The term Disruptive Technology is first coined in 1995 by Bower & Christensen (Johnstone & Kivimaa, 2017). In their article “Disruptive Technologies: Catching the Wave” (Bower & Christensen, 1995). According to Cambridge English Dictionary, disruptive technology is “a new technology that completely changes the way things are done (Disruptive technology, n.d)
In their paper, Bower et al (1995) discussed how disruptive technologies create new markets and succeed because of that. The authors also discussed why established companies doesn’t invest in disruptive technologies because of many issues related mainly to cost and benefit on the short run. As disruptive technologies first serve emerging markets and it needs time to grow along with the growth of the emerging markets themselves. The profit margins are low and new technologies must be adopted that sometimes sustained technologies infrastructure cannot handle.
The authors also emphasized the idea of the emerging markets that are served by disruptive technologies. According to the authors, “Many of the disruptive technologies we studied never surpassed the capability of the old technology. It is the trajectory of the disruptive technology compared with that of the market that is significant”.
The authors suggest that it is important first to “Determine whether the technology is disruptive or sustaining”. And one approach they suggest is to “examine internal disagreements over the development of new products or technologies”. They discussed when technical people are in and marketing & finance people are out then “Disagreement between the two groups often signals a disruptive technology that top-level managers should explore”. The authors also suggest asking key customers about new technologies and then locating their markets such as who the customers will be. But again, these required changes are just too many and sometimes are risky.
According Bower et al (1995), “ How, then, can an established company probe a market for a disruptive technology? Let start-ups-either ones the company funds or others with no connection to the company – conduct the experiments. Small, hungry organizations are good at placing economical bets, rolling with the punches, and agilely changing product and market strategies in response to feedback from initial forays into the market”. Along with that is to be responsible of building a “disruptive technology business in an independent organization” as well as to “Keep the disruptive organization independent”. They suggest that “Different types of technological innovations affect performance trajectories in different ways”. On the one hand, sustaining technologies tend to maintain a rate of improvement; that is, they give customers something more or better in the attributes they already value”. “On the other hand, disruptive technologies introduce a very different package of attributes from the one mainstream customers historically value, and they often perform far worse along one or two dimensions that are particularly important to those customers. As a rule, mainstream customers are unwilling to use a disruptive product in applications they know and understand. At first, then, disruptive technologies tend to be used and valued only in new markets or new applications”.
How Businesses responded
According to Wikipedia, around 215 mergers and acquisitions alphabet has done between 2001 to 2018 (List of mergers and acquisitions by Alphabet, 2018). Facebook with 67 acquisitions between 2005 to 2018 (List of mergers and acquisitions by Facebook, 2018). Apple with 94 acquisitions between 1988 to 2018, and most happening 2010 and later (List of mergers and acquisitions by Apple, 2018). Microsoft has 209 acquisitions between 1987 to 2018 and has stakes on 64 other companies. All these data informs us about the followed strategy (List of mergers and acquisitions by Microsoft, 2018).
Meanings for Business
In 2015, Christensen, Raynor, and McDonald (2015) published an article titled “What is disruptive innovation?” with a sub titles saying “Twenty years after the introduction of the theory, we revisit what it does- and doesn’t- explain.”
In one hand the authors suggest that disruptive innovations originate in low-end or new-market footholds. In the low end footholds, the disrupters target overlooked less-demanding segments. In the new market foothold, disrupters create markets that did not existed. It turns non-consumers into consumers. And that “disruptive innovations don’t catch on with mainstream customers until quality catches up to their standards.” And that why the authors claim that Uber’s innovation is sustaining and not disruptive. And that’s why also the authors claim that Netflix is a disrupter. As Netflix has served overlooked segment that doesn’t care about new releases. In fact they started the sale and rental of DVDs by mail. The authors argue that new technology allowed Netflix to expand to online streaming. Initially disrupter don’t compete with establish companies. In this paper, the authors again emphasized the importance of understanding that “disruption is a process”, and that “disrupters often build business models that are very different from those of incumbents”.
Bower et al (1995) have encouraged investing these disruptive startups. In this paper, Christensen, Raynor, and McDonald (2015) seem to continue encouraging established companies to invest in disruptive startups and even to start regulating the process. That is by strengthen their customers relations and maintain their sustaining technology along with establishing a new division that looks after and invest in opportunities rising from disruptive innovations.
Tellis, G. (2006). Points out that the definition of disruptive technology introduced by Christensen (2013) is ambiguous along with its sampling logic. In addition, the author claims that studies conducted over years suggest that disruption on incumbents occurs not because of the technological innovation itself, but rather the lack of vision of mass market along with the “unwillingness to cannibalize assets to serve that market” Tellis (2006).
Disruptive technologies are able and in a matter of a very short time to replace business models, which can have deep effects on national economies. There is a great need for an extensive investigation on this modern age important trend. The investigation should deeply look into the current and futures effects of disruptive technologies on public and private sector organizations in Oman and what actions and precautions to be taken in order to stay competitive and preserve business continuity.
List of References
Bower, J. L., & Christensen, C. M. (1995). Disruptive technologies: catching the wave.
Johnstone, P., & Kivimaa, P. (2017). Multiple dimensions of disruption, energy transitions and industrial policy. Energy Research & Social Science, 37, 260-265.
En.wikipedia.org. (2018). List of mergers and acquisitions by Alphabet. [online] Available at: https://en.wikipedia.org/w/index.php?title=List_of_mergers_and_acquisitions_by_Alphabet&oldid=841228054 [Accessed 30 May. 2018].
En.wikipedia.org. (2018). List of mergers and acquisitions by Apple. [online] Available at: https://en.wikipedia.org/w/index.php?title=List_of_mergers_and_acquisitions_by_Apple&oldid=843386021 [Accessed 30 May. 2018].
En.wikipedia.org. (2018). List of mergers and acquisitions by Facebook. [online] Available at: https://en.wikipedia.org/w/index.php?title=List_of_mergers_and_acquisitions_by_Facebook&oldid=841228985 [Accessed 30 May. 2018].
En.wikipedia.org. (2018). List of mergers and acquisitions by Microsoft. [online] Available at: https://en.wikipedia.org/w/index.php?title=List_of_mergers_and_acquisitions_by_Microsoft&oldid=842505903 [Accessed 30 May. 2018].
Disruptive technology Meaning in the Cambridge English Dictionary. (n.d.). Retrieved from https://dictionary.cambridge.org/dictionary/english/disruptive-technology
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 44-53.
Christensen, C. M. (2013). The innovator's dilemma: when new technologies cause great firms to fail. Harvard Business Review Press.
Tellis, G. J. (2006). Disruptive technology or visionary leadership?. Journal of Product Innovation Management, 23(1), 34-38.