What is Disruptive Technology?
Technology and Technological Systems not only affect end-users and consumers within different markets and industries, but have also had a significant impact upon SMEs and larger enterprises across the globe. Technology is not a disconnected, completely standalone concept, but is intimately connected with how businesses operate, and how executives strategically decide on the business model and direction of their enterprise. With the constant evolution of technological systems over the last 50 years and the advances seen in computing power due to Moore’s Law, “business as usual” has been disrupted several times. These disruptions have changed the way enterprises operate, and how new markets, new products/services, and new business models have developed. However, it is important to understand the differences between technological developments that do not disrupt current markets and industries, versus those innovative technologies that do disrupt “business as usual.” Businesses across the globe then capitalize on such innovations to offer new products or services to consumers. Identifying such disruptive technology systems could give businesses an advantage over the competition with opportunities to pioneer innovative fields and technologies which could change the future.
While technology can be loosely defined as any applied scientific instrument or device that aids in the completion of tasks, disruptive technology is the development of a technology that is so innovative and readily practical that it alters the current market and creates a new market. That is, disruptive technologies are not only revolutionary, but they “change business as usual” by offering a completely new way of operating.The old way becomes obsolete, while the new way becomes the standard. Older technologies and practices become legacy technologies, and the markets associated with those older systems ultimately become obsolete. New markets are created by the disruptive technology, allowing businesses to create new business models, offer strategic differentiators, develop their products more efficiently, and offer more novel products and services to consumers. While such technologies often radically change the way businesses operate, end-users are also often able to utilize such disruptive technologies to such an extent that daily life is radically changed, for example, with the development and evolution of computer systems. Disruptive technology, ultimately, has the ability to change the world and even influence how societies develop and operate.
Defining Disruptive Technology in the Specific Sense Coined by Clayton Christensen
Clayton Magleby Christensen, an American business specialist and consultant, coined the term (and created the theory) of Disruptive Technology in his 1995 article “Disruptive Technologies: Catching the Wave,” and in his book “The Innovator’s Dilemma.” Clayton’s Team of analysts created the business-analysis theory of Disruptive Technology for business executives in companies who were responsible for financial decisions associated with innovative technologies. It is important to note that Christensen regarded technology - and, especially, disruptive technology - as only a means to an end, with the business model associated with the technology serving as the catalyst and impetus for the disruptive impact. To this end, he changed the term from disruptive technology to disruptive innovation. Hence, Christensen’s idea of disruptive technology evolved from being a technologically focused-theory to a business modeling theory, and thus is closely ingrained in the dynamics and theory of business model innovation It now acts as a specific guide for providing insights and tools to business managers for the identification of disruptive technologies. Due to this, Christensen’s concept of “disruptive technology” - or “disruptive innovation” - indicates a dynamic, evolving and changing state of technological affairs (amongst business industries) over time, and not a fixed, static technology that develops at a specific point in time.
The important takeaway with Christensen’s specific definition of disruptive technology/innovation is that it is the business model associated with a new technology that drives the revolution and evolution of economic change, and not the technology itself. A disruptive technology may not be particularly advanced, but needs only to alter “business as usual” in a significant sense in order to create a new market and make older markets begin to decline.
The Categories of Technology According to Christensen
In order for business leaders to identify true disruptive technologies that are new today, it is important to note that there are different types of new technologies that may or may not be true disruptive technologies, based on their usual definitions. There are sustaining innovations - which encompass evolutionary and revolutionary technologies - and there are true disruptive technologies.
Sustaining technologies are new and often innovative technologies that do not radically alter the current market, and thus do not create new markets like a disruptive technology would. Such technologies only help to enhance current markets and products, and include:
- Evolutionary innovations: products that develop along an expected route with additional features added to existing markets/products, such as the addition of cores to Computer CPUs over the years, which (along with adding increasingly small transistors) exponentially increased computing power over the last 50 years.
- Revolutionary innovations: while an evolutionary technological innovation adds to existing markets by adding more “bells and whistles” via expected developments of existing products, revolutionary technological systems introduce radically different products that are completely different from anything on the current market. However, due to a variety of reasons, they do not disrupt or alter current markets or create new markets, which is what a disruptive technology does.
Disruptive technologies are innovative, revolutionary technologies that are completely new/unique, and are coupled with a business model that allows them to overtake existing markets, and to create a brand new market that has never existed before. When this happens, the current products in the existing market slowly become obsolete as they are overtaken by the new, disruptive technology that makes them irrelevant to most consumers.
The Characteristics of Disruption
New or innovative technology does not necessarily equate with a disruptive technology. As Christensen noted, the most important element is the business model associated with the technology, and not the technology itself. A perfect example is with the automobile, which was a truly advanced, revolutionary system for its day. Yet despite its innovation, most consumers could not afford such a technology, and thus the older market of horse-drawn carriages continued to thrive until much later. To that end, sometimes a technology does not become disruptive until many years later after its deployment to the public.
Thus, new technologies, based on a business model that utilizes a “luxury-item” system (typically associated with being too expensive for the average consumer to afford), often don’t disrupt current markets in a way that disrupts their economic systems and creates a new market. Electric cars, tablet computers, and VR systems, are all examples of innovative and revolutionary technological systems that did not greatly alter current markets typically due to being too expensive for most consumers, or due to not offering functionalities that were deemed so unique so as to make older technologies obsolete.
A true disruptive technology is not only innovative, but also offers a unique experience to end-users, while being associated with a strategically pragmatic business model, which includes the price-tag.
Targeting Customers not Currently Served by Incumbents
There are several ways for a technology to disrupt the existing market associated with a line or category of products/services. Consumers are often targeted and linked to different companies and leaders (sometimes pioneers) within an industry. Such customers are within particular demographics, which companies strategically model their products/services towards. Thus, disruptive technologies are often technological systems that more effectively target current demographics usually served by incumbents, or reach customers that are not served by incumbents. Disruptive technologies also allow businesses to utilize technological strategic differentiators to stand out from the crowd, and to offer unique products/services that give the business the opportunity to reach more target customers within a market.
Marching Upmarket, Enabled by Key Technologies
As they evolve, key technologies allow businesses to employ strategic differentiators, and also allow companies to more effectively reach more consumers with better products/services. The ability to utilize a new, completely revolutionary technology - in conjunction with an appropriate business model - allows a company to take control of upmarket sectors of an industry, while appealing not only to affluent consumers, but also broader demographics.. This is all possible simply by offering a high-quality product that is radically different than anything available on the current market(s).
Examples of Disruptive Technologies (Both Past and Present)
There are a variety of new, innovative technologies that do not technically equate with a disruptive innovation in that they do not truly create a new market or greatly disrupt current markets. But throughout the modern history of technological innovations and developments - and currently, with evolving advanced technologies - a myriad of disruptive technologies have come about that have one critical thing in common - they have greatly shaken up “business as usual,” and have changed the current markets in a significant way. As noted by Statista, by 2025 experts estimate that there will be major economic impacts on different markets as a result of the evolution of several key, novel technologies, such as 3-D Printing, Advanced Robotics, Cloud technology, Automation, and the Internet of Things, to name a few. Combined, those five technologies alone will represent several trillions of dollars (USD) total in market shares (“Disruptive Technologies Economic Impact Forecast 2025, by Sector”) .
The Personal Computer
While the computer has been around for some time, older computer models were used mainly by the military, and often were so massive that they took up an entire room. In 1976 and 1981, respectively, Steve Jobs and Steve Wozniak engineered and invented the Apple 1 (an Apple Computer used for personal tasks), while Dr. Mark Dean later helped to lead and patent IBM’s creation of the IBM Personal Computer. Before that, mathematician John Simmons had created a complex “Computer Calculator,” the progenitor to the modern computer as it is known. The PC allowed end-users and businesses to complete complex tasks, such as tasks for school, work, or personal interests, and to communicate with others more efficiently, while also being able to store digital data and cut project work timelines in half via the PCs computing power. Hence the PC and workstations changed business operations forever, giving the average person the ability to complete tasks that were unprecedented, creating a new market, ( and making the PC a truly disruptive technology.
The Internet equates with a global connection of servers and clients, and other networked devices in a very large interconnected network of WANs (Wide-Area-Networks) and LANs (Local-Area-Networks), allowing computer systems all over the globe to communicate with one another via centralized and decentralized servers. The HTTP-based World Wide Web allows people to surf the Internet’s myriad of websites, which has radically changed the way people study, research, learn, and communicate. The Internet has effectively altered businesses on a global scale, and has even helped with globalization by creating a more interconnected world, while also creating entirely new markets such as e-commerce.
Before electronic mail was available, paper and fax communications were used to distribute personal or business messages to other parties using whatever technology was available at the time (either via phone lines or couriers, etc.). Email greatly decreased the required timeframes for personal or business message communications, while offering a more secure and efficient way to communicate with others, including those across the globe (using the Internet) andallowing new markets associated with the evolving Internet to thrive.
Before cell phones became standard technological systems, personal communications were limited to pagers and car phones. Cell phones connect to cellular towers and use radio waves to transmit data in an analog format, along with complex telecommunications engineering protocols to transducer those signals into discreet, digital data. Like email, Cellphones allowed for quick and efficient communications between personal parties or business parties, greatly altering how people operated, and effectively making the pager and car phone markets obsolete.
Laptop Computers and Tablets
Laptops are small, portable, slim computer systems (PCs) that allow people to have the power of a Desktop PC in a smaller frame that can be carried anywhere. Tablet Computers are touch-based, slim and very mobile computer systems designed for ease-of-use, while typically utilizing a variety of apps to allow personal and business parties to conduct a variety of affairs in a feasible manner (e.g. studying, researching, checking email, transferring financial funds, connecting to the World Wide Web, or sending documents to clients, ). While desktop personal computer systems changed the market radically, laptops and tablets further impacted the markets by offering truly mobile computer systems that could allow workers and end-users to take their computer with them on the go.
While cell phones aided with standard communication timeframes and efficacy, smartphones allowed end-users to have entire computers in their pocket which could utilize a variety of different “apps” to balance their bank accounts, message their clients, respond to emails, and even sell stocks. While laptops and other computer systems were impacted greatly by the invention of the Tablet computer, smartphones greatly changed the market by offering a device that combined cell phones with computer systems.
While Artificial Intelligence isn’t entirely new, the advent of Machine Learning and Deep Learning, in conjunction with Robotics, allowed machines to “learn,” grow and rewrite their own algorithms to simulate the way a human brain grows in knowledge with learning and experience. Advanced AI has radically changed how businesses analyze their business data, how SMEs and large enterprises create corporate strategies, and how everyday applications use data to “learn” and help make products better for consumers. Along with automation, machines and apps that can “think” and “learn” have the ability to change entire job markets and create new economies, while changing the efficiency and bottom lines of most companies that deploy them.
While 2D printing has been around for some time, 3D printing allows consumers and businesses to quickly build 3D models by the utilization of the 3D printer machine’s ability to cut out (from materials and substrates) different forms and objects, according to a blueprint. Such a technology essentially allows consumers and businesses to quickly engineer complex or simple 3D objects by “printing” them out via a 3D printer. This new ability can radically change how businesses manage their resources and strategize their supply-chain, among other things.
The Blockchain is a new, advanced technology platform that uses complex cryptography and a decentralized network as a distributed ledger technology that can build apps, record data transparently, or carry out financial transactions via a chain of blocks. While blockchain technology is typically equated with “Bitcoin,” it has become a platform used for a variety of decentralized and transparent projects, such as smart contracts and even a completely decentralized Internet. Blockchain technology has the ability to completely alter the entire market associated with the Internet and application development.
While Bitcoin remains the premier cryptocurrency, the desire for globalized consumers to conduct financial transactions transparently without the middlemen of banks created the phenomenon of cryptocurrency, which has the potential to completely change the face of financial systems on a global scale. Cryptocurrencies are essentially digital tokens or assets generated by and transacted via the distributed ledger technology known as the blockchain. Thus, as a digital currency, cryptocurrency has radically changed how the concept of “currency” is regarded, while new cryptocurrencies spring up on a yearly basis - some based on businesses, concepts or even private interests. How financial institutions and governments have reacted to the disrupted innovation known as cryptocurrency defines its truly disruptive nature as an alternative currency that does not rely on banks or governmental institutions.
The Internet of Things (IOT)
The Internet of Things connotes the wide array of devices now connected to the Internet, and how many “smart” devices (i.e. smart watches, smart clothes, smart cities, smart cars, smart houses) are not only connected to the Internet (allowing remote control via WiFi or LAN), but also often have attached sensors and actuators that record and send data to company servers. Such data allows companies to better understand how to alter their products to better serve specific customers, and can even help change how modern projects are completed (due to data analysis), such as construction tasks, city management, and law enforcement workflows.
Cloud storage and Cloud computing have radically changed how businesses operate by offering massive, robust off-site data centers and servers to allow for unprecedented data analytics, data storage, and data computing among businesses of all sizes. Along with higher Internet bandwidths and the evolution of streaming services, cloud systems have even allowed companies to stream entire games and/or programs in real-time to consumers that are connected to their servers. Essentially, cloud storage/computing allows users to take advantage of massive and powerful computer systems to increase their efficiency and complete complex computer tasks with high technical demands, all via the Internet. Additionally, new products/services, such as Infrastructure as a service (IaaS) and Platform as a service (PaaS) became new models for the deployment of enterprise level products and services via the Cloud.
Starting with MySpace and then Facebook, Twitter, Instagram, and Messaging apps, the interactive Web 2.0 helped to evolve the creation of social networking apps, which are online and web apps used for people to connect with others, including their family, friends, or those within a certain niche. Along with the Internet, email, and the World Wide Web, Social networking created an entirely new market by allowing consumers and businesses to share what they like, reach a new audience or demographic with ideas or marketing strategies, and to connect with an ever-increasingly globalized world.
How Not to be Blindsided and Spot Disruptive Technology Easily
While the quest to identify disruptive technologies may seem like a valuable venture, it is important for business executives who may be most connected to the strategic use of disruptive technologies in their business (e.g. Chief Information Officers and Chief Finance Officers) to maintain the correct perspective and mindset when searching for, spotting, and utilizing disruptive technologies in business.
It is critical for business managers and executives to maintain the correct perspective when searching for, identifying, and planning the strategic use of disruptive technology in their business. Strategic planners must see the minute details of how such technologies can radically alter their enterprise's business model and operations on a daily basis, along with seeing the broader, more general, bigger picture of how such disruptive technologies can alter a company’s overall direction in the future. While looking at different technologies with a broader perspective, business strategists can effectively identify exactly how disruptive technologies can optimize their business operations, both short term and long term.
Gain Deeper Understanding of Customers
While looking at the bigger picture of how disruptive technologies can alter long term goals of an organization and provide novel solutions to company problems, it is important for chief executives of a company to then align their strategic vision of how to use disruptive technology (in conjunction with their broadened perspective) with each step in their company’s overall blueprint, including using their newly envisioned strategic plan to gain a better understanding of their target demographics, customer base, and the buyer personas of their most valued customers.
Act on the Insights Gained from these New Perspectives
Using a broadened, more appropriate perspective, a newly aligned strategic plan, and better insights into the buyer personas of their most valued customers, company managers and executives can then act on these valued insights to develop, implement and deploy disruptive technology into their company’s workflows to more effectively carry out company operations. Changes may include offering new products or services based on the innovative, novel disruptive technologies,but the most critical step is for executives to map out how disruptive technologies can strategically be used to solve the pain points within the enterprise’s potentially altered business model, and how each technological system can be aligned with meeting the company’s ultimate goals. Typically, the Chief Information Officer (CIO) would identify and strategize the use of disruptive technology within a company or enterprise, along with ensuring that the technology is deployed and implemented correctly according to the overarching strategic plan that he/she has drafted.
Disruptive technology is Good Or bad, Depending On Whose Perspective You Are Looking From.
As with most things in the business world, one’s perspective of the state of affairs helps to define whether disruptive technology is a good or bad thing. For those businesses who rely on a certain system that is bound to become obsolete - or who utilize outdated products and services to target their pertinent demographics - disruptive technologies only help to decrease their business effectiveness as their technologies and business systems become obsolete. For example, the increase of Artificial Intelligence utilization in businesses of all sizes is said to potentially threaten the jobs of certain workers in a variety of different industries, while also having the ability to give other people more jobs (and giving businesses, the ability to be more effective and efficient). Overall, disruptive technologies have the capacity to greatly help businesses evolve while increasing operational efficiency and reductions in overhead across the board, which, ultimately, is always a good thing.