This article was first published in the March 2016 UK edition of Accounting and Business magazine.

The term ‘disruptor’ was first applied to innovative businesses in 1997, but it’s only recently that it has gained traction. A variety of companies now proudly use the term ‘disruption’ to describe their activities. But how genuine many of the claims to disruption are is questionable. Cutting through the noise to understand which of the advances really is disruptive is a major challenge for businesses in this era of extraordinary technological advances and pioneering new business models. 

A disruptive business, according to Justin Pritchard, a partner specialising in telecoms and technology at EY, is one that ‘comes into an established marketplace and changes the ecosystem. It’s a business model with a totally different approach, often using new technology.’ 

The obvious example that is often cited is Uber, a passenger car service that started life in San Francisco seven years ago and is now a global business worth $62bn. It owns no cars and its drivers are self-employed; the business’s value lies in its customer interface. Uber and AirBnB, a successful rental accommodation business, have been described as ‘dating agencies’ – businesses with services that own no material assets. 

It is the smartphone that has made all this possible, allowing people to tap the app. Customer behaviour has changed too. ‘Technology is making it easy for consumers,’ says Marie Griffiths, director of Salford University’s Centre for Digital Business. ‘We have become very lazy and not loyal at all.’ Smartphones and apps underpin a great many disruptive strategies and have changed the business landscape. The major players in the market, such as Apple and Google, not only have huge reserves of cash but also access to vast stores of data and knowledge, so they aren’t limiting themselves to devices and software. 

Google’s plans for what would be hugely disruptive driverless cars are advanced – they could be on the road by 2020. ‘Google and Apple are attempting to commoditise the automotive industry, just as they commoditised the handset industry,’ says Richard Windsor, founder of and an independent research provider to the technology sector. ‘They want their technology to be in every car.’ 

If the value of a car were to be determined by software rather than its engine power, that would be a major disruption in the car market. Established players are buying software businesses to compete: BMW bought Nokia’s Here mapping software for $3bn so it would not have to use Google’s equivalent.

Friends with five buckets

In an era of disruption dominated by a few corporate giants, partnerships between companies will be increasingly necessary if they are to rival the biggest guns. ‘Businesses need to sit in a partner ecosystem consisting of five buckets,’ says Martin. ‘They need access to the customer, a consultative cell (such as a call centre, web presence or app), good content, connectivity to all devices, and vast computing power to run the ecosystem. The only businesses that can do all this on their own are the likes of Apple and Google.’ 

Retail banking is one sector that is seriously vulnerable to disruption. Transferwise, a money transfer company, claims to be eight times cheaper than the traditional banks, and allows money to be sent abroad in moments via a smartphone. This niche has been snatched from the sleepy banks, and more such disruptive services are being lined up. ‘Transferwise and others are coming into the market saying “we’re going to dislodge you”,’ says Pritchard. ‘This is going to force banks to provide services they should have given years ago. Banks have been dragging their feet and could be in real trouble in the long term as innovative models disrupt them.’ 

The banking sector has historically had regulators to protect it from ‘imposter-competitors’. Taxi organisations have likewise turned to legislators to save them from Uber – with negligible effect. Griffiths is blunt in her assessment of the banks: ‘As a sector they haven’t caught on to different technologies. Why didn’t HSBC or RBS come up with something like ApplePay? It’s a sector ripe for takeover by the tech companies.’

Another dimension

Materials science is an area where advances in technology are happening at a dizzying rate. BMW is making hybrid cars out of carbon fibre, nano technology has huge potential for radically extending battery lifetime, while graphene has been described as a wonder material – very light yet stronger than steel. 

But it’s 3D printing that may have the most immediate disruptive potential. The machine ‘prints’ layers of material one on top of the other. The software running the machine allows great flexibility, so one machine can quickly be configured for different tasks. ‘The technology could change manufacturing and logistics in the same way the internet changed retailing,’ says Pritchard. 

Griffiths says many businesses are coming to the Centre for Digital Business wanting to know how to exploit the potential of 3D printing and asking when the next breakthrough is coming. One of her clients, a major telecoms player, is keen to be among the first to print individual components for its Wi-Fi server rather than having to replace the whole thing as it does now. ‘It’s already used for prototyping, with an idea scanned, printed and tested with no need for building models. Already you can cut out processes,’ she says. 

Numerous 3D printing patents expire this year and Griffiths says: ‘We’re just scratching the surface of this technology.’ She feels much more complex tasks will be possible in as little as two years. With such an innovation, there will be great implications for copyright, patents, licensing and ethics. Why develop a product yourself when you can simply print someone else’s? 

Other buzzwords in disruption are augmented reality and virtual reality. The former builds on what you can already see, such as overlaying the outline of a building design on the landscape via an architect’s smartphone. The latter, as game players will already know, requires a headset that gives the wearer a view of a virtual world. Game manufacturers are well ahead: Oculus is one of the market leaders and is due to release the eagerly anticipated Rift headset this month. But there is a huge range of applications beyond gaming, such as in the training/education sector (see the Deloitte Digital video referenced opposite).

A new normal

While the word ‘disruption’ implies an unusual event, businesses must come to view disruptive models and technology as the new normal. There are many examples of how businesses have failed to respond in time to threats. Kodak gave the world the first digital camera but totally failed to understand the implications of its own technology. Creative rivals did not, and Kodak filed under Chapter 11 of the US bankruptcy code in 2012. 

Businesses need to respond to this new world by identifying likely disruptors. Companies seeking the advice of Griffiths and her researchers are not sitting back and waiting to see what happens next. ‘The HMVs of the high street didn’t look forward, or even around,’ she explains. ‘An organisation needs people who are horizon scanners, who then bring that information in. It can be harder for bigger businesses to accommodate disruptive technology, rather like an elephant trying to change direction. But if they don’t change, they’ll become mammoths.’

Matt Warner, journalist