Disruptive technology and its impact

The research article Demystifying Disruption: A New Model for Understanding and Predicting Disruptive Technologies delves into several topics related to understanding and predicting disruptive technologies. An interesting facet of the article is how it outlined three domains of disruption: technology disruption (when a new techology outperforms a dominant technology), firm disruption (when the market share of a firm leveraging  a new technology exceeds that of the largest firm using a previously dominant technology), demand disruption (when the total share of products in the market based on a new technology exceeds that of products based on a previously dominant technology). The authors also focused on the method of attack:

The authors tested the following hypotheses:

1. Technologies using a lower attack (potentially disruptive) come primarily from entrants
2. Technologies using an upper attack (sustaining breakthrough) come primarily from incumbents
3. Technologies using a lower attack (potentially disruptive) are priced lower than dominant technologies at entry
4. The hazard of disruption is higher from an entrant than from an incumbent
5. The hazard of firm or demand disruption is higher if a new technology uses a lower attack
6. The hazard of disruption is higher if a new technology is introduced by a small firm
7. The hazard of disruption is lower if a new technology is introduced by a small firm
8. The hazard of disruption is higher if a new technology is lower priced than the dominant technology at entry

What the authors discovered is that contrary to popular belief, incumbents in certain markets drive disruption as frequently as new entrants. In fact, in their study the authors found that:

only 8% of all technology disruptions and 25% of all firm disruptions were caused by entrants using a lower attack

– and –

although 47% of all technologies adopt a lower attack, only 16% of all technologies cause technology disruption and only14% of all technologies cause firm disruption via a lower attack

Interestingly, the authors note that a firm’s internal culture is responsible for undertaking an attack, rather than responding to an external threat. That’s why creating a culture of innovation and creativity is a key factor in successfully introducing a sustainable disruptive technology.