A disruptive technology is an innovation that creates a new market or value network, but which eventually disrupts an existing market or network. These gamechangers typically offer poorer performance than established technologies, at least in their early years, but they are cheaper and provide customer benefits not even considered by existing market leaders.
The disruptive technology quickly improves in quality and replaces older technologies. But the industry leaders either miss these developments or fail to see that the performance of the new technology will improve rapidly. Even if they see it, they cannot retool their business quickly enough because of institutional inertia.
An example is digital cameras. Initially, they took only very low-resolution photos but now many professional photographers prefer them. Although the leader in film photography, Eastman Kodak, understood the threat, it was unable to re-engineer its business and in 2012 eventually filed for Chapter 11.
Every period since the industrial revolution has had disruptive technologies – railways, electricity, telegraph and telephone, TVs and computing
A new entrant can challenge an established market with an offering that is cheaper and better. Amazon, for example, not only competed with conventional bookstores on price, it offered wider choice, user reviews and no need to visit a store – and eventually put many booksellers out of business. Similarly, Wikipedia has replaced encyclopaedias.
Even incremental improvements can be disruptive if market leaders cannot keep up with technological change, which has happened in the smartphone market.
Every period since the industrial revolution has had disruptive technologies – railways, electricity, telegraph and telephone, TVs and computing. But the current pace of change is particularly rapid, driven by developments in a few key technologies such as cheap data storage, faster bandwidth, chips that allow smaller devices, greater network interconnectedness or robotics and artificial intelligence.
Here are eight potentially disruptive technologies:
The internet of things: Everything from household appliances to wearable computing is being linked via the internet. Five years ago, the number of connected devices exceeded the population of the world. By 2015, there could be 25 billion to a trillion devices – 120 times the population.
Mobile payment: There has been an increase in mobile devices being used for financial transactions. They can be used to pay at point-of-sales terminals with a virtual banking card in the SIM card, or can provide access to banking applications, e-commerce, and SMS services.
Insurance telematics: With a telematics device installed in a car, drivers can be sold personalised insurance based on how safe they drive. This benefits inexperienced but careful young drivers or motorists with low annual mileage. A telematics black box is an integrated GPS tracking system with a GSM cellular module offering functions for accident alert, theft detection and vehicle tracking.
Flexible screens: Imagine a screen that bends around the side of the phone. Then imagine a range of bendable, rollable and foldable digital devices. Other than larger screens and better resolution, there is little room for improvement in flat display panels. The first thin smartphones and tablet PCs using bendable plastic could be in stores by 2014.
Biocracking: Conventional cracking involves refined oil products. Biocracking takes natural raw materials (crops or biomass) and uses yeast or bacteria to produce building block chemicals such as lactic acid.
Power to gas: The intermittent nature of renewable power generation means storage of electricity is important. With power to gas, or P2G, excess electricity is used to electrolyse water into its components, hydrogen and oxygen, and the hydrogen reacts with CO2 to form methane – the main component of natural gas.
Spray-on solar: Solar panels can be installed on any surface by spraying nano-particles of photovoltaically active material with a conducting polymer. These nano-particles generate electricity when exposed to light.
Biosimilars: Biologics, including insulin, were one of the most significant drug developments in recent decades but patents on many of these complex and expensive drugs soon expire. This will allow manufacture of substantially cheaper generic versions – biosimilars – selling at between 50 per cent and 70 per cent of the original price.
This research was first published on 7 October 2013.