Protect Your Company from the Threat of Disruptive Technologies

You've heard how disruptive technologies can upset entire industries and perhaps you're worried that an up-and-coming innovation will throw a wrench into your business model. It's not an unfounded concern, especially if your business is technology-driven. Just look at how Voice over Internet Protocol (VoIP) shook up the market for traditional telecommunication providers by allowing anyone with an Internet connection to receive a range of voice services at lower costs than those offered by most carriers.

But how worried should you really be, and what can you do to prevent a disruptive technology from putting a crimp in your business?

First off, let's talk about where these technologies come from and just what makes them disruptive. The term "disruptive technology" was coined by Harvard Business School Professor Clayton M. Christensen in his 1997 book The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Christensen used the term to describe a product or service that overtakes the existing dominant technology or product in the market. It does this by filling a need the other technology could not fill, such as providing a new capability or lower price point, or by moving upmarket through performance improvements that eventually overturn the existing technology. (For an fascinating analysis of where the next significant changes are expected to occur, be sure to read Six Next-Gen Disruptive Technologies.)

In contrast, Christensen defines a "sustaining technology" as one that improves the performance or quality of existing technologies. While sustaining technologies are apparent in the marketplace, disruptive technologies can be hard to plan for because they usually come from outside of mainstream development channels. It's impossible to know about every technical development happening in your industry, but you can take some steps to make yourself more prepared for a disruptive force in the market.

It may sound obvious, but keep your eyes and your ears open about what's going on in your industry. Take a wide view — look to see what's going on in other parts of your market and other parts of the world, not just in your own niche. Network with players in your industry and read up on new technical developments that could affect the way you do business.

Secondly, don't just watch what your customers are doing; you'll also want to make sure that you are listening to what they are saying. They probably have suggestions for improvements or changes to your product and if you aren't willing to fill their needs, someone else might come along with a solution that will.

Challenge your organization. Ask your staff if there is a faster, cheaper, or more efficient way to serve your customers and be open to creative solutions that may not fit with your traditional way of doing business.

The best way of insulating yourself from an upset is by constantly improving your product and leaving little room in the market for someone to step in and fill a void. Disruptive technologies often overturn traditional technology by being less expensive, but that often comes with a price — lowered performance. If you evolve your product to a higher performance and price level, it probably won't be competing for the same customer base as a lower-priced, pared-down version.

Of course, not all disruptive technologies are cheaper and less developed than existing solutions. Sometimes they offer new capabilities or deliver traditional services in a new way. There's no way to prepare for these innovations, but you can control how you react to them. If a disruptive technology offers something unique to consumers, you might want to think about adding this capability to your product line or partnering with the innovators. If the new technology directly competes with your offering, you may look for ways to improve your product and build onto the new capabilities that are being offered by disruptive players.

At their essence disruptive technologies are a catalyst for change, so your best strategy is to be aware of what's going on in the market and be flexible. After all, change challenges a business to be stronger and more agile.

Scarlet Pruitt is a freelance writer and business consultant based in San Francisco. She has covered business and technology for publications in the U.S., Europe, and Latin America.