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Disruptive Technology

A technology that affects the normal operation of the market or the industry

What is Disruptive Technology?

Disruptive technology is the technology that affects the normal operation of a market or an industry. It displaces a well-established product or technology, creating a new industry or market. A professor at Harvard Business School, Clayton M. Christensen, invented the term “disruptive technology.”

 

Disruptive Technology

 

New technology can either be sustaining or disruptive. While sustaining technology depends on the incremental improvements in the already existing technology, disruptive technology is a completely new one. Hence, the practical application of such types of technology may not have been proven yet.

Also, disruptive technologies often attract a small audience and generate performance problems. They do not occur frequently; however, they are more suitable for long-term use.

They may not be able to fulfill the demands of the high-end market initially, but they exceed market expectations when it appears to be profitable. Disruptive technologies are generally originated from startups and young companies rather than the leading companies.

 

Summary

  • Disruptive technology is a technology that affects the way businesses, consumers, or industries function.
  • Disruptive technology generally attracts a limited audience, performance issues, and unproven practical application.
  • Artificial intelligence, virtual/ augmented reality, internet of things, blockchain technology, and e-commerce are some of the disruptive technologies significantly influencing the future.

 

Examples of Disruptive Technology

The following are some examples of the disruptive technologies that significantly influence the future of humans:

 

1. Artificial Intelligence (AI)

Artificial intelligence (AI) is used in numerous applications, such as fraud protection, video games, and spam detection in emails. AI helps to streamline company operations and enhance the lives of individuals.

Systems such as chatbots for web support, virtual assistants like Google Home or Apple Siri, and tracking the estimated time of arrival of online food orders helps answer questions, take requests, and make lives easier and more efficient.

Artificial intelligence discovers an individual’s preferences by collecting data from products purchased, search histories, and overheard conversations. Google is building an algorithm that enables AI to learn driving through experience, similar to humans.

 

2. Blockchain

Blockchain was developed through Bitcoin for disrupting the banking sector, where ledgers are highly centralized. Blockchain utilizes the technology of distributed ledger and through its decentralized and cryptographic components, blockchain removes the requirement of third parties involved in financial transactions.

The decentralization, security, and transparency features of blockchain are intended to increase the security of financial transactions while reducing the hefty bank charges. The transactions become faster and free from the risks of only one point of authority.

Blockchain is enabling a shift to a shared economy from the prevailing ownership economy. In a shared economy, people will be able to share resources, such as data storage, solar energy, and cars.

 

3. Internet of Things (IoT)

With its expansive network of devices connected to the internet, the Internet of Things (IoT) helps to reduce the gap between digital and physical spheres. IoT sees new relationships to develop between things and other things, things and people, and people and other people.

Although the potential to connect other devices to the internet is not new, a greater number of things are now being connected to the internet than ever before. IoT will help make a transition into smart cities. IoT will make the cities cost-effective, safe places to live, and more efficient.

 

Making a Disruptive Technology Success

According to Clayton Christensen, disruptive technology becomes successful because of the following:

 

1. Business models should be innovative

The business model targeting low-end customers or a new segment of customers will aid in the success of disruptive technology.

 

2. Value network

When it succeeds, a network of suppliers, customers, and distributors also prosper.

 

3. Enabling technology

The disruptive technology should be able to make products accessible and affordable to a bigger audience.

 

Well-established companies focus on efficiency improvement and lack sufficient time for preparing for a disruptive technology appearance. On the contrary, startups or young companies are generally risk-taking companies. They identify the capability of disruptive technology and look for ways to incorporate the same in the business. However, preparing for the disruption is difficult, as they tend to appear suddenly.

 

Additional Resources

CFI is the official provider of the global Certified Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Bitcoin Mining
  • Distributed Ledger Technology
  • Knowledge Engineering
  • Value Network

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