven their worth to organisations across multiple sectors. Now it's not just a case of 'if', but 'when' your business takes the same step.

Could an MBA help you capitalise on today’s disruptive environment with more confidence and success? Learn more about Victoria University (VU) Online’s 100 per cent online MBA course or get in touch with our Enrolment team on 1300 043 531.

By Indeed Editorial Team

Updated July 30, 2021 | Published February 4, 2020

Updated July 30, 2021

Published February 4, 2020

Disruptive technology is a term that applies to gadgets, electronics, services and concepts that have a major impact on their respective industries, ultimately changing them in irreversible ways.

Working with disruptive technology, businesses can often establish themselves in new markets or take advantage of the opportunity to displace big companies in an established landscape. Understanding how this type of technology influences industries is important. In this article, we explore what disruptive technology is, its benefits and major examples of disruptive technology.

What is disruptive technology?

Disruptive technology is any innovation that dramatically changes the way consumers, businesses and industries operate. When they're first developed, disruptive technologies often create a new market. They establish their own value network and are often seen as risky outliers when they're introduced.

In other cases, disruptive technologies enter an established market but radically change the way business is handled and needs are met. These technologies completely replace their predecessors by offering revolutionary benefits that are notably superior. When a disruptive technology enters an existing market, it can make current items or processes obsolete.

Examples of disruptive technology

Here are a few examples of disruptive technologies:

Artificial intelligence

Artificial intelligence is a technology that allows computers to problem solve and reason in the same ways that humans do. Examples of Artificial Intelligence include:

Robots
Self-driving cars
Home assistants
Chatbots found on retail sites
Digital travel agents

3D Printing

3D printing is used in several industries—primarily the medical and aeronautical fields— and is the process of creating three dimensional objects from a non-three dimension source, such as a digital source. Objects are created layer by layer in this process and this allows people to print unusual shapes with fewer materials.

Blockchain

Bitcoin and cryptocurrency are examples of currency that are exchanged in digital ledger transactions through what is called a blockchain service. While this process is still evolving and hasn’t quite reached the masses yet, it’s considered a disruptive technology that is changing the ecommerce industry. It’s important because it involves a cashless system that will change how we exchange money.

Smartphones

Smartphones have replaced landlines, traditional cell phones and even computers for many people. As new apps become available, smartphones increase their functionality, disrupting other industries as well. A smartphone can act as a GPS, radio, television, e-reader (which itself replaced printed materials), camera, remote control and more.

E-commerce

E-commerce makes nearly any product accessible via the internet. Shoppers no longer have to leave their homes and shop at brick and mortar stores and startup companies don't need physical retail locations to sell their products. E-commerce disrupted the retail industry by making it possible to shop online and receive anything from shoes to produce in a matter of days or even hours.

With the advent of ride-sharing apps, customers can now order transportation from individuals rather than a taxi cab company. Customers use an app to arrange where and when they’d like to be picked up. Ride-sharing changed the industry, both for the consumer and the driver, who can now work independently for ride-sharing companies, setting their own hours and choosing jobs.

GPS systems

Global Positioning Systems (GPS) have replaced paper maps. Drivers once had to consult paper maps to find their location if they were lost. Modern GPS technology can find users instantaneously by satellite and provide route choices for their destinations. With convenient, turn-by-turn directions, and rerouting options for traffic and road obstacles, the driver is able to focus on driving.

Social media networking disrupted traditional social interactions in numerous ways. It made it possible for people to see what friends were doing, without having to call, email or text them. With the ability to check in on friends without actually speaking to them, some chances for deeper connections were lost. Social media networking has influenced not only, personal interactions; but also, those that take place with businesses as well.

Streaming entertainment

With the invention of streaming entertainment, cable networks and local programming are no longer necessary for viewers to watch their favorite television series. Consumers don't need to purchase or rent DVDs or Blu-rays to see the latest movies at home. Some films are even available to stream while still in the theater, so customers can stay home and stream them.

When is something considered a disruptive technology?

To be considered disruptive, technology must be easily accessed by a majority of the population. Revolutionary inventions are often not disruptive because they're too expensive for the common consumer. In many cases, it's not until the technology is refined enough to become affordable that it's considered disruptive to the market. A disruptive technology is one that enters the mainstream and changes the way most people think or behave.

An example of disruptive technology would be the personal computer. When it was first introduced it was too expensive for the typical consumer to afford. However, as technology advanced, computers became more affordable, more efficient and less expensive to produce, so therefore the price point dropped and computers became more affordable to a greater percentage of the population.

How is disruptive technology different from sustaining technology?

Most technology is considered sustaining rather than disruptive. Sustaining technology evolves slowly and steadily over time. Established businesses typically work with sustaining technologies that allow them to refine their production methods and corner a known market. However, over time a disruptive technology can become a sustaining technology as it becomes firmly established.

Here are some examples of sustaining technologies:

smart phones
smart TVs
personal computers
home assistants

Advantages of disruptive technology

Disruptive technology offers many distinctive advantages to both consumers and companies including:

Innovative benefits

One of the key features of disruptive technology is its ability to offer consumers new and notable benefits. When this type of technology enters the marketplace, it changes the entire industry. The internet disrupted previous ways of gathering information, such as libraries, newspapers and even social interactions.

It also revolutionized the way that individuals could perform research. By embracing disruptive technology, individuals and businesses alike can enjoy the benefits that the technology offers to their regular activities.

Startup opportunities

Disruptive technology provides opportunities for startup companies to gain a significant foothold in existing industries. Those who begin offering the new technology early can establish themselves as thought leaders in a fresh market.

This provides a unique chance for small startups to experience rapid growth and potentially outperform larger, more well-established companies.

Related: What Is a Startup? Everything You Need To Know About Startups

Room for business growth

When an established business willingly embraces disruptive technology, it enjoys prime opportunities for growth either within its current industry or within a new industry that's been created by the technology.

Companies that can smoothly incorporate disruptive technology in their existing line of products and services can help existing customers transition into using the disruptive technology while also capturing new buyers with their entry into the fresh market.

Disadvantages of disruptive technology

While disruptive technologies are largely beneficial once they're well established, they can create some challenges in their early stages including:

Unrefined inventions

New technology is typically untested and unrefined during its early stages and development can continue for years. During this time, businesses offering the technology may struggle to market an innovative product. The earliest users of disruptive technology may find themselves working with clunky prototypes that don't yet offer the sleek refinement that's presented in later stages of development.

Early performance problems

Nearly all innovations go through a period of problem-solving. Modern consumers are accustomed to experiencing this with a newly developed app or piece of software. Updates and patches are necessary to overcome the glitches and other challenges that the technology might present. The same process applies to any disruptive technology and can make early adoption more challenging.

Related: 15 Things To Know About What It’s Like To Work in Tech

Unproven applications

It can take time for a disruptive technology to find its place in the marketplace. The potential applications for the innovation are at first unproven. Users may doubt whether they can use the product to replace its predecessors. For example, when small kitchen appliances were first made available, cooks may have doubted whether electric mixers could deliver the same quality as their own skilled hands.

They were also unaware of the countless applications for these products, which have since become a staple in most homes, eliminating the need for a professional hand and hours to produce quality homemade meals.