Disruption is a reality confronting businesses across the economic landscape. Since the theory of disruptive innovation was first introduced by Harvard Business School Professor Clayton Christensen, it's proven to be a useful framework for examining the radical changes that industries undergo as emerging technologies and business models upend the status quo set by successful, established companies.
Before diving into some of the disruptive technologies at play in the world today, it’s important to first understand what disruption is and how it happens.
What Is Disruptive Technology?
“‘Disruption’ describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses,” writes Christensen in the Harvard Business Review. According to Christensen, in the online course Disruptive Strategy, this happens as companies focus on improving their products and services for their most demanding, profitable customers, leading them to neglect segments at the low end of the market.
This opens the door for new entrants, such as startups, to target the overlooked customers and meet their needs at a lower price point—or create a market where none existed. From there, the newcomers improve their offerings and build on their successes, eventually moving from fringe to widespread adoption in the mainstream market. It's at this stage the entrants are able to compete head-on with incumbent businesses, causing disruption.
Disruptive technology is a technological innovation that causes disruption within a market or industry. Adoption of disruptive technologies often forces incumbent businesses to rethink their processes or adapt their business models to compete with new entrants. This phenomenon is referred to as technological disruption.
History has many examples of industries that have been disrupted by new technologies. The emergence of the printing press disrupted the business of scribes; the development of affordable automobiles disrupted the railroad industry; the propagation of the internet and blogs disrupted the print news industry; the emergence of the smartphone disrupted countless industries, including the film industry.
The development and adoption of emerging technologies like artificial intelligence, 3D printing, ride-sharing apps, cloud computing, and more, continues to push entire industries toward disruption, even today—driving innovation in the process.
Related: 4 Keys to Understanding Clayton Christenson’s Theory of Disruptive Innovation
3 Examples of Industries Facing Disruptive Technology
Nearly 63 percent of companies are poised for high levels of disruption, according to a study by Accenture, and 44 percent show severe signs of susceptibility to future disruption. As disruptive technologies take hold across the world of business, here are three industries on the cusp of significant change.
1. 3D Printing in Manufacturing
The advent of 3D printing technology, also referred to as “additive manufacturing,” has led to seismic shifts in the way that products are made for industries ranging from aerospace to healthcare, and tremendous opportunities lie ahead. A report by management consulting firm A.T. Kearney projects that 3D printing will triple its market value in the coming years, increasing from $8.8 billion in 2018 to more than $26 billion by 2021.
“The technology provides an unprecedented ability to customize products and respond quickly to shifts in market demand,” writes Dartmouth College Professor Richard D'Aveni in the Harvard Business Review. “As a result, it is moving from limited applications, such as prototyping and making conventional machine tools, to a central role in manufacturing for a growing number of industries.”
While 3D printing began as a niche technology, it has grown to be a key element in the mass production processes of corporate giants. General Electric has used additive manufacturing to produce tens of thousands of fuel nozzles for its LEAP jet engine, while 3D printed components are being built into Boeing’s 787 Dreamliner. Beyond aerospace, the technology has been used to create auto parts, as well as medical implants tailored to individual patients.
The limits of what is possible with 3D printing are still being tested, but the technology is already shaking up the traditional manufacturing sector, and it’s poised to make a lasting impact.
2. The iBuyer Model in Real Estate
The process of buying and selling a home has remained largely untouched by technological innovations, but a wave of real estate startups in the field of property tech, or “proptech,” are aiming to change that. In a KPMG global survey of the proptech industry, 93 percent of business leaders said they agreed that traditional real estate organizations need to engage with proptech companies to adapt to change.
Unlike a traditional buying and selling model involving an agent, a new way of doing business is emerging that speeds up the transaction process. As outlined in a recent Citi report, an instant buyer, or “iBuyer,” model is taking hold in which a company uses an algorithm to calculate the value of a home and offers to buy it at a discounted price from the seller. The iBuyer company then spruces up the home and attempts to resell it for full value. Rather than a months-long process involving open houses and showings, the iBuyer model allows a homeowner to sell their property in a matter of weeks at a lower cost to the seller.
One major player in the iBuyer space is Opendoor, which has captured nearly three percent of home sales in Phoenix and Dallas, according to a CB Insights report, and the company expects to be in 22 cities by the end of 2018. Other startups, like Offerpad and Knock, have seen success in several US metro areas and plan to expand to other markets. As these companies have widened their industry footprint, listing platforms like Zillow and Redfin, have moved to develop their own direct purchase programs.
The iBuyer model is appealing to consumers seeking an alternative, streamlined solution to the traditional methods of buying and selling property, and it’s set to continue driving innovative growth in the real estate market.
3. Esports in the Sports Industry
Games like football, soccer, and baseball have long been at the forefront of the sports industry, but a new kind of spectator event is quickly gaining traction. Competitive video gaming, widely known as “esports,” is drawing millions of viewers and filling stadiums with fans all over the world. In PwC’s 2018 Sports Survey, esports overtook soccer as the sports sector with the most potential for global growth.
While the world of esports is just emerging into the spotlight, it’s been steadily building a core audience for decades. Arcade games spurred tournaments in the 1980s, and the real-time strategy game StarCraft became a phenomenon in South Korea in the early 2000s, complete with televised events and corporate sponsorship.
The esports industry began to take hold in the US with the rise of Twitch in 2011, a platform that allows users to livestream gameplay and engage with other players online. Unlike the linear format of traditional sports broadcasting, Twitch enables its audience to become broadcasters themselves, creating a more engaging viewer experience. Amazon purchased Twitch in 2014, and its average monthly viewership is now on par with several cable news networks.
Related: 4 Myths About Disruption: A Discussion With Innosight’s Mark Johnson
In true disruptive fashion, esports grew by meeting the needs of a tech-savvy audience looking for an interactive digital experience that many sports media companies failed to deliver. It’s continued to build on that foundation as it’s moved upmarket. In 2018, the NBA partnered with Take-Two Interactive to form the NBA 2K League, the first official esports league operated by a US professional sports organization.
And professional sports aren’t the only sector of the industry where esports is making its mark. There are now more than 80 colleges and universities that offer an esports program, and there have been talks of including it in the Olympic Games.
The adoption of esports into established franchise models signals its progression into the mainstream market, and it shows no signs of slowing down. Analytics company Newzoo projects esports market revenue to reach $1.4 billion by 2020, up from an estimated $905.6 million in 2018. As audiences continue to seek out immersive viewing experiences, esports is well-positioned to push sports organizations, advertisers, and broadcasters to rethink their distribution models and how they engage with fans.
Opportunity in Change
While disruption brings radical change to industries, it also presents an opportunity for established businesses to adapt and grow. In a recent KPMG survey, 98 percent of business leaders said they see technological disruption as more of an opportunity than a threat.
As disruptive technologies continue to emerge across business sectors, entrants and incumbents alike are afforded the chance to innovate in the face of shifting market demands.
Do you want to deepen your understanding of disruptive innovation? Explore our six-week online course Disruptive Strategy and learn how to anticipate disruption and drive growth in your organization.
(This post was updated on June 22, 2020. It was originally published on October 29, 2018.)
