CRISIL YOUNG THOUGHT LEADER

2015

IMPACT OF DISRUPTIVE
TECHNOLOGY IN
BUSINESSES
AJIT REDDY KANDELA
XLRI, Jamshepur

Table of Contents
Executive Summary ................................................................................................................. 3
Introduction - Disruptive Technology.................................................................................... 4
Impact of disruptive technologies in various sectors ............................................................ 4
Manufacturing...................................................................................................................... 4
Retail ..................................................................................................................................... 5
Finance .................................................................................................................................. 6
Healthcare ............................................................................................................................. 8
Impact of disruptive technologies on global economy .......................................................... 8
Preparing for disruptive technologies .................................................................................. 10
Business leaders.................................................................................................................. 10
Policy leaders ...................................................................................................................... 10
Bibliography ........................................................................................................................... 11

Executive Summary
Technology is changing rapidly and in so many directions that businesses have become
beneficiaries and victims concurrently. Yet, technological advancements continue to drive
global economic growth.
Technology can transform and create immense value to businesses but it often does so
through disruption. Disruptive technologies will have massive and far reaching impacts to
businesses in manufacturing, retail, finance and healthcare industries. 3D printing will
transform the manufacturing industry with innovative product design, just-in-time supply
chain and virtual inventory. Beacons will create a delightful in-store shopping experience to
the customers and Internet of things will disrupt the insurance industry with integrated
connection of smart devices.
Business leaders cant wait too long to determine which emerging technologies are truly big,
they need to understand how these technologies will enhance competitive advantage and need
to alter organizational processes to introduce them. Policy makers also need to carefully look
at potentially disruptive technologies to ascertain the magnitude of impacts, before these
technologies start exerting their disruptive powers in various industries, economy and society.

Introduction - Disruptive Technology

Disruptive technology is one that displaces an existing technology or overturns a traditional
business practice to create a completely new industry. The term Disruptive technology was
coined by Harvard professor Clayton M. Christensen. According to him new technology can
be divided into two categories: Sustaining and disruptive. Sustaining technology is an
improvement to an existing technology and it satisfies the future needs of the customer
whereas disruptive technology is an unknown and untested technology that lacks practical
application.
Past examples of disruptive technologies that reshaped history:
Disruptor
Disruptee
Personal Computer
Typewriter
Email
Letter writing
Cellular Phones
Fixed line telephones
Smart Phones
Cellular Phones

Impact of disruptive technologies in various sectors

Manufacturing
Manufacturing technology rapidly advanced in the past 10 years. Today's increasingly
automated and technology driven industries have reduced human intervention to a large
extent. The application of advanced technologies is changing the face of manufacturing in
ways unimaginable a few decades ago. In addition to cutting the costs, these technologies
create precision, speed, efficiency and flexibility into the manufacturing process. Following
are some of the most important and disruptive technologies that are driving growth:
1. 3D printing - 3D printing also known as additive manufacturing enables the creation
of a physical object
from a threedimensional digital
plan.3D printing,
which is few years
away from large-scale
adoption, will change
every aspect of
manufacturing
industrys future. It
will help in creating a
just in time supply
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chain. Following are ways in which 3D printing will transform the manufacturing
business:
a. Increase in Innovation and product design cycles
b. Manufacturing and assembly moves closer to customers
c. Increase in production speed and quality
d. Warehouses and inventory goes virtual
2. Nanotechnology Nanotechnology involves manipulation of matter on atomic and
molecular scales. It is currently applied mostly in space technology and biotechnology
however it is going to play an indispensable role in the manufacturing industry in
future.
The two key features of Nanotechnology that are going to disrupt the manufacturing
industry are:
a. Manufacturing using machinery based on nanoscale devices
b. Building products with atomic precision
Nanoscale devices and atomic precision will together bring atomic precise
manufacturing (APM) that will result in extraordinary improvements with respect to
performance of products, range and cost.
3. Predictive Maintenance technology Predictive maintenance includes various
diagnostics testing technologies that periodically test equipment to detect and
correlate data in order to determine ideal operating conditions.
The technologies used for predictive maintenance include electronic devices that
connect factories through the internet which will help in controlling the processes.
Predictive maintenance technologies reduce failure rate, improve product quality and
safety levels, cut down repair and insurance costs.

Retail
While many solutions, applications and tools are playing a role in changing how retailers use
technology in their business, three developments in particular stand out.
1. RFID - The ubiquitous bar code is going to get replaced soon by smart labels, also
called radio frequency identification (RFID) tags. RFID tags are intelligent bar codes
that track every product in the shopping cart by interacting with a networked system.
RFID minimizes the waiting time during billing to almost zero by communicating
with an electronic reader that detects all the items in the cart and rings up almost
instantly. Also its ability to track products, from supply chain to consumer, will
become an underlying core competence of a retailers technology footprint. The sales

of RFID readers
is expected to
grow from $738
million in 2014 to
$5.4 billion in
2020.

2. Beacons - Beacons are Bluetooth-enabled devices which send signals to the

customers smartphone once they are within 50-100 feet of the device. This
technology helps in creating an innovative in-store shopping experience and also
change the way marketers and
consumers interact.
Beacons can give insights to the
retailers on where the individual
shoppers are navigating in their
stores, where they are stopping
etc. Few companies are running a
pilot where beacons are used to
accept inquiries and customer
service requests from customer
mobile devices, as well as push
out targeted promotions.

Finance
Financial services organizations are, by their nature, very cautious in adopting new
technology or new use of technology. This results in early adopters capturing a significant
portion of the market share. Here are some of the disruptive technologies with massive
impact in financial services industry.
1. Blockchain Blockchain, the distributed ledger technology that underpins bitcoin,
has emerged as the most important innovation in the financial services industry. It has
transformed business practices such as auditing and accounting. It is a digital,
distributed transaction ledger, with identical copies maintained on multiple digital
systems controlled by different entities. Anyone participating in a blockchain can
review the entries in it and a participant can update the blockchain only through
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majority consensus. A
widespread
commercialization of the
technology is still a few
years off as it is still
young and changing
rapidly. Nonetheless, to
avoid disruptive
surprises, decision
makers and planners
across industries should
pay heed now and start
investigating the applications of this technology.
2. Internet of Things Internet of Things (IoT) refers to a network of wirelessly
connected smart devices that communicate with each other. According to popular
belief, the financial services industry has less to do with IoT, but truth couldnt be
further away from it.
Insurance is where IoT can make the biggest impact. With the emergence of
telematics (in-vehicle telecommunication devices), cars are able to transfer drivers
behaviour data to insurance companies. This can easily be extended to health and
property insurance as well. For example, a fitness band, which measures ones health
parameters, on detecting erratic heart rate or a serious health hazard, can immediately
change ones health insurance to suit the present status in the best possible manner.
Regarding property insurance, with the help of emerging smart home platforms,
property owners can voluntarily provide data on how they maintain their households.
Insurers can reward good behaviour like locking the doors when leaving their homes
that lessens the risk of theft or turning off their stoves after use etc.

3. Biometrics Biometric verification is a means by which an individual can be

uniquely identified by one or more distinguishing biological traits. Its application in
financial transactions has been alluring as biometric identifiers are very hard to fake
thereby reducing friction and fraud.
Biometrics hasnt gained much traction in consumer applications in the financial
sector. However, with more advancements in wearable devices like smart watches and
fitness bands, it seems like a good bet.
MasterCard is planning to launch the worlds first biometrically authenticated device
which will enable secure credit-card payments using a persons heartbeat. This
solution could be the key to the payment via wearable devices like smart watches.
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Healthcare
Paradigm shifting technologies are allowing healthcare practitioners to offer cheaper, faster
and more efficient patient care than ever before. There have been significant disruptions in
the healthcare industry in the recent years, here are some of the technologies with far
reaching impacts.
1. Genomics and Big data Genomics will help us in reaching the core of all medical
problems by going to the root of our illness our genes. Genome information is data
intensive and is thus better analysed using big data technologies.
With all the insights from the big data analytics and artificial intelligence on genomic
information, doctors will be able to give personalized medicines to the patients. One
important aspect of this technology that still needs to be worked on is the return on
investment. However there is little doubt that this technology will change the face of
healthcare industry.
2. Cloud-based robotics Cloud-based robotics is an emerging field of robotics which
integrates storage, computing and services into a cloud platform. Robots have become
cheaper and more competent however there were limitations to the hardware
capabilities which is overcome by this technology. This technology enables greater
memory, computational power and inter-connectivity for robotics applications.
Complex surgeries can be performed from a remote location through cloud robotics.

Impact of disruptive technologies on global economy

Since the beginning of the industrial revolution, global economic growth has been driven
largely by a series of advances in technology. Steam power, mass-produced steel, and
electricity drove massive economic growth, which has continued into the new millennium
with semiconductors and the Internet. Each new wave of technology has surged the
productivity and enabled efficient new methods for performing existing tasks giving rise to
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an entirely new types of businesses. Today we have a dozen disruptive technologies which have
the potential for huge economic impact:

1. Internet of Things and Big data Close to nine billion smart devices are currently
connected to the Internet. That number is expected to reach 50 billion devices in the
next decade. All these devices are packed with sensors which are capable of
collecting, analysing and sharing data.
The total potential economic impact of Internet of things is estimated to be in the
range of $2.7 trillion to $6.2 trillion per year by 2025. Government administrations in
the developed countries could save more than $100 billion per year in operational
efficiency improvements using big data. The greatest benefits of internet of things and
Big data is expected to be captured by Financial services, Healthcare and
Manufacturing industries.
2. Cloud computing Cloud computing can significantly reduce communications
technology and energy costs and can augment the use of digital platforms and
services. The global cloud computing market could create an economic impact in the
range of $1.7 trillion to $6.7 trillion per year by 2025. Entertainment, Hospitality and
Finance are the key industries that are going to be impacted by the evolution of cloud
computing. The impact of Cloud technology on small and medium sized enterprises is
expected to be strong, leading to the establishment of around 400,000 new SMEs in
the next five years and permanently shifting the landscape of the economy.
3. 3D printing or Additive manufacturing The 3D printing market grew at CAGR of
33.8 percent over the past three years. The total economic impact could reach $230
billion to $550 billion per year by 2025. Of the total, consumer use of 3D printing is
estimated to have an impact of $100 billion to $300 billion and the rest is through
direct manufacturing.
4. Next-Generation Genomics The rate at which gene-sequencing technology has
improved over the past decade is astonishing. The first human genome sequenced in
2003 took 13 years of work by scientists and costed nearly $3 billion. Now a genome
sequencing machine will be able to sequence a human genome in a few hours and for
a cost of $1000. The next-generation genomics is estimated to have a total economic
impact of $700 billion to $1.6 trillion per year by 2025. The impact of disease
prevention and treatment applications through genomics could reach $500 billion to
$1.2 trillion per year in 2025.

Preparing for Disruptive technologies

Business leaders
Disruption by its very nature is extremely difficult to predict. However, with careful analysis
of technology, industry and consumer behaviour trends, business can get a sense on how to
prepare and what to prepare.
The following strategy will help in preparing for disruptive technologies better:
1. Understand the disruption Crafting a vision for your industry will give you a sense
of what the future could look like. Understanding the magnitude of disruption is also
very important as disruption can happen at the industry level, the business-model
level or the process level. Also it is essential to have a sense of what the disruption
can do to your value chain.
2. Prepare a response Most important tasks include conducting rigorous market
research and frequent innovation workshops. Fine-tune programs across Process,
People, technology and strategy to maximize organizational potential for business and
technology innovation.
3. Focus on customer Pay attention to the most tech-savvy customers as they may
provide better perspective on technology than industry experts. Also staying close to
the customers not only builds loyalty but also enables the organizations to test new
ideas quickly and inexpensively.

Policy leaders
Governments have played a significant role in bringing many disruptive technologies to life.
They not only provide incentives for technology development but also act as early buyers to
speed adoption. The biggest challenge for policy leaders is the detrimental effects of
technology on employment. Disruptive technologies like advanced robotics automate a large
number of jobs but they create higher value-added jobs. Hence, policy leaders should focus
on building the skill level of labour force that fits the demand of higher value-added jobs.
They can achieve this using emerging technologies like mobile internet to provide
customized, interactive training to workers and students.
Finally, policy leaders should wisely choose the metrics to assess technologies as metrics can
influence policy decisions. They should look at the metrics that captures both societal and
economic welfare.

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Bibliography

Innovators Dilemma by Clayton M. Christensen

McKinsey report - Disruptive technologies: Advances that will transform life,

business, and the global economy

KPMG report The Changing Landscape of Disruptive Technologies

ESPAS report Global Economy in 2030

www.themanufacturer.com/

http://deloitte.wsj.com/cio/2015/11/04/retail-industry-undergoing-massive-disruption/

http://cointelegraph.com/news/world-economic-forum-distributed-technology-to-gomainstream-by-2027

http://www.claytonchristensen.com/key-concepts/

http://www.weforum.org/global-challenges/future-of-the-global-financialsystem/projects/disruptive-innovation-in-financial-services

http://www.businessinsider.com/technology-is-changing-the-financial-servicesindustry-2016-1

http://techcrunch.com/2015/09/21/healthcare-is-the-last-industry-to-be-disruptedsays-kpcbs-beth-seidenberg/

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