What Are the Pros and Cons of Business Disruption?

Low-end disruption and new-market disruption are types of disruptive innovation. Disruption is the process by which a smaller company—usually with fewer resources—moves upmarket and challenges larger, established businesses. In both low-end and new-market disruption, incumbent businesses are motivated by higher profit margins to not fight the new entrant for market share.

You may approach disruption from the perspective of an incumbent business that thrives on sustaining innovations or has an opportunity to disrupt an existing market with an innovative product or service. Either way, learning about disruptive innovation can enable you to assess your company’s place in the competitive landscape, understand the factors influencing disruption, and craft strategies to avoid or drive disruption.

Business disruption refers to any innovation within an industry that radically and lastingly changes the way all companies in that industry operate. The term “disruptive innovation” can be traced back to the late American academic and business consultant Clayton Christensen.

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What are the effects of disruption in business?

Business disruption has the power to shift a market and change the definition of relevance within an industry. Some of the effects of business disruption include:

1. Transforms a business model

Disruption can change the entirety of a business model by taking advantage of growing innovations within existing systems and new technology. As technology continues to increase in capability, more opportunities to transform a business model from one purchasing technique to another emerge. Companies can adjust their strategies as a result of:

For example, renting movies rather than buying them disrupted the business model for the movie distribution industry.

2. Shifts the focus to convenience

A continuous focus of businesses today is the idea of convenience. This is because many disruptions in business have proven successful by increasing customer convenience. Again, considering the movie distribution industry, the transformation of VHS tapes to DVDs is one example. DVDs enhanced the customer experience by providing convenient features, such as:

This disruption in the industry led to DVDs replacing VHS tapes.

3. Improves efficiency

When a business creates a new idea that is more efficient than what’s currently available, it will likely replace other systems or practices. For example, the disruption of the car as a replacement of the horse-drawn carriage caused a significant decrease in popularity for horses and carriages. Improving industry standards through disruptions often results in enhanced efficiency.

How does business disruption happen?

Business disruption commonly happens when a new product enters the marketplace and replaces a popular product. This can happen when a new product is offered at a substantial discount and is, therefore, more affordable to a wider audience, such as when laptops eventually became affordable to a wide percentage of the population, or when a new product introduces an upgraded technology, such as the cell phone market.

What are the advantages of business disruption?

If a business can recognize disruption and adapt to it, it may find new ways to grow. Businesses that take advantage of disruption may also change the industry they operate in, with the potential to profit from its structure in the future. The advantages of business disruption include:

1. Improved business flexibility

Using or taking part in a business disruption allows a company greater flexibility in its methods, such as production and distribution. Because responding to the innovations of disruption requires a quick turnaround, businesses can learn to turn ideas into products or results faster. Disruption encourages a less rigid hierarchy. Because of disruptions natural inclination towards intuitiveness, taking part brings fresh ideas to a business.

2. New opportunities for growth

While creating a way for a business to participate in disruption, upper management may also see new ways to grow a business even further. New markets and ways to increase sales may not be a disruption itself, but businesses can discover growth opportunities during the disruption process. For example, if a business participates in disruption by creating a new mobile marketing campaign, they may also discover a new way to advertise or a new market they can sell products in.

3. Increased customer satisfaction

Because disruption results often align with customer needs, participating in disruption can increase your customers satisfaction with your products or services. This can lead to more:

What are the disadvantages of business disruption?

While business disruption may have benefits for a company or industry, it can also have disadvantages. Here are the most common disadvantages of business disruption:

1. The process is risky

Disruption, even when done well, may not prove effective. Ideas may need to go through many phases of improvement before they become genuinely disruptive. There is not a single formula for disruption that guarantees success. Through testing and alterations, you may discover that your ideas fall short of becoming disruptions due to:

2. It’s unpredictable

By nature, disruption is unexpected, and a business may cause a disruption by accident. To cause a successful disruption on purpose and achieve your desired results is rare. Often, the results of a company not adjusting to a disruption can be detrimental, possibly replacing the business altogether.

However, you can combat these effects by operating with flexibility and being open to making changes quickly. Companies can also prioritize innovation and welcome improvements to their processes, policies and products or services.

3. Results take time

Because disruption requires replacing an established product with a new, similar one, the process can take a lot of time. Customers need time to understand, purchase and use a product. Building enough customer traction and retention could take many years. In hindsight, identifying disruption is clear, but disruption prediction during the process is more challenging. Its important to be persistent and have incremental, measurable goals to help you track your progress.

Examples of business disruption

Disruptions become more common as technology improves, and there are many examples of disruptions, including:

Video streaming services

The natural path of progression for the movie distribution industry was the development of streaming services. As more companies offered their products through streaming technology, this disrupted the industry, creating a market primarily for streaming services instead of DVD rentals and purchases.

In this example of disruption, the effects it had on the industry were based on convenience. Many streaming services have since attempted to capitalize on convenience.

Communication services

Communication services were once limited to wired phone calls. Through different phases of disruptions in the communication industry, other services became accessible, including:

These communication services disrupted businesses in multiple ways. They enhanced the convenience of the services for customers and applied the technology to mobile devices. Many of the services, like email, emerged as free services, targeting a wide range of consumers.

Information services

As the capability of the internet advanced, digital information services became a major disruptor in the industry. Previously, individuals had to rent or buy information from providers. With the rise of the internet, information became increasingly accessible. This example shows that some types of disruptions can take years to take hold, as the internets information services took approximately a decade to experience a rise in popularity.

FAQ

What is disruption in business example?

New-market disruption occurs when a company creates a new segment in an existing market to reach unserved or underserved customers; for example, creating a cheap version of an expensive product to cater to less wealthy consumers.

What makes a business disruptive?

Disruptive innovation requires access to ignored or overlooked markets and technology that can transform a product into a more accessible and affordable one. To be disruptive, the network of partners—suppliers, contractors, and distributors—must also benefit from the new, disruptive business model.

What do we mean by disruption?

Definition of disruption

: the act or process of disrupting something : a break or interruption in the normal course or continuation of some activity, process, etc.

What does it mean to disrupt an industry?

Disruption refers to a situation in which new entrants to a marketplace or industry use new technologies or business models to take from the traditional established players.

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