Disruptive technology

Definition

Disruptive technology refers to innovations that significantly alter or replace existing products, services, or processes, often creating new markets and value networks while displacing established market leaders. These technologies typically start by serving a niche market and then gradually move upmarket, eventually disrupting existing businesses and changing the competitive landscape.

5 Must Know Facts For Your Next Test

1. Disruptive technologies often emerge from small companies or startups that target overlooked segments before moving into mainstream markets.
2. Examples of disruptive technology include digital cameras replacing film cameras, streaming services overtaking traditional cable television, and ride-sharing apps disrupting taxi services.
3. These technologies can create both opportunities and challenges for existing businesses, forcing them to adapt or risk obsolescence.
4. Disruptive technology can lead to significant economic shifts, creating new industries while rendering others obsolete, thus affecting job markets and consumer behavior.
5. Organizations must foster a culture of innovation and agility to effectively respond to disruptive technologies and maintain competitive advantage.

Review Questions

• How do disruptive technologies differ from sustaining technologies in their impact on markets?
  • Disruptive technologies differ from sustaining technologies primarily in their approach to market impact. While sustaining technologies improve the performance of existing products for established customers, disruptive technologies introduce innovations that create new markets or transform existing ones. This often results in the displacement of established companies as disruptive technologies meet previously unmet needs or address problems in ways that incumbent businesses overlook.
• Discuss the role of small startups in the emergence of disruptive technologies and the implications for larger companies.
  • Small startups often play a critical role in the emergence of disruptive technologies by targeting niche markets that are typically ignored by larger companies. These startups can innovate rapidly, allowing them to introduce groundbreaking solutions that gradually gain traction and eventually disrupt established businesses. As these innovations evolve and move upmarket, larger companies must adapt quickly to survive; otherwise, they risk losing their competitive edge and market share.
• Evaluate the long-term effects of disruptive technology on an industry, using specific examples to illustrate your points.
  • The long-term effects of disruptive technology on an industry can be profound, as seen with the rise of digital photography over traditional film photography. Digital cameras initially appealed to niche markets with specific needs but eventually became mainstream, leading to the decline of film manufacturers like Kodak. This disruption not only transformed consumer behavior but also led to the creation of new businesses focused on digital imaging solutions. Similarly, ride-sharing apps like Uber have reshaped urban transportation by offering convenience and affordability while challenging traditional taxi services. These shifts illustrate how disruptive technologies can alter industry dynamics, create new competitors, and necessitate innovation among existing players.

Related terms

Innovator's Dilemma: A concept that explains how established companies can fail despite doing everything 'right' because they overlook new technologies or market shifts that initially seem less profitable.

Sustaining Technology: Technologies that improve the performance of established products and services, typically focused on the needs of existing customers, as opposed to creating new markets.

Market Disruption: The process by which a new entrant or technology significantly alters the way an industry operates, often leading to a shift in market dynamics and competition.