Disruptive Technology

Definition

Disruptive technology refers to innovations that significantly alter or disrupt existing markets and value networks, often displacing established technologies and business models. This term is crucial in understanding how new advancements can create new markets while simultaneously rendering older technologies obsolete, thereby influencing economic growth and development strategies.

5 Must Know Facts For Your Next Test

1. Disruptive technologies often start by targeting niche markets or underserved customer segments before gradually moving upmarket to challenge established companies.
2. Examples of disruptive technologies include smartphones, which changed communication and computing, and streaming services that transformed the entertainment industry.
3. The impact of disruptive technology is not limited to economic shifts; it can also influence social structures and access to services in various communities.
4. Organizations that fail to adapt to disruptive technologies may experience rapid declines in market share and relevance due to the inability to compete with more innovative solutions.
5. Disruptive technology can play a vital role in inclusive growth by providing access to resources and services for marginalized populations, thus fostering pro-poor development.

Review Questions

• How does disruptive technology contribute to changes in market dynamics and consumer behavior?
  • Disruptive technology alters market dynamics by introducing innovations that challenge existing products or services. This often leads consumers to shift their preferences towards newer solutions, which can cause established businesses to lose market share if they fail to adapt. The introduction of disruptive technologies tends to create new consumer behaviors, as people become accustomed to using more efficient, affordable, or accessible options.
• Discuss the implications of disruptive technology for traditional businesses in terms of strategy and adaptation.
  • Traditional businesses face significant challenges when confronted with disruptive technology, as they must rethink their strategies to remain competitive. Companies may need to invest in research and development, adopt agile methodologies, and even pivot their business models to incorporate new technologies. Failure to adapt could result in obsolescence, making it crucial for established firms to recognize and respond proactively to technological advancements that can reshape their industries.
• Evaluate how disruptive technology can enhance inclusive growth and pro-poor development strategies in emerging economies.
  • Disruptive technology has the potential to significantly enhance inclusive growth by providing marginalized populations with access to essential services like education, healthcare, and financial resources. For example, mobile banking has revolutionized financial inclusion for those without traditional banking facilities. By integrating such technologies into pro-poor development strategies, governments and organizations can empower underserved communities, improve living standards, and drive sustainable economic growth that benefits a broader range of stakeholders.

Related terms

Innovative Technology: Innovative technology encompasses advancements that improve upon existing technologies or create entirely new solutions to meet consumer needs.

Market Disruption: Market disruption occurs when a new product or service fundamentally changes the way an industry operates, often leading to the decline of established players.

Value Proposition:

Value proposition is the promise of value to be delivered to customers, serving as the primary reason a consumer should choose one product over another.