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What are disruptive technologies, you ask? The term was first used by Harvard Business School professor Clayton M. Christensen to describe a new technology that unexpectedly displaces an established technology. In his book, The Innovator's Dilemma, Christensen separates new technology into two categories: sustaining and disruptive. Sustaining technologies are based on incremental improvements to an established technology, whereas, disruptive technologies can be defined as "simple, convenient-to-use innovations that initially are used by only unsophisticated customers at the low end of markets". Christensen has stated that large companies tend not to pay attention to these disruptive technologies because they don't satisfy the demands of high-end users - at least, not at first.

Christensen stated that because these radical innovations initially emerge in small markets, they can, and many times do, become competition for established products. If a company is only prepared to deal with "sustaining technologies," or technologies that improve product performance, not disruptive technologies, it may fail.

McKinsey Global Institute (MGI) has published a summary report on emerging disruptive technologies having the potential to generate up to $33 trillion a year into the worldwide economy by 2025. MGI's report (Disruptive Technologies: Advances that will transform life, business, and the global economy) describes 12 potential disruptive technologies. Here is a sampling of MGI's disruptive technologies:

  • Mobile Internet: In the last four years, 1.3 billion people have purchased a smartphone. It is estimated that there are 4.3 billion people remaining to be connected to the internet. A high percentage will use mobile internet technologies.
  • Automation of Knowledge Work: A Knowledge Worker is someone who works at any of the tasks of planning, acquiring, searching, analyzing, organizing, storing, programming, distributing, marketing, or otherwise contributing to the transformation and commerce of information. There are 230+ million Knowledge Workers. Automation of their work is rapidly gaining.
  • The Internet of things: There has been a 300% increase in connecting machine-to-machine devices over the past five years.It's been estimated that 1 trillion "Things" could potentially be connected to the internet across all industries.
  • Cloud technology: MGI's report referenced that the cost of owning a server is 3x the cost of renting in the cloud and that there are 2 billion global users of cloud-based services.
  • Advanced robotics: There has been a 170% growth in sales of industrial robotics from 2009 through 2011.
  • Autonomous and near-autonomous vehicles: An Autonomous Vehicle is a driverless or self-driving car capable of fulfilling the human transportation capabilities of a traditional car. At the 2014 Consumer Electronics Show, BMW and Audi unveiled their latest driverless car technology and conducted demonstration drives. Ford has partnered with MIT and Stanford to research automated driving.
  • 3D printing: Three-dimensional printing or the current buzz term "additive manufacturing" is the process of making three-dimensional solid objects of virtually any shape from a digital model. While 3D Printing has been around since the early 1980's, it has recently been commercialized to the point where economically priced 3D printers are readily available from a wide-variety of sources. Don't think just small parts - the Navy just issued a contract to research 3D printing of concrete buildings!
Where do we go from here? It appears that disruptive technologies have the potential to be economically disruptive. Every business faces the challenges associated with competitiveness and maintaining market share. Every business needs to innovative and to explore how their products and/or services will need to change over time. Businesses need to think through how to utilize disruptive technologies to their advantage.

For more information or questions on this topic, please contact your local UHY LLP professional.