By Nikhil Agarwal
The biggest startup lesson I’ve learned is that you can’t succeed without embracing disruptive technology. It might seem like a buzzword, but it's true: Disruptive technology is what makes or breaks a business. Specifically, I mean technologies that make your product obsolete overnight—and there are plenty of examples to prove this point.
Kodak was a dominant player in the traditional film camera industry, and it had built its business model around the sale of film, cameras, and the processing of film. However, the rise of digital cameras and digital photography presented several challenges to Kodak's business model. As a result of these challenges, Kodak's business model began to crumble, and the company filed for bankruptcy in 2012. The rise of digital cameras and digital photography had disrupted Kodak's traditional business model, and the company was unable to adapt quickly enough to survive in the new digital landscape. The story of Kodak serves as a cautionary tale of how failing to embrace disruptive technology can lead to the downfall of even the most established and dominant players in an industry.
Disruptive technology refers to an innovation that fundamentally changes the way a particular industry or market operates. It can create new markets, disrupt existing ones, and displace established market leaders. Disruptive technologies often start as simple, low-cost alternatives to existing technologies, but as they improve and become more widely adopted, they can have a significant impact on the industry. Examples of disruptive technologies include the personal computer, streaming services, and ride-sharing apps.
Disruptive Technologies: Catching the Wave
Harvard Business School Professor Clayton Christensen is credited with coining the term "disruptive technology" and introducing it in his 1995 article "Disruptive Technologies: Catching the Wave," which he co-wrote with Joseph Bower. "Disruptive Technologies: Catching the Wave" is a seminal article published by Clayton Christensen and Joseph Bower in the Harvard Business Review in 1995. The article introduced the concept of "disruptive technology," which refers to a new technology that disrupts an existing market or creates a new one.
Christensen and Bower identified two types of technologies: sustaining and disruptive. Sustaining technologies are incremental improvements to existing technologies, while disruptive technologies are fundamentally different and can create new markets or disrupt existing ones.
The authors argued that established companies often struggle to adopt disruptive technologies because they are focused on improving their existing products or services, and are not willing to take risks on unproven technologies. In contrast, startups and new entrants are more likely to adopt disruptive technologies because they have less to lose and are more willing to take risks.
The article provided several examples of disruptive technologies, including the personal computer, mini steel mills, and discount retailers. It also discussed strategies for established companies to respond to disruptive technologies, including creating a separate division or entity to focus on the new technology, acquiring a startup that has developed the technology, or partnering with a startup to bring the technology to market.
"Disruptive Technologies: Catching the Wave" has become a classic in the field of innovation and entrepreneurship and has influenced many business leaders and academics.
Disruptive Technology and Startups
Disruptive technology is often viewed as a double-edged sword. While it can create enormous opportunities for those who embrace it, it can also pose significant challenges for those who are slow to adapt. Businesses and industries that fail to keep up with disruptive technology risk becoming obsolete, while those that embrace it can gain a competitive advantage and thrive in the new market landscape.
Whether a startup should focus on disruptive technology depends on several factors, including the market they are targeting, the competition, and the resources available. Take two examples of Paytm from India and Spotify from United Kingdom:
One of the best examples of disruptive technology in India is the mobile payment platform, Paytm. Paytm was launched in 2010 as a digital wallet service that allowed users to store money and make payments through their mobile phones. At the time of its launch, the concept of mobile payments was relatively new in India, and most transactions were still conducted using cash. As a result of these disruptive innovations, Paytm quickly gained popularity in India, and it currently has over 89 million users for Jan 2023 alone. Though Paytm suffered a major setback due a debacle during their IPO launch, however, they are working hard to stabilise their business. Paytm's success has also inspired other companies to enter the mobile payment space, leading to increased competition and further innovation in the industry.
An example of disruptive technology in the UK is the music streaming service, Spotify. Prior to Spotify's launch in 2008, the music industry was dominated by physical sales of CDs and digital downloads. However, Spotify disrupted this traditional model by offering a subscription-based streaming service that allowed users to access millions of songs on demand. As a result of these disruptive innovations, Spotify has become one of the most popular music streaming services in the world, with over 345 million active users and 155 million paying subscribers as of December 2020.
On one hand, developing a disruptive technology can give a startup a significant advantage over its competitors, as it can create a new market or disrupt an existing one. It can also attract investment and media attention, which can help the startup grow and succeed. On the other hand, developing a disruptive technology can be risky and expensive. It may require significant resources, including research and development, as well as marketing and sales efforts to educate potential customers on the benefits of the new technology. Additionally, the market may not be ready for the technology, and the startup may struggle to gain traction.
Ultimately, it is up to the startup to weigh the potential benefits and risks of developing a disruptive technology and determine if it aligns with their goals and resources. Some startups may choose to focus on incremental improvements to existing technologies or business models, while others may pursue more radical innovation.