Disruptive Technologies

Disruptive Technologies

A disruptive technology is a new technology, that radically transforms markets, creates wholly new markets or destroys existing markets for other technologies. It is a technological innovation, product, or service that eventually overturns the existing dominant technological product in the market. Typically, it is introduced by market newcomers rather than current market leaders. The word disruptive is used since the new technology often has a seriously damaging impact on the business models of companies who's product currently dominates a market. This essay will consider 4 past examples of disruptive technologies: broadband, digital photography, shipping containers and DVDs. It will also look at potential disruptive technologies, failed technologies and the Gartner Curve. The term "disruptive technology" was first coined by Clayton M. Christensen in his 1995 article Disruptive Technologies: Catching the Wave.

Here, are some of the disruptive technologies which have “helped” to shape our world as we know it;

Broadband v Dial-Up

Broadband is one of the most recent examples of a disruptive technology, replacing dial-up as a means of connecting to the internet. Broadband outperforms dial-up in almost every area. Whereas dial-up connections could typically only offer connection speeds of around 56Kb per second, broadband companies such as Tiscali can now offer speeds of up to 8Mb per second (tiscali.co.uk). Broadband's considerably faster connection holds many advantages for internet users. Users can take advantage of audio and video streaming with a quality similar to that of television as opposed to a lower quality stop-start, stuttering experience using dial-up. Broadband also allows quicker downloads, for example downloading an entire film could take less than an hour as opposed to entire days using dial-up. This can also be extremely beneficial in a business setting when downloading large files as time is often crucial. Not only is broadband considerably faster than dial-up but it can allow telephone calls using the same phone line simultaneously. Also, broadband is constantly switched on, so users can connect to the internet simply by switching on their PC. Call charges are no longer an issue either as broadband is payed by monthly subscription, monitoring connection time to save money is no longer necessary.

America On-Line (AOL) is the company worst affected by this disruptive technology. AOL was the market leader in the US for dial up receiving 80% of all fees. However, since the development of broadband technology AOL has been slow to react. AOL's dial-up service has lost over 7 million subscribers in the last 3 years and its broadband service has failed to establish itself as a premium internet service. At the end of 2005, US cable group Comcast was the biggest supplier of broadband with 8.5m customers whereas AOL only had around 5m. According to industry estimates, less than 50 per cent of broadband fees will go to AOL(Clark 2006).

Digital Photography v Photographic Film

Digital photography has revolutionised the photographic industry. Digital photography holds a huge number of advantages over film photography, for example:

- Instant review of pictures, with no wait for the film to be developed
- If one already owns a newer computer, permanent storage on digital media is considerably cheaper than film
- Ability to capture and store hundreds of photographs on the same media device within the digital camera; by contrast, a film camera would require regular changing of film (typically after every 24 or 36 shots)
- Minimal ongoing costs for those wishing to capture hundreds of photographs for digital uses, such as computer storage and e-mailing, but not printing
- Digital photography has many features which will improve the actual quality of photographs i.e. smaller sensor format and anti-shake functionality

In 2003 it was expected that U.S. sales of digital cameras on a unit basis would outstrip sales of traditional cameras that use film, according the Photo Marketing Association International in Jackson, Mich. (Bandler 2003). Eastman Kodak Co. was the number one photo film-maker and digital photography proved to be a disruptive technology for them. In 2002, Kodak says, digital cameras shaved three percentage points from the company's average annual growth rates of 4% to 5% for unit sales of film. This year, Kodak estimates, "digital substitution" will take four to five percentage points off its historical growth rates for film. Kodak now finds itself as the number 3 digital camera seller in the US and most analysts are sceptical as to whether Kodak can become number 1(Bandler 2003). This disruptive technology has left the former market leader playing catch up.

Containerization

Despite appearing rather simplistic in its design, container ships and containerisation has had a dramatic effect on our economy and can be attributed to the continual rise of globalisation. It is somewhat surprising that such a basic concept was not implemented to its full potential until 1951. Previously, motor vehicles, trains and occasionally sea vessels were used to transport goods and cranes with slings unloaded crates onto pallets. Longshoremen then muscled the crates into place, and forklifts moved the pallets to warehouses (apl.com). Damage, delays and theft were particularly common.

The global standardisation of containers and container handling equipment has revolutionised international trade and has become one of the most important innovations in 20th century logistics. Today, a parcel can be sent from one side of the world to another within days. Customers around the world are reaping the benefits of a ground-breaking advance that started with a concept as simple as a steel box (apl.com).

As is the case with most new technology, jobs were lost as a result. As mentioned above, labourers were used to handle and transport goods, so containerization rendered their skills useless. Herod (1998) provides an insight not only into the savings in time that containerization has brought, but also of the jobs which were lost. On the other hand, containerisation has reduced waste, cargo cost and increased trade, which has created many more jobs in total.

DVD v VHS

The March 1997 introduction of the DVD format to American consumers was perhaps the greatest blow to the dominance of the Video Home System, or the “VHS” (Washington Post, 2005). The drop in price of DVDs around the millennium proved the catalyst for the demise of the VHS. In addition to being physically smaller than the VHS, the DVD offered other performance benefits.

Firstly, the picture provided on screen by a DVD is of a much higher quality. As is the digital sound which a DVD can offer, the longevity and the durability of a DVD. This is in addition to the fact that a DVD is simply easier to use.

The impact that the introduction of DVDs has had on society is massive. Those who fixed VHS players for a living found themselves out of a job unless they could learn new skills in order to repair DVD players instead. Selling companies (such as Virgin and HMV) and rental companies (such as Global and Blockbuster) had to switch from stocking VHS to DVDs, and DVD players had to be introduced on a massive scale. Nowadays DVD players and recorders are owned by around 60% of people in Western Europe and considerable growth is expected in central and eastern Europe in the future (bbc.co.uk).

In fact Global have been hit particularly hard by the demise of the VHS. The Glasgow based rental chain made losses of £2.5m in 2006. Fiona Moriarty, director of the Scottish Retail Consortium, explained why she was not surprised at such demise; “Videos aren't a treat item anymore. Their sales and their rentals have been replaced by DVDs, which are far more affordable than they were.” (scotsman.com)

Potentially Disruptive Technologies

There are new also technologies currently being developed, which have the potential to to be disruptive. Here, we look at the two which we feel would have the most significant impact.

RSS feeds

RSS (Really Simple Syndication) allows Internet users to subscribe to websites that change or add content regularly. These sites use specialized software that sends out updates whenever the site's content changes. These updates are picked up by software programs called RSS readers, which notify their users whenever a particular site has signaled an update. These RSS readers can be Web-based (e.g., Bloglines, Newsgator) or on a user's desktop (e.g. FeedDemon, Pluck). The RSS subscriptions themselves are invariably free (Ehman 2006).

RSS feeds pose a significant threat to the newspaper industry. Effectively, users can construct their own newspapers by selecting the information they wish to receive, filtering any unwanted information which they have no interest in. The most obvious advantages are that it is more personalised, cheaper and saves a daily trip to a newsagent. Electronic paper is another potentially disruptive technology which could facilitate RSS technology in taking over from the traditional newspaper.

Electronic Paper

Electronic paper, or e-paper, is a generic term for a new class of reflective displays that have some of the characteristics of traditional paper (dupont.com). Unlike traditional displays, e-paper can be crumpled or bent like traditional paper.

While still in the relatively early stages of development, the impact that e-paper could potentially have on our society is massive. Firstly, it could be used in education to replace the classic textbook. Gone would be the stereotypical image of a student lugging countless books from class to class. Instead, a student would be able to upload necessary text and literature onto his/her e-paper as necessary, thus eliminating the heavy burden of textbooks.

Similarly, newspapers again would find demand drop to a considerably lower level as higher quality substitutes would be available. While news contained in a newspaper is generally a day old, news delivered via e-paper could be up-to-date. This is obviously more attractive, a theory which regular readers of the Evening Times, Daily Record PM or users of RSS feeds will subscribe to.

If such a technology was to be successful, it would be to the detriment of some members of society. In the examples provided above, the demand for publishers in particular would drop dramatically, as would the success of book shops. Newspaper companies would have to cut jobs and news agents would also suffer as a result.

Failed Technologies

There have been many technologies in the past which have been touted as disruptive technologies but have gone on to fail. A classic example is the betamax video tape format. Sony's Betamax is the 1/2 inch home video cassette tape recording format introduced on April 16th 1975 and derived from the earlier, professional 3/4 inch U-matic video cassette format. Betamax sales dwindled away and VHS emerged as the winner of the format war which had developed — despite being the least sophisticated (Wikipedia.org/wiki/betamax).

The Japanese Fifth Generation Computer System (FGCS) suffered a smiliar fate since its software was not suitable for commercial applications and the proprietary architecture was eventually surpassed in speed by less specialized hardware (for example, Sun Workstations and Intelx86 machines). Other examples of failed technologies include Laser Discs, Cold Fusion, the Digital Audio Tape, the Apple Newton and the Apple Lisa, Sega Dreamcast and the list goes on...

The Cycle of New Technologies

A Hype Cycle is a graphic representation of the maturity, adoption and business application of specific technologies (gartner.com).

In 1995, Gartner Inc (an information and technology research and advisory firm) started using such hype cycles to characterize the over-enthusiasm or "hype" (or too high expectations initially) and subsequent disappointment that typically happens with the introduction of new technologies (or too low expectations in the long-term).
An example is the introduction of iPods and iTunes which caused an explosive growth in what was known as the MP3 market. In 2003 it was thought that it would take the iPod 4 to 5 years for them to reach the plateau of production. However a year later in 2004 they were just beginning to climb out of the trough disillusionment.

"We forecast they would reach the plateau in five to 10 years in 2003, but now, we are saying they will reach plateau in two to five years.” (Laura Behrens, speaking in 2004)

REFERENCES

Bandler 2003
“Technology (A Special Report): Photography --- A New Picture: For photo-film makers, digital advances offer an opportunity -- and a threat”
Wall Street Journal. (Eastern edition). New York, N.Y.: pg. R.17

Clark 2006
“AOL focuses on broadband switch TELECOMS/INTERNET; [USA 2ND EDITION]”
Financial Times. London (UK): pg. 17

Ehman 2006
“Revolutionary, Simple, Sensational”National. Ottawa: Vol. 15, Iss. 2; p. 14 (1 page)

Herod 1998“Transactions of the Institute of British Geographers”,
New Series. Vol. 23, No. 2 (1998), pp. 177-191.

Author Unknown 2005
“Parting Words For VHS Tapes, Soon to Be Gone With the Rewind”
Washington Post, August 28, 2005

Wikipedia.org:

en.wikipedia.org/wiki/Disruptive_technology#Books_and_papers
en.wikipedia.org/wiki/Digital_photography#Comparison_with_film_photography
en.wikipedia.org/wiki/Betamax
en.wikipedia.org/wiki/Containerization

Other websites used:

www.tiscali.co.uk/products/broadband/8mb-unlimited-extra.html?code=NN-HB-0282&srccode=
news.bbc.co.uk/1/hi/entertainment/4719958.stm
business.scotsman.com/index.cfm?id=850022006
www.solutions.dupont.com.au/Displays/en_US/knowledge_center/terms_e.html
www.gartner.com/pages/story.php.id.8795.s.8.jsp
news.bbc.co.uk/1/hi/technology/3577746.stm
www.apl.com/history/topics/innovate/contain.htm