Spotting disruptive technology

Nowadays, people frequently talk about disruptive technology and its concerns; however, only a few know what they are actually referring to and how to respond.

Unfortunately, the theory’s core concepts have been widely misunderstood and its basic tenets have frequently been misapplied. As a result, incorporation of the theory into business is like a double-edged sword, bringing both success when practiced correctly and dangers when misused. For example, the theory is sometimes used to solve backwards-looking problems that have already been solved when it should have been applied to generate forward-looking solutions.

The theory of disruptive technology has been used as one of the foundations of innovation-driven growth. Executives of small entrepreneurial companies give high value to disruptive technology; using it to guide strategies and business directions.

So what counts as a disruptive technology and how are they different from technological innovations? First, in order to be counted as a disruptive technology a company would need to open up a new market segment that has not been explored, for example, opening the market for 3D printing.

Those new markets could be discovered through ‘low-end’ or ‘new-market’ footholds. In low-end footholds incumbents usually try to provide their best products and services to customers that have a low willingness to pay but appear to be relatively less-demanding or seeking for relatively less complex solutions. Disrupters then seize opportunities by advantaging from the demand gap, fulfilling needs in this unfulfilled section. An alternative is case is for new-market footholds, which disrupters create a new market and place simple products and services into the newly found market.

Thirdly, most people confuse sustaining innovations with disruptive technologies. Sustaining innovations, unlike disruptive technologies, are innovations which enhance current existing characteristics. Most incumbents are likely to improve their products before asking the customers what improvements would be valued most and which are counted as sustaining innovations. Examples include technologies with enhance a camera’s image quality.

Secondly, another feature of disruptive technologies is that they do not catch on with mainstream customers until quality catches up with standards. With disruptive technologies, typically pricing alone is insufficient to encourage adoption. In order to induce customers to purchase new products, the product’s quality would also need to reach a certain benchmark. Once that occurs customers then start to adopt the new product and happily accept the low prices- this is how disruption drives prices down in a market.

Is Uber a disruptive technology?

Let’s apply the basic tenets of disruptive innovation with Uber.

Uber, founded in 2009, is a well-known mobile application which connects people who need rides with drivers who are willing to provide them. Since its inception, the company has rapidly grown and has been continuing to expand into many countries. Without a doubt, Uber has transformed the taxi business. But has it also disrupted the taxi business?

The answer is no, Uber did not disrupt the taxi business because it responded to customers’ needs from a market that already exists.

Referring to the low end and new market footholds mentioned above, Uber neither provides its services to less-demanding customers nor create a new market to catch customers. What Uber did was launched relatively less expensive and convenient services to existing customers of the taxi service industry. The things that Uber did not disrupt the business sector but rather it better fulfilled the demands of those taxi customers. With its convenient cashless payment process and feature for customers to rate rides afterwards which helps ensure driver standards, Uber is considered to be a sustaining innovation.

Date : 27/09/2019