What is Considered a Disruptive Technology?

“Disruptive technology” has become a buzzword associated with tech giants like Uber, Amazon, and Netflix. These companies have displaced taxi services, brick-and-mortar stores, and the way we consume media.

The term also gets thrown around a lot in conversations about things like “big data,” “blockchain,” and “Industry 4.0.” These buzzy concepts have become shorthand for “innovation. But what does it actually mean for a technology to be disruptive?

At a basic level, a disruptive technology is a technology that goes mainstream and changes the way people work, think, or behave.

Most technology falls into a category called “sustaining technology,” which focuses more on generating value by refining established products, slowly evolving them over time.

Working with disruptive technology can help businesses carve out a competitive advantage, establish themselves in new markets, or even displace larger, established firms.

In this article, we’ll settle on a disruptive technology definition then dig deeper into what it means.

The most common “disruptive technology” definition was coined by Harvard Business School professor, Clayton M. Christensen, to describe an innovative product/technology that displaces an established solution, creates an entirely new industry, or transforms the competitive landscape.

Disruptive technology replaces the technology that came before by offering a new set of benefits that are objectively superior. Eventually, the new technology renders established solutions or practices obsolete.

According to Christensen, true disruption comes from the combination of an innovative process and an undervalued market. Additionally, disruptive technology must also be accessible to the average consumer.

Look at big data analytics as an example.

While the attention surrounding this topic dates back at least a decade, it’s only recently that small-to-midsize companies had access to solutions to help them capture the value of their data. We’re seeing something similar with the rise of the IoT, blockchain, and AI and machine learning.

The point is, disruption can’t happen until people can put the technology to work.

If a solution is too expensive for the “average consumer” or not yet available on the market it’s something to keep an eye on to be sure–but disruption is still a ways off.

In the digital era, staying ahead of innovation has become a major concern for companies’ planning for their future survival.

In the past decade, we’ve experienced the true power of disruptive technology first-hand. We’ve seen new entrants topple incumbent industry giants

According to an EY survey published in February 2020, 66% of corporations said that they expect to be making “good progress” on their digital transformation initiatives by 2022.

While technology has a rich history of changing markets–from the railroad and the telephone to the internet, the smartphone, and the cloud–the pace of change is getting faster and faster.

Now, amid a global pandemic, the pressure is on for brands as they struggle to respond to a challenging combination of economic losses, changing customer needs, and a new way of working.

Companies have been moving more and more processes into the cloud, allowing them to automate and integrate business processes, centralize and sync company data, and access critical business tools remotely, leading to greater competitive advantages.

While the cloud isn’t exactly considered cutting edge anymore, it has become more important in this current work-from-home era–with demand up significantly from where it was going into 2020.

For example, Citrix saw a 200-400% increase in demand for services built on the company’s public cloud. CEO David Henshall says they’ve seen several customers compressing a years-long cloud migration into a matter of months, even weeks in response to the forced move to remote work.

When most people think of automation, industrial machinery is often the first thing that comes to mind.

While machinery has seen greater precision with software, the recent wave of automation is coming from professional services firms–using SaaS tools embedded with AI and machine learning capabilities to automate workflows and streamline the customer and employee experience.

Early examples of disruption in this space include solutions like Intuit’s TurboTax and eTrade use web and mobile applications to provide a service that was once conducted by financial professionals.

The permeability and speed of the internet made it easier for consumers to access financial services, expanding service channels through a digital marketplace.

According to IDC, AI investments are up 12.3% from last year, while another report from Refinitiv found that COVID was accelerating AI/ML investments, both from the technology side and in terms of companies hiring more data scientists.

These days, we’re seeing AI-powered solutions focused more on supporting “human-machine interactions” that help organizations understand emotional data at-scale. These solutions enable greater personalization and relevance alongside the self-serve convenience offered by TurboTax and its ilk.

AI is now embedded into everything from CRMs to inventory planning tools and marketing automation software to help brands better understand their audiences.

A study conducted by Intuit and Emergent Research predicts the number of companies using cloud computing is expected to more than double by 2020, jumping from 37% to nearly 80%.

A few years back, Procter & Gamble digitized their entire operations to connect directly with retailer partners’ point-of-sale systems to streamline the logistics of inbound, outbound, raw materials, and finished products.

As the second-largest user of trucks in the United States, P&G’s effort reduced “deadhead” movement by 15%.

Process integration is evolving into an expansive network that brings the “total experience” into one, silo-less central hub. According to Gartner, “total experience” aims to improve business outcomes where different tools/processes intersect–i.e., logistics, PoS, customer data, marketing and sales tools, work together to support a cohesive vision.

Discussions surrounding the latest disruptive technology solutions are a focal point of industry publications, as well as companies of all sizes, across all industries.

While technology has helped create products and deliver services more efficiently, companies benefit most by using technology that aligns with their business processes–whether it’s disruptive or sustaining. Often, refining an established product or service has a greater impact on whether customers choose a new competitor over the incumbent.