Disruptive technology

Definition

Disruptive technology refers to innovations that significantly alter or replace existing industries and markets by providing simpler, more affordable, and accessible alternatives. These technologies often start at the bottom of the market, serving niche customers before gradually improving and capturing mainstream customers, ultimately leading to the decline of established businesses. This process is closely tied to the concept of creative destruction, where new innovations render old practices obsolete.

5 Must Know Facts For Your Next Test

1. Disruptive technology often emerges in overlooked segments of the market, appealing to consumers who prioritize affordability and accessibility over performance.
2. Companies that fail to adapt to disruptive technologies may experience significant declines in market share or even go out of business entirely.
3. Examples of disruptive technology include the rise of smartphones, which transformed the mobile phone industry, and streaming services that disrupted traditional media consumption.
4. Disruptive technologies can create entirely new markets, leading to job creation and economic growth in those areas while simultaneously displacing established businesses.
5. Understanding disruptive technology is crucial for businesses seeking to innovate and remain competitive in rapidly changing environments.

Review Questions

• How does disruptive technology influence established industries and market structures?
  • Disruptive technology influences established industries by introducing innovations that meet consumer needs more effectively than existing products. By starting in niche markets, these technologies can gradually gain traction, improve over time, and eventually challenge or replace dominant players. As a result, traditional companies must adapt to these changes or risk losing market share and relevance.
• Discuss how creative destruction is connected to disruptive technology and its impact on economic growth.
  • Creative destruction is closely linked to disruptive technology as it describes the cycle through which new innovations lead to the demise of outdated industries. This process fuels economic growth by allowing resources to be reallocated from declining sectors to emerging markets driven by disruptive technologies. Consequently, while some businesses may fail, new opportunities arise, fostering innovation and competition.
• Evaluate the long-term implications of disruptive technology on workforce dynamics and economic stability.
  • The long-term implications of disruptive technology on workforce dynamics include potential job displacement in traditional sectors as new industries emerge. While some roles may become obsolete, new jobs will be created in areas related to developing and supporting these technologies. However, this shift can lead to economic instability if workers are unable to transition into new roles quickly, highlighting the need for education and retraining programs to prepare the workforce for a rapidly evolving job landscape.

Related terms

Innovation:

The process of translating an idea or invention into a good or service that creates value or for which customers will pay.

Creative Destruction: A concept by Joseph Schumpeter that describes how new innovations continuously replace outdated industries and economic structures.

Market Disruption:

A change in the competitive landscape that occurs when new entrants or technologies reshape consumer preferences and business practices.